What is mortgage insurance and when do I have to pay it?
Understand why mortgage insurance may apply and why the rules differ by loan type.
Mortgage insurance generally protects the lender or program against certain losses; it does not replace homeowners insurance or protect the homebuyer’s belongings.
It may be required because of the loan type, down payment or other circumstances and can increase upfront or monthly costs.
Conventional mortgage insurance and FHA mortgage insurance have different structures and removal rules.
Conventional mortgage insurance
Private mortgage insurance may apply to a conventional loan, often when the down payment is smaller. How it is paid and when it may be canceled depend on the loan and applicable rules.
FHA mortgage insurance
FHA-insured mortgages generally use FHA mortgage insurance premiums. FHA insures loans made by participating lenders, and its premium structure is different from conventional private mortgage insurance.
Other programs use different structures
VA and USDA financing have their own guarantee-fee or program-charge structures and eligibility rules. Do not assume that every program uses PMI.
What to compare
- Upfront mortgage-insurance or program charges
- Monthly or annual cost
- How long the charge applies
- The total payment and cash to close
- Whether another loan option changes the overall tradeoff
Compare the full cost of the loan
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