Mortgage Insurance, also known as Private Mortgage Insurance (PMI) or MI, is a fee that you should be expected to pay if you are putting less than 20% down. Depending on the loan program that you are evaluating, there are different costs associated with your mortgage insurance. Essentially, with mortgage insurance, the borrower pays the premiums, but the lender is the beneficiary. The coverage protects lenders against default by the borrower. If a borrower stops paying on a mortgage, the insurance company ensures that the lender will be paid in full.
Your mortgage company will pick insurance providers for you, but it is paid by the borrower. Usually, it is done in monthly installments, but there are programs whereby the borrower pays the entire insurance premium in a lump sum at closing, or it can be built into your rate so there is no monthly expense. Ask your lender for options when it comes to MI!
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