Mortgage Insurance : Home Mortgage Insurance
Mortgage insurance is a policy that protects lenders against some or most of the losses that result from defaults on home mortgages. it's required primarily for borrowers making a down payment of less than 20%.
How mortgage insurance works.
Like home or auto insurance, mortgage insurance requires payment of a premium, is for protection against loss, and is used in the event of an emergency. If a borrower can't repay an insured mortgage loan as agreed, the lender may foreclose on the property and file a claim with the mortgage insurer for some or most of the total losses.
Why you need mortgage insurance and how to get it
You need mortgage insurance only if you plan to make a down payment of less than 20% of the purchase price of the home. The FHA offers several loan programs that may meet your needs. Ask your lender for details.
How to receive a discount on the FHA intial mortgage insurance premium
Ask your real estate agent or lender for information on the HELP program from the FHA. HELP - Homebuyer Education Learning Program - is structured to help people like you begin the homebuying process. It covers such topics as budgeting, finding a home, getting a loan, and home maintenance. In most cases, completion of this program may entitle you to a reduction in the initial FHA mortgage insurance premium from 2.25% to 1.75% of the purchase price of your new home.
What is PMI?
PMI stands for Private Mortgage Insurance or Insurer. These are privately-owned companies that provide mortgage insurance. They offer both standard and special affordable programs for borrowers. These companies provide guidelines to lenders that detail the types of loans they will insure. Lenders use these guidelines to determine borrower eligibility. PMI's usually have stricter qualifying ratios and larger down payment requirements than the FHA, but their premiums are often lower and they insure loans that exceed the FHA limit.
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