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88. WHAT IS MORTGAGE INSURANCE?
Mortgage insurance is a policy that protects lenders
against some or most of the losses that result from defaults on home
mortgages. It's required primarily for borrowers making a down payment
of less than 20%.
89. HOW DOES MORTGAGE INSURANCE WORK? IS IT LIKE
HOME OR AUTO INSURANCE?
Like home or auto insurance, mortgage insurance
requires payment of a premium, is for protection against loss, and is
used in the event of an emergency. If a borrower can't repay an insured
mortgage loan as agreed, the lender may foreclose on the property and
file a claim with the mortgage insurer for some or most of the total
losses. 90. DO I NEED MORTGAGE INSURANCE? HOW DO I GET IT?
You need mortgage insurance only if you plan to make a
down payment of less than 20% of the purchase price of the home. The FHA
offers several loan programs that may meet your needs. Ask your lender
for details.
91. HOW CAN I RECEIVE A DISCOUNT ON THE FHA INITIAL
MORTGAGE INSURANCE PREMIUM?
Ask your real estate agent or lender for information
on the HELP program from the FHA.
HELP - Homebuyer Education Learning Program - is
structured to help people like you begin the home buying process. It
covers such topics as budgeting, finding a home, getting a loan, and
home maintenance. In most cases, completion of this program may entitle
you to a reduction in the initial FHA mortgage insurance premium from
2.25% to 1.75% of the purchase price of your new home.
92. WHAT IS PMI?
PMI stands for Private Mortgage Insurance or Insurer.
These are privately-owned companies that provide mortgage insurance.
They offer both standard and special affordable programs for borrowers.
These companies provide guidelines to lenders that detail the types of
loans they will insure. Lenders use these guidelines to determine
borrower eligibility. PMI's usually have stricter qualifying ratios and
larger down payment requirements than the FHA, but their premiums are
often lower and they insure loans that exceed the FHA limit.
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