| 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%. |
| 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. |
| 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. |
| How can I receive a discount on the
FHA initial mortgage insurance premium? |
| Ask your real estate agent or lender
for information on the HELP program from the FHA. HELP - Homebuyer
Education Learning Program - is structured to help people like you begin
the home buying process. It covers such topics as budgeting, finding a
home, getting a loan, and home maintenance. In most cases, completion of
this program may entitle you to a reduction in the initial FHA mortgage
insurance premium from 2.25% to 1.75% of the purchase price of your new
home. |
| 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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