Questions & Answers
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We've compiled a list of common questions we've encountered in the loan application and home buying experience. If you have any other questions of your own, please contact us today.
What is Mortgage Insurance?
Mortgage insurance, also referred to as MI, is paid monthly with a borrower’s mortgage payment. It protects lenders against taking a financial loss if the borrower stops making payments. Mortgage insurance is required on mortgage programs that require little or no down payment and the lenders exposure is greater than 80% of the purchase price or appraised value, whichever is less.
Mortgage insurance can be avoided by utilizing loan programs such as an 80/20, in which a 1st mortgage (80% LTV) and 2nd mortgage (20% LTV) are taken on the property. No down payment is required. Or, there is Lender Paid Mortgage Insurance (LPMI). With this option, the lender pays the mortgage insurance, which is offset by a higher interest rate charged to the borrower.