The idea behind mortgage insurance is relatively simple: an insurance entity agrees to insure against default on a loan in exchange for premium payments.

The insuring entity may be a “private” mortgage insurance company or a government entity, but the company that issues mortgage insurance is not a lender.

Conventional loans use Private Mortgage Insurance – also known as PMI

When you buy a property using conventional financing, you will be required to put down a 20% down payment or purchase private mortgage insurance. When you have mortgage insurance on conventional loans, you can usually get your lender to drop your private mortgage insurance once you reach a 20% equity point in your property – and conventional loans allow for property appreciation when making the calculation. [Read more...]