HOME INSURANCE MORTGAGE
Home mortgage insurance is a financial guarantee that insures lenders against loss in the event a borrower defaults on a mortgage. If the borrower defaults and the lender take title to the property, the mortgage insurer reduces or eliminates the loss to the lender. In effect, the mortgage insurer shares the risk of lending the money to the borrower. Home mortgage insurance should not be confused with mortgage life insurance, which provides coverage in the event of a borrower's death, or homeowner's insurance, which protects the homeowner from loss due to damage from fire, flood or other disaster.
All home buyers can also benefit from home mortgage insurance as it allows them to become homeowners sooner, and it dramatically increases their buying power -- excellent benefits from a buyer's perspective. First-time buyers can use a low down payment to help them afford their first home, or to purchase a more expensive home sooner. Repeat home buyers can put less money down and gain significant tax advantages because they will have more deductible interest to claim. They can also use the cash they would have used for a large down payment for investments, moving costs or other expenses. The cost of home mortgage insurance is divided into two parts. The first part is a payment made at the time of closing. The second is an ongoing payment made each month with your principal and interest payment.
Without the guarantee of mortgage insurance, lenders normally require a borrower to make a down payment of at least 20% of a home's purchase price, which can mean years of saving for some borrowers. This large down payment assures the lender that the borrower is committed to the investment and will try to meet the obligation of monthly mortgage payments to protect his investment. With the guaranty of mortgage insurance, lenders are willing to accept as little as 5% or 10% down from borrowers. Mortgage insurance fills the gap between the standard requirement of 20% down and an amount the borrower can more easily afford to put down on a purchase. A low down payment also allows borrowers to purchase more home than they might otherwise be able to afford.
Just remember, with mortgage insurance, borrowers can increase buying power, put less money down and purchase a home sooner. It's as simple as that.