Real Estate Glossary > M > Mortgage Insurance Definition

This insurance protects the mortgage lender An individual at a bank, mortgage company, or credit union that issues a borrower a loan. against loss if a borrower defaults on his loan. There is both private and public mortgage insurance. Private mortgage insurance is required for borrowers of conventional loan | conventional loans with a down payment The amount of money a buyer pays in cash at closing to fund a home purchase, usually expressed as a percentage of the total home price. of less than 20%. FHA loans and VA loans A special type of loan backed by the government and only available to veterans of the US military and surviving relatives. are essentially public mortgage insurance as borrowers pay higher insurance premiums in exchange for a low down-payment. These funds allow the FHA to insure lenders against losses if borrowers default on FHA-approved loans. Insurance costs will be included as part of the monthly loan payment. FHA-insured loans A loan with a low down payment and competitive interest rates that is insured by the Federal Housing Administration, a government agency that that provides funding for these loans from mortgage insurance payments. have two mortgage insurance components – an up-front mortgage insurance premium and a monthly mortgage insurance payment. The upfront payment is a one-time premium, currently 1.75% of the loan, and is paid at closing or may be financed into monthly payments. Borrowers pay a monthly mortgage insurance payment until they reach 78% loan to value The ratio of the amount of money borrowed over the appraised value of the home expressed as a percentage. from the original purchase price of the home.