As a potential homebuyer, you may have come across the term “mortgage insurance” and wondered what it is and why you need it. In this article, we’ll explain what mortgage insurance is and how it can benefit you.
At MortgageDepot, we specialize in helping homebuyers obtain the best loans for their unique situations. One type of loan that may require mortgage insurance is an FHA loan, which is backed by the Federal Housing Administration.
Mortgage insurance is a policy that protects the lender in case the borrower defaults on their loan. If you put less than 20% down on your home, you will likely be required to purchase mortgage insurance to secure the loan.
Here are some important points to keep in mind about mortgage insurance:
- Mortgage insurance is required for loans with less than 20% down payment.
- The cost of mortgage insurance is typically added to your monthly mortgage payment.
- Mortgage insurance is not the same as homeowner’s insurance, which covers damage to your home and personal belongings.
- Mortgage insurance is only required until the borrower has built up enough equity in their home to reach 20%.
- If you have an FHA loan, mortgage insurance is required for the life of the loan.
At MortgageDepot, we can help you navigate the different types of loans and their requirements for mortgage insurance. We can also help you calculate the cost of mortgage insurance and factor it into your monthly mortgage payment.
There are two types of mortgage insurance: private mortgage insurance (PMI) and mortgage insurance premium (MIP). PMI is typically required for conventional loans, while MIP is required for FHA loans.
If you have an FHA loan, you will be required to pay an upfront MIP fee as well as an annual MIP fee. The upfront fee is typically 1.75% of the loan amount, while the annual fee is based on the loan term and the loan-to-value ratio.
At MortgageDepot, we can help you understand the different types of mortgage insurance and their costs. We can also help you find ways to minimize your mortgage insurance costs, such as by increasing your down payment or refinancing your loan once you have built up enough equity in your home.
Mortgage insurance is an important aspect of securing a loan for a home purchase. At MortgageDepot, we can help you navigate the requirements for mortgage insurance and find the best loan for your unique situation. Contact us today to learn more.
Connect with one of our loan consultants to learn more.
