Mortgage insurance can be a tricky topic in the finance world. Lender paid, borrower paid, up front fees, monthly payments…it all gets a little confusing if you don’t know what questions to ask. In this article, we’ll ask (and answer) those questions for you, as we go through the basics of mortgage insurance so you can better understand why you need it, what fees are associated with it, and which loan type and payment option is best for you.
In general, borrowers who put less than 20% of the sales price down as payment on a home, or do not have at least 20% equity in the home they are refinancing, are often required by the lender to take out mortgage insurance. This serves as insurance to a lender against a default, since borrowers who put less down (or have less equity) are a higher risk to the lender. Certain government loan programs require mortgage insurance regardless of the down payment.
This is where it gets a little tricky. Just like with many of the fees associated with a purchase or refinance loan, the amount of mortgage insurance a borrower has to pay varies by both loan program and financial situation:
Again, both fees and payment options will vary based on the loan program and your financial situation. Mortgage insurance fees can include an upfront payment, monthly payments, or a combination of the two. By loan program:
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