What is mortgage insurance?

Mortgage Insurance aka Private Mortgage Insurance** or PMI is a premium paid to cover the lender in case of a default on the loan.  Generally it is required on any home loans with less than a 20% Down Payment for a new purchase and more than 80% Loan to Value on Refinance Loans.

Facts about mortgage insurance for common loan types:

1. Conventional loans:
   1. The cost is calculated based on your credit score & percentage of down payment
   2. It can be removed when your loan reaches 80% of the original property value and will fall off at 78%
      Loan to Value (LTV)
   3. You can refinance your loan to drop or lower the mortgage insurance as the value increases to save money in the long term
2. FHA loans:
   1. The cost of mortgage insurance does not vary based on credit or down payment.
   2. Mortgage insurance will never fall off, it is continued over the full term of the mortgage
   3. You can refinance your loan into a conventional mortgage to remove or lower the mortgage insurance when your home increases in value
3. VA Loans
   1. There is no mortgage insurance on VA Home Loans. This is one of the benefits of VA Home Loans
4.   USDA Loans
   1. Technically there is no mortgage insurance on USDA loans.
   2. Instead there is a guarantee fee that is added to the loan amount upfront when the loan closes and an annual fee that is paid monthly similar to mortgage insurance on other loan types.
   3. The monthly guarantee fee stays in the payment for the life of the loan.
   4. You can remove the guarantee fee by refinancing your loan into a conventional loan.

** Private Mortgage Insurance can be removed from your loan payment 2 different ways after purchase.