What is Mortgage Insurance? Mortgage insurance is something that many first-time home buyers do not think about. Unfortunately it is a fee that is included in the monthly mortgage of many first time home buyers. Mortgage insurance is simply designed to protect the mortgage lender in the event of a default on the home loan. Mortgage insurance is required by borrowers that put less than 20% down on their home loan. Unfortunately, many people looking to buy a new home do not budget this into their monthly payment.
What is Private Mortgage Insurance
Another common mortgage question is what is PMI? PMI stands for Private Mortgage Insurance. Esentially it is an insurance policy provided by private companies. Rather than the FHA or VA, PMI is designed to protect the lender if the borrower defaults on the mortgage. Again usually required for borrowers making less than a 20 percent down payment. Private Mortgage Insurance is for mortgage loans other than FHA and VA.
What is Mortgage Insurance Premium or MIP
MIP is a payment that is made by the borrower to the lender to protect the lender against losses resulting in default. The Mortgage Insurance Premium is required for FHA loans. MIP is now required for the term of an FHA loan for those who only put a down payment of 3.5%. This is one of the disadvantages of an FHA loan. Unfortunately, during the housing crises, the Federal Housing Association took a tremendous hit on their reserves due to all the foreclosures. So, unfortunately, they needed to make some changes in their Mortgage Insurance Premium to build those money reserves back up again.