What is mortgage insurance?

Mortgage Insurance is a type of insurance that protects the lender in the event a borrower defaults on their mortgage payments. This insurance is typically required when the borrower has less than 20% equity in the home. When this type of insurance is required, the borrower will pay a one-time premium, usually part of the closing costs, which is then added to the total loan amount. In California, the two most common types of mortgage insurance are private mortgage insurance (PMI) and the Federal Housing Administration (FHA) Insurance. PMI is generally used when borrowers make a down payment of less than 20%. It’s paid directly to the lender and the cost depends on the size of the loan and the down payment. FHA Insurance is for borrowers who make down payments of less than 3.5%. It’s also paid directly to the lender and the cost is typically lower than PMI. Mortgage insurance can be beneficial to borrowers because it protects the lender in case of a default. For example, if the borrower were to default on the loan, the lender would be able to recoup some of their money thanks to the insurance policy. This can also help borrowers get access to lower interest rate mortgages, since lenders feel more secure when there is insurance in place.

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What is mortgage insurance?

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