Types of Mortgage Insurance
Two specific types of mortgage insurance include PMI, or private mortgage insurance, and the government-backed MI. Find out why MI costs a half to a third of what private mortgage insurance can cost with help from a financial specialist in this free video on mortgage assistance and personal finance.
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Hi, my name is Matt McKillen with Innovative Financial Group. The question posed to me are "what are the different types of mortgage insurance?" There's two specific types of mortgage insurance available. One is called PMI, or private mortgage insurance. Now this is an insurance policy that's purchased on your mortgage that generally coincides with a FannieMae or FreddieMac conventional loan, and mortgage insurance is required any time the loan amount goes over eighty percent loan to value. The other type of mortgage insurance product out there is basically the government-backed mortgage insurance, and it's on FHA loans, and it's called MI. So it's MI versus PMI. Now MI is paid, whenever you take an FHA mortgage, you generally have to pay about one and half percent of your loan amount. It's financed in the mortgage, and it's paid back to FHA on the day you close on your loan. Then, from that point on, you have to pay a monthly premium included in your mortgage payment, just like with your taxes and insurance. The difference between MI is that the cost of the mortgage insurance is probably a half to a third of what private mortgage insurance is running. So, generally, most of my clients these days that are getting into properties with less than twenty percent down, are going with an FHA loan, because it only requires three percent down payment, and the MI--or the mortgage insurance--on the FHA products is substantially cheaper on your house payment. Again, my name is Matt McKillen, I'm with Innovative Financial Group.