Mortgage Insurance is an insurance policy that’s required in various forms on home loans that require down payments above 20 percent. Mortgage insurance, or ‘MI’ (sorry Michigan), isn’t like the homeowners insurance policies you may have researched, however. If you want a mortgage with a loan-to-value ratio that’s greater than 80% percent, you have to buy it to protect your lender in case you default.
Mortgage Insurance Options
Private Mortgage Insurance (Conventional Loans)
Private Mortgage Insurance, also known as ‘PMI’ is something that’s required for conventional loans that have a loan-t0-value ratio greater than 80%. Since conventional loans aren’t provided by a government entity, the required mortgage insurance is also provided by an individual ‘private’ company. Hence, “Private” mortgage insurance. Typically, PMI costs borrowers between 0.5% percent to 1% percent of their mortgage amount annually.
Learn more about Private Mortgage Insurance.
FHA Mortgage Insurance (FHA Loans)
There’s two kinds of FHA Mortgage insurance.
- Upfront Mortgage Insurance Premium (UFMIP) – This is an upfront cost that’s added to the mortgage amount and paid over time. The current FHA UFMIP rate is 1.75% of the mortgage.
- Annual Mortgage Insurance Premium (MIP) – Annual FHA mortgage insurance is also known as “Monthly Premiums” or “Periodic Premiums”. Your FHA annual MI amount is divided into 12 payments and charged with your monthly mortgage bill.
Learn more about FHA Mortgage Insurance.
USDA Mortgage Insurance
USDA Mortgage Insurance is included for 100% financing rural development loans.
Is Mortgage Insurance Tax deductible? *
Can I deduct mortgage insurance? *
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