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Trulia Orlan…, Other/Just Looking in Orlando, FL

How Does Mortgage Insurance Work?

Asked by Trulia Orlando, Orlando, FL Thu Jan 17, 2013

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Poorly, just ask AIG. All kidding aside, mortgage insurance protects the lender from default by the borrower. It offers no protection to the consumer.
1 vote Thank Flag Link Thu Jan 17, 2013

For the Lender yes, supposedly.... but if you ask Lehman Brothers..I think they feel other wise.
Kevin did an awesome job of explaining.. See below..

0 votes Thank Flag Link Thu Jan 17, 2013
It insures the lender in case you default when you dont have 20% down..

You have a home you buy for $100,000 and you use FHA 3.5% down. The have the bank is at risk for 96.5% of the purchase price, your loan, They will add mortgage insurance to your loan which will cover them on the difference.

If you buy that same home with 20% down instead of 3.5%, its not required.

As time goes by ans your equity builds, you can request that the mortgage insurance be dropped once you have 20% equity in the property. Banks give you hard time about this though, so make sure you can request it and if you get a mortgage through a credit union, its easier to drop because your a member/owner at a credit union.


Kevin Cloutier
A HouseSOLD Name
Southern Premier Realty
0 votes Thank Flag Link Thu Jan 17, 2013
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