When you are buying your first home, you may be told by the lender that you have to get mortgage insurance. Mortgage insurance is set up to help lessen the risk that your mortgage lender assumes every time they make a loan. If something happens to you that causes you to be unable to pay your mortgage anymore, such as death, illness, or unemployment, the lender is able to recover their money. Because the lender has a lowered risk, they are more likely to give you the mortgage that you need in order to get your home.
Where to Get Mortgage Insurance
There are a few places where you can get the insurance from. One is from an insurance company that offers this kind of insurance. Another is the Federal Housing Administration.
Private Company
If you choose to work with a private company that offers this kind of insurance, they will also assume some of the risk that the lending company does. They will add on the cost of your insurance premium right onto your mortgage payment, in most cases. A certain percentage of each payment you make will go towards paying that insurance premium. The amount of your premium will depend on how good your credit is, how much you are putting down on your house, and the value of your mortgage. Your premiums may be higher if you choose to go with a private company.
Federal Housing Administration
The FHA is part of the federal Department of Housing and Urban Development. One of the programs that that they offer is a mortgage insurance program. Instead of having stockholders or investors like a private company would, the FHA's mortgage insurance program is backed by the funds that they receive as other people pay on their mortgage insurance policies. Your payments are part of your regular mortgage payment. Since the way the FHA is set up differs from how a private mortgage insurance company is, you will may be able to get a lower premium.
Your mortgage company may have a preference as to who to work with when it comes to mortgage insurance. If they don't, or they leave the choice up to you, you can do a little shopping around to see which mortgage protection insurance program will work best for you and your situation. Getting the insurance will make it easier for you to get your new house.
Share24 September 2015
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