What does "Mortgage insurance" mean?

Mortgage insurance covers the lender's financial loss if a borrower defaults on the loan. It typically protects the lender for a percentage of the loan amount, often up to 20% of the total loan value, depending on the specific policy and terms. If the borrower fails to repay, the mortgage insurance compensates the lender for the unpaid balance.

PMI on a $400,000 mortgage typically costs between $100 and $300 per month, depending on the down payment amount and credit score. If you make a 5% down payment, PMI can be around 0.5% to 1% of the loan amount annually, which translates to $2,000 to $4,000 per year, added to your monthly payments.

Yes, mortgage insurance can be included in a mortgage. This is commonly referred to as "financing the mortgage insurance," allowing borrowers to roll the cost of the insurance into their loan amount. This is often done when the down payment is less than 20%.

Mortgage insurance is required when a borrower makes a down payment of less than 20% on a home. This insurance protects the lender in case the borrower defaults on the loan.