Mortgage Insurance is required for borrowers who put less than 20% down payment on a conventional mortgage loan to protect the lender against default.
Mortgage Insurance, also known as Private Mortgage Insurance (PMI), is a requirement for borrowers who make a down payment of less than 20% on a conventional mortgage loan. Its purpose is to protect the lender in case the borrower defaults on their loan.
By requiring Mortgage Insurance, lenders are able to mitigate their risk when lending to borrowers with lower down payments. This insurance coverage provides financial protection to the lender by reimbursing them for a portion of the outstanding loan balance if the borrower fails to repay it.
It’s important for borrowers to understand that Mortgage Insurance primarily benefits lenders and does not provide any direct financial protection or benefit to them as borrowers. However, it can help prospective homeowners who don’t have enough funds saved up for a larger down payment gain access to mortgage financing.
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