MIP is mandatory when a loan is...

Mortgage Insurance Premium (MIP) is specifically associated with Federal Housing Administration (FHA) loans. When a borrower takes out an FHA loan, MIP is required due to the structure of these loans, which are aimed at helping low to moderate-income families qualify for home financing even with lower credit scores and down payments. MIP protects the lender against losses if the borrower defaults on the loan, ensuring stability in the FHA lending program.

In contrast, non-conforming loans can vary widely in their requirements and do not inherently necessitate MIP. VA loans, which are backed by the Department of Veterans Affairs, may require a funding fee but do not have MIP. Lastly, conforming loans, which adhere to guidelines set by Fannie Mae and Freddie Mac, often do not require mortgage insurance if the borrower makes a down payment of 20% or more. Thus, MIP is uniquely tied to FHA loans, making it mandatory when borrowing under this program.