In which situation might a borrower be required to pay MIP?

A borrower is required to pay Mortgage Insurance Premium (MIP) specifically when taking out an FHA loan. The Federal Housing Administration (FHA) insures these loans, allowing lenders to offer them to borrowers with lower credit scores or smaller down payments. Since these loans present a higher risk to lenders, the MIP compensates these lenders for the risks associated with such financing options. The MIP is usually composed of an upfront fee paid at closing and ongoing monthly premiums over the life of the loan.

In contrast, while conventional loans may require private mortgage insurance (PMI) when the borrower has low equity (which serves a similar purpose to MIP but is associated with a different loan type), this doesn't fall under MIP. Other scenarios presented, like refinancing, may have different requirements based on the type of mortgage involved, but MIP is specifically tied to FHA loans. Personal loans do not typically involve any mortgage insurance as they are not secured by real estate.