What does mortgage insurance do?
Private mortgage insurance protects a lender if a home owner defaults on a loan. Lenders generally require mortgage insurance on low down payment loans because experience shows that borrowers with less than 20 percent invested in a house are more likely to default on a mortgage. Because the mortgage insurance company shares the risk of foreclosure with the lender, the lender is willing to lend you money with a significantly smaller down payment. Mortgage insurance is unique compared to other types of property or life insurance purchased by a home buyer. It should not be confused with credit life insurance, a policy that repays an outstanding mortgage debt upon the death of the borrower who holds the insurance policy. Private mortgage insurance is available on a wide variety of mortgages, including fixed and adjustable-rate loans.With the wide variety of conventional loans available in the marketplace, the borrower has the freedom to choose the type of loan that best suits his or her ne
