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There are different types of mortgage insurance. Private Mortgage Insurance (PMI) is insurance that protects the lender - the mortgage company. Many home buyers can not afford the traditional 20% down payment on a house. You can some of the payment, but they have not and can not take the money necessary to produce a 20% deposit. With less than 20% down payment, the lender is at greater risk. PMI is the guarantee that they do not lose money. The buyer pays the monthly premium for PMI.

The Federal Housing Administration (FHA) and Veterans Administration (VA) are both organizations that the guarantee mortgages. The borrower must meet certain requirements in order to qualify for a FHA or VA guaranteed loans.

In principle mortgage insurance works as follows. Let us say that you want to buy a house that sold for $ 264,000 - that was the average price for a house in the U.S. in October 2007. A 20% deposit would be $ 52,000. Not many people can much cash, that all at once. If you have a deposit of, say, $ 15,000, a private mortgage insurance will be written to the balance of the usual down payment and the premium is placed on the monthly payment.

Many people do not realize that the PMI can be canceled after the mortgage has been reduced and / or at home has appreciated in value.

In the past, buyers were not informed that mortgage insurance could be canceled if the loan-to-value decreased to a certain point - usually 78%. The homeowner is Protection Act of 1998 made it mandatory for companies to inform buyers each year on the conditions and the status of their mortgage insurance and give them the opportunity to cancel if they no longer legally required.

Milos Pesic is a mortgage broker and owner of a highly popular and comprehensive information and mortgage loan website. For more articles and resources on different types of mortgages and loans, mortgage refinancing, mortgage lenders and brokers and much more can be found on his website at:

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