“What is Mortgage Insurance?”

That’s a question I get asked a lot from a majority of my clients.

Mortgage Insurance is actually a thing that protects the lender from you if you default on your mortgage. So, if you stop making payments or if you say ‘now I’m done with this, I’m going to walk away from the house’ that mortgage insurance amount that you’re paying each month is supposed to help the lender recoup the cost of the mortgage.

We see it on conventional mortgages a lot if you have less than a 20% down payment. You actually always have mortgage insurance on your conventional mortgage and then FHA, VA, and USDA each have a certain way that they do it. So FHA has their Mortgage Insurance premium that they apply, which is a financed amount into the mortgage. VA and USDA each have a funding fee as well. So that’s kind of how they recoup the cost of the people that miss their mortgage payments or default on their mortgages. Conventional just does it a different way since it’s a little bit more market-based.

So if you have any other questions about Mortgage Insurance reach out to us.