About Mortgage Insurance
Mortgage insurance helps protect a mortgage company against losses due to foreclosure. This protection is provided by private mortgage insurance companies and allows mortgage companies to accept lower down payments than would normally be allowed.
Private mortgage insurance also enables mortgage companies to grant loans that would otherwise be considered too risky to be purchased by third party investors. The ability to sell loans to investors is critical to maintaining mortgage market liquidity, which in turn, allows mortgage companies to continue originating new loans.
About FHA Mortgage Insurance
Although the insurance protection concept is similar, there are differences between private mortgage insurance and FHA mortgage insurance. FHA insurance is a government-administered mortgage insurance program that does have certain restrictions. This is the type of insurance you would need on a FHA loan. FHA has maximum regional loan limits that are lower than those with private mortgage insurance. FHA may be more expensive, take longer to receive approval, and have fewer payment plan options. FHA insurance lasts for the life of the loan, unlike private mortgage insurance which is cancelable in most circumstances.
