I’m Michael DiVita — DRE #01372066 | NMLS #241655, DiVita Home Finance (DRE #01818285 | NMLS #323700), Tiburon, CA. I’ve been in California mortgage lending since 2000 and founded DiVita Home Finance in 2007. Whether to stay in FHA or refinance into conventional is one of the most common questions I get from California homeowners — the math is specific to your numbers. Call (800) 239-1103.
Both PMI and MIP are types of mortgage insurance required when you put less than 20% down — but they work very differently, and the distinction can be worth hundreds of dollars a month. Understanding the difference also tells you when it makes sense to refinance out of FHA into conventional.
What Is PMI?
Private Mortgage Insurance applies to conventional (non-government) loans. It protects your lender, not you. Key facts: required when LTV is above 80% (less than 20% down); cost ranges from 0.2%–1.5% of loan amount annually depending on credit score and LTV; automatically cancels at 78% LTV based on original purchase price; you can request removal at 80% LTV — or sooner if your home has appreciated and you get a new appraisal.
What Is MIP?
Mortgage Insurance Premium applies to FHA loans. It goes to the federal government. Key facts: required on all FHA loans regardless of down payment size; upfront MIP is 1.75% of the loan amount paid at closing (can be financed in); annual MIP is 0.5%–0.55% of the loan paid monthly; if you put less than 10% down, MIP stays for the life of the loan and never cancels automatically; if you put 10%+ down, MIP cancels after 11 years.
Side-by-Side Comparison
| Factor | PMI (Conventional) | MIP (FHA) |
|---|---|---|
| Loan type | Conventional | FHA |
| Required when | LTV above 80% | All FHA loans |
| Annual cost (approx) | 0.2%–1.5% | 0.5%–0.55% |
| Upfront fee | None | 1.75% of loan amount |
| Cancellation | At 78%–80% LTV | Life of loan (if <10% down) |
| Credit score impact | Major — higher score = lower PMI | Minimal — rate nearly flat regardless |
The Problem With FHA MIP in California
California home values have appreciated significantly across most markets. Many FHA borrowers from 2020–2023 now have 20%+ equity — but their MIP keeps charging every single month regardless. The only way to eliminate FHA MIP for a loan with less than 10% down is to refinance into a conventional loan. There is no other path to cancellation. With current rates, the math on refinancing out of FHA works best for those who bought at high rates (7%+) in 2022–2023 and have since built equity. The rate savings plus MIP elimination can add up to $600–$900/month in combined savings on California loan sizes.
When to Refinance Out of FHA
The right time to consider a conventional refinance is when: you now have 20%+ equity confirmed by current home value (not just original purchase price), your credit score is 620+ to qualify for conventional, current conventional rates are within 0.5% of your FHA rate or better, and the combined savings from rate reduction plus MIP elimination covers closing costs within 2–3 years. I run this analysis regularly for California FHA borrowers — it’s straightforward once we have your current balance, rate, and an updated value estimate.
Frequently Asked Questions — PMI vs MIP California
What is the difference between PMI and FHA MIP?
PMI (Private Mortgage Insurance) applies to conventional loans, costs 0.2%–1.5% annually based on your credit score and LTV, and automatically cancels when you reach 78% LTV. FHA MIP applies to all FHA loans regardless of down payment — it includes a 1.75% upfront premium plus 0.5%–0.55% annually, and if you put less than 10% down, it stays for the life of the loan. The key practical difference: PMI eventually goes away on its own as you build equity; FHA MIP does not unless you refinance into a conventional loan.
How do I get rid of FHA mortgage insurance in California?
If you put less than 10% down on your FHA loan, the only way to eliminate MIP is to refinance into a conventional loan once you have 20%+ equity. California appreciation has made this possible for many 2020–2023 FHA buyers — even if your original down payment was 3.5%, home values in many Bay Area, LA, and San Diego markets have climbed enough to cross the 20% equity threshold. I pull an updated estimated value and run the break-even math at no cost — call (800) 239-1103.
Is PMI or FHA MIP cheaper in California?
FHA MIP (0.55% annually) is often lower than PMI for borrowers with credit scores below 700. But FHA MIP never cancels for most buyers, while PMI cancels at 80% LTV. Over a 5–10 year hold in California — where appreciation tends to push you past 80% LTV faster than the amortization schedule — conventional with PMI is usually cheaper in total cost if you have a credit score above 680 and California appreciation working for you. Below 680, FHA often wins in total cost even accounting for the non-canceling MIP.
Talk to Michael Directly
DiVita Home Finance | Tiburon, CA | In lending since 2000, founded DiVita Home Finance in 2007. Michael DiVita DRE #01372066 | NMLS #241655. Company DRE #01818285 | NMLS #323700.
💬 Text: (310) 849-9124
