Mortgage Insurance Need to Know

What is Mortgage Insurance?

If you are considering buying or even refinancing a home this is a question you absolutely need to know the answer to.  Lets start with the short answer.  Mortgage Insurance is an insurance policy that a home buyer or homeowner must pay if they do not have at least 20% equity in their home.  Mortgage Insurance protects the lender in case a homeowner defaults on their mortgage.  Mortgage insurance does not do anything for the homeowner other than allow them to purchase a home with less than 20% down.  Without it, this wold not be possible!  This is a very general answer and is most certainly not a one size fits all explanation.  Lets keep going.

Mortgage insurance is paid in a variety of ways depending upon the type of financing being used, a borrowers qualifications (credit, debt to income etc…) and in some cases a borrowers preference.  Mortgage insurance may be paid in monthly installments, as a large one time up front premium, a combination of both or by increasing a borrower’s interest rate.  To make a bit more sense out of all these different options check out this link for a basic mortgage insurance break down loan type by loan type – HERE.

Each of the different mortgage insurance payment options result in a different monthly payment and overall cost to the borrower.  Sometimes the difference in monthly payment to the borrower can be hundreds of dollars a month.   In addition, if the right mortgage insurance option is not utilized a borrower may miss out on the ability to receive a tax write off for their mortgage insurance.

Long story short, buyers need to make sure they have a loan officer that is a mortgage insurance expert to make sure they select the best possible overall mortgage and mortgage insurance plan.  Please let me know how I can help.

By Jeremy House

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