Mortgage insurance - A policy that protects lenders against some or most of the losses that can occur when a borrower defaults on a mortgage loan mortgage insurance is required primarily for borrowers with a down payment of less than 20% of the homes purchase price.
Mortgage insurance was created to insure mortgage loans against borrower defaults. This enables lenders the ability to make loans to individuals that have less than a 20% down payments.
Most mortgage professionals will recomend that a borrwer take a second mortgage to borrow amounts in excess of 80% of the property value in order to avoid paying mortgage insurance.
One of the primary reasons for doing this would be that the interest paid on the second mortgage is tax deductable (in most cases) while the mortgage insurance premium is not.
Qualifying for a loan with mortgage insurance may be more difficult than one without as the mortgage insurer may require additional qualifications from what the lender requires.
There are different types of 100% loans. You can
either get 1 loan for 100% or an "80/20" loan. Speak to your mortgage
professional to see which program is best for you!
