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Understand Mortgage Insurance 

Borrowers need to understand that home purchases with less than 20% equity are required to pay mortgage insurance. This means that if the lending amount is more than 80% of the value of the home then mortgage insurance is required by the lender to protect the lending company from the borrower defaulting.

The usual mortgage requires the policy to be paid for a minimum of one year, but homeowners usually try and get the loan value down to the 80% mark within that year to stop paying the insurance premium.
FHA loans are slightly different in that they require the insurance to be paid for at least five years of the loan.

Depending on the home purchaser's situation this doesn't always equate to a negative thing. It can assist them with getting a loan with a smaller down payment or even just allow them to be approved for lending. Either way, it is equally important for future home purchasers to understand mortgage insurance.
Posted 8:41 AM

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