Q&A: Mortgage Insurance
Question:
What is mortgage insurance and how does it work
Answer:
Mortgage insurance lowers the risk to the lender of making a loan to you, so you can qualify for a loan that you might not otherwise be able to get.
Typically, borrowers making a down payment of less than 20 percent of the purchase price of the home will need to pay for mortgage insurance. Mortgage insurance lowers the risk to the lender of making a loan to you, so you can qualify for a loan that you might not otherwise be able to get. But, it increases the cost of your loan. If you are required to pay mortgage insurance, it will be included in your total monthly payment that you make to your lender, your costs at closing, or both.
There are several different kinds of loans available to borrowers with low down payments. Depending on what kind of loan you get, you’ll pay for mortgage insurance in different ways:
If you get a conventional loan, your lender will arrange for mortgage insurance with a private company. Private mortgage insurance rates vary by down payment amount and credit score but are generally cheaper than FHA rates for borrowers with good credit. Most private mortgage insurance is paid monthly, with little or no initial payment required at closing.
