What should I know about mortgage insurance?

Mortgage insurance is an important aspect of the home buying process, especially for those who are unable to make a significant down payment. Lenders often require mortgage insurance to protect themselves in case the borrower defaults on the loan. This insurance typically applies when the down payment is less than twenty percent of the home's purchase price. There are two primary types of mortgage insurance: private mortgage insurance, or PMI, and mortgage insurance premium, or MIP. PMI is generally associated with conventional loans, while MIP is related to loans backed by the Federal Housing Administration, or FHA. Both types of insurance can add to the monthly mortgage payment, which is something potential borrowers should factor into their budget. It is crucial to understand that mortgage insurance does not protect the borrower. Instead, it serves as a safeguard for the lender. Borrowers should also know that they can cancel PMI once their equity in the home reaches twenty percent, while FHA loans have different regulations regarding MIP cancellation. Finally, potential home buyers may want to explore the current web page for further detailed information on mortgage insurance and how it could impact their financing options.