What is the exam-ready distinction?
| Roadmap post | 193 of 500 |
|---|---|
| Official syllabus topic | Financing: Mortgage Insurance; Conventional and FHA Loans |
| Official PSI area | Financing |
| Published weight | 10% of the 100-question national portion |
| Source edition | PSI Georgia Candidate Information Bulletin dated July 1, 2026 |
| Content checked through | August 2, 2026 |
The Rule
PSI publishes a weight for the complete official area, not a guaranteed count for this individual comparison. Use the source, document, actor, event, and timing stated in the question before applying a memorized definition.
Side-by-side comparison
Read across each row. The terms are deliberately compared on identical dimensions so the difference remains clear when the exam hides the vocabulary inside a scenario.
| Decision dimension | Private mortgage insurance | FHA mortgage insurance |
|---|---|---|
| Loan family | Conventional loan | FHA-insured loan |
| Provider | Private mortgage insurer | Federal Housing Administration insurance program |
| Who is protected | Lender or covered investor against borrower default loss | Approved lender against covered default loss |
| Ending coverage | HPA and contract cancellation or termination rules can apply | Duration follows current FHA rules, original LTV, term, and endorsement conditions |
Decision rule
Georgia-specific distinction
Worked example
Scenario. A borrower has a covered conventional first mortgage with borrower-paid PMI and asks whether federal cancellation rules may apply.
Reason it through. The Homeowners Protection Act addresses qualifying borrower-paid PMI on covered residential mortgages. FHA MIP follows a different program framework.
Answer. Analyze the HPA and loan terms rather than applying FHA MIP duration rules.
Common exam traps
- Calling all mortgage insurance PMI
- Saying insurance protects the borrower
- Using one cancellation threshold for every product
- Claiming FHA annual MIP always lasts for one universal period
Original practice questions with detailed explanations
These are original instructional questions mapped to the July 1, 2026 PSI outline. They are not copied from PSI or any live examination. Choose an answer before opening the explanation.
Question 1Which insurance is associated with a conventional loan rather than an FHA-insured loan?
- A. FHA annual MIP
- B. Private mortgage insurance
- C. VA funding fee
- D. Title insurance
Show answer and explanation →
Answer: B. Private mortgage insurance
Private mortgage insurance is correct. PMI is private insurance associated with qualifying conventional loans. FHA mortgage insurance includes program charges such as upfront and annual MIP. Both protect the lender or insurance fund against borrower default loss, not the borrower's equity. PMI cancellation rights and FHA MIP duration follow different laws and program rules. The rejected choices are FHA annual MIP; VA funding fee; Title insurance. Each misses the legal category or controlling fact stated in the rule.
Question 2A borrower has a covered conventional first mortgage with borrower-paid PMI and asks whether federal cancellation rules may apply.
- A. Apply FHA annual MIP rules because all mortgage insurance is federal.
- B. Tell the borrower insurance protects the borrower's down payment.
- C. Analyze the HPA and loan terms rather than applying FHA MIP duration rules.
- D. Assume PMI can never terminate.
Show answer and explanation →
Answer: C. Analyze the HPA and loan terms rather than applying FHA MIP duration rules.
The Homeowners Protection Act addresses qualifying borrower-paid PMI on covered residential mortgages. FHA MIP follows a different program framework. Therefore, Analyze the HPA and loan terms rather than applying FHA MIP duration rules. The other choices fail because they replace those controlling facts with a neighboring concept or an unsupported absolute rule.
Question 3What should a candidate identify first when comparing PMI Versus FHA Mortgage Insurance?
- A. The option with the longest definition, without classifying the facts.
- B. A memorized Georgia rule, even when the question asks for a national concept.
- C. The answer that sounds most favorable to the buyer, regardless of the document or event.
- D. Identify the loan program first, then the insurer, premium structure, governing cancellation or duration rule, and who receives protection.
Show answer and explanation →
Answer: D. Identify the loan program first, then the insurer, premium structure, governing cancellation or duration rule, and who receives protection.
Identify the loan program first, then the insurer, premium structure, governing cancellation or duration rule, and who receives protection. That sequence identifies the legal category before the label. Choosing by definition length ignores the facts, importing a Georgia rule can answer the wrong jurisdictional question, and favoring one party substitutes sympathy for classification.
Mastery tracking
Mark this distinction mastered only when every statement is true.
- Define every compared term without using the other term as the definition.
- Rebuild the comparison table from memory.
- State the decision rule and Georgia distinction without notes.
- Solve the worked example after changing one controlling fact.
- Explain why every trap and distractor is tempting but wrong.
- Answer all three original questions correctly in mixed practice on a later day.
Recommended next lesson
Continue with Primary Versus Secondary Mortgage Market. Continue to roadmap comparison 194.
Return to the complete exam-concept library or the Financing hub.