Facts You Should Know About Mortgage Insurance

Two people in white shirts discussing mortgage insurance with calculator and clipboard on desk

Mortgage insurance is a type of insurance policy that protects lenders in case borrowers default on their mortgage payments. Here are 9 facts that you should know when you are financing your new home:

  • Mortgage insurance is usually required for borrowers who make a down payment of less than 20% of the home's purchase price.

  • There are two types of mortgage insurance: private mortgage insurance (PMI) and government mortgage insurance (such as FHA, VA, and USDA loans).

  • PMI is provided by private insurance companies and is typically required for conventional loans.

  • Government mortgage insurance is provided by the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), and the US Department of Agriculture (USDA) and is required for their respective loan programs.

  • The cost of mortgage insurance varies depending on the size of the down payment, the loan amount, and the type of mortgage insurance.

  • PMI can be canceled once the borrower reaches 20% equity in the home, either through payments or appreciation.

  • For government mortgage insurance, the borrower may be able to cancel the insurance after a certain period of time or once they reach a certain amount of equity.

  • Mortgage insurance premiums are usually added to the borrower's monthly mortgage payment.

  • Mortgage insurance is not the same as homeowner's insurance, which protects the homeowner in case of property damage or liability issues.

If you have any questions about buying or selling, please reach out to us. We can help.

.Cecilie Korst////