What is Mortgage Insurance or MI?
What is Mortgage Insurance or MI?
Mortgage insurance is required by the lender in cases where the borrower has a loan that is more than 80% of the value of the home or loan to value (LTV). The coverage which mortgage insurance provides insures the lender in cases of default. The amount of MI can vary depending on the lender. Some lenders figure MI off of the credit score, some are figured off of the LTV, etc. On a FHA loan there is also mortgage insurance required up front.
If you do not have the 20% needed for down payment, there are options. You can take out a 2nd mortgage at the time of the first mortgage. This can be done in a 5,10,15 or 20% 2nd loan. Keep in mind that rates on a 2nd are much higher than a rate on a first. Please speak with you loan officer to see what your best options are.
Usually mortgage insurance can be removed after 2 years if the loan balance is less than 80% LTV. You will often have to prove this, by obtaining a new appraisal on the home and sending it to your lender with a request to remove mortgage insurance.
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