Frequently
Asked Questions
• Getting
Started
• Finding
Your Home
• You've
Found It
• General
Financing -- Questions:The Basics
• First
Steps
• Finding
The Right Loan For You
• Closing
• How
Can HUD And The FHA help Me Become a Homeowner
• Mortgage
Insurance
MORTGAGE INSURANCE
86. WHAT IS MORTGAGE INSURANCE?
Mortgage insurance is a policy that protects lenders against
some or most of the losses that result from defaults on home
mortgages. It's required primarily for borrowers making a
down payment of less than 20%.
87. HOW DOES MORTGAGE INSURANCE WORK? IS IT LIKE HOME OR AUTO
INSURANCE?
Like home or auto insurance, mortgage
insurance requires payment of a premium, is for protection
against loss, and is
used in
the event of an emergency. If a borrower can't repay an insured
mortgage loan as agreed, the lender may foreclose on the
property and file a claim with the mortgage insurer for some
or most
of the total losses.
88. DO I NEED MORTGAGE INSURANCE? HOW DO I GET IT?
You need mortgage insurance only if you plan to make a down
payment of less than 20% of the purchase price of the home.
The FHA offers several loan programs that may meet your needs.
Ask your lender for details.
89. WHAT IS PMI?
PMI stands for Private Mortgage Insurance or Insurer. These
are privately-owned companies that provide mortgage insurance.
They offer both standard and special affordable programs for
borrowers. These companies provide guidelines to lenders that
detail the types of loans they will insure. Lenders use these
guidelines to determine borrower eligibility. PMI's usually
have stricter qualifying ratios and larger down payment requirements
than the FHA, but their premiums are often lower and they insure
loans that exceed the FHA limit.
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