What is Mortgage Insurance?

If your down payment on a home with a conventinal loan is less than 20% of the appraised value or sales price, you must obtain mortgage insurance.

Mortgage insurance is sometimes referred to as private mortgage insurance, or PMI, to distinguish it from FHA and VA insurance, run by government programs. The cost of mortgage insurance varies depending on the size of the down payment and the loan, but it typically amounts to about 1% of the loan with a 5% down payment.

With mortgage insurance, the borrower pays the premiums, but the lender is the beneficiary. The coverage protects lenders against default by the borrower. If the borrower stops paying on the mortgage, the mortgage insurance company ensures that the lender will be paid in full.

Statistics have shown that there is a greater chance of default on a loan with a smaller than 20% down payment. Mortgage insurance is the vehicle that allows borrowers to buy a house with less than a 20% down payment.

Mortgage companies pick insurance providers for their customers, but the borrowers pay for the insurance - usually in monthly installments. Equity Loans, LLC offers Lender-Paid Mortgage Insurance (LPMI) where the borrower does not pay a monthly mortgage insurance payment. Please visit our website at www.equityloansoregon.com for our contact information if you are interested in finding out more about LPMI.