Mortgage Insurance

The purpose of mortgage insurance is to protect the lender in the event that the borrower defaults on the mortgage. When a borrower takes out a mortgage with a down payment of less than 20% of the home’s value, the lender typically requires mortgage insurance as a condition of the loan. This insurance provides a safety net for the lender in case the borrower is unable to make their mortgage payments, allowing the lender to recover some of their losses. Mortgage insurance can take different forms, such as private mortgage insurance (PMI) for conventional loans or mortgage insurance premiums (MIP) for government-backed loans like FHA loans.