Does Mortgage Insurance get a Bad Rap?

Mortgage insurance is a policy issued on your mortgage loan that allows your lender to recapture any money lost in the event of an early default and/or during a foreclosure process. The sole purpose of this type policy is to lower the amount of risk for the lender.

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Does mortgage insurance really deserve the bad reputation that precedes it?

It does cost you, the borrower, more money every month, which translates to a higher mortgage payment and less money in your pocket.

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But, let’s explore what it does accomplish.

The policy allows the borrower to use a lower down payment when purchasing a home. This can be a huge benefit to first-time buyers.

It also allows lenders to lend more money to potential buyer homebuyers by having the ability to recapture funds in the event of a default.

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The bottom line is mortgage insurance assists a very large segment of buyers annually into the market place. According to US Mortgage Insurers (USMI), mortgage insurance assisted nearly 2 million conventional borrowers in 2021 alone.

In my opinion, the mortgage insurance policy could be one of the largest contributors to the American Dream of homeownership across the nation.