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Mortgage Insurance
Q: What Is Mortgage Insurance?
A: 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%.
Q: How Does Mortgage
Insurance Work? Is It Like Home Or Auto Insurance?
A: 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.
Q: Do I Need Mortgage
Insurance? If So, How Do I Get It?
A: 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.
Q: How
Can I Receive A Discount On The FHA Initial Mortgage Insurance Premium?
A: 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.
Q: What
Is PMI?
A: 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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