Mortgage Insurance

Mortgage insurance, also known as (PMI) Private Mortgage insurance or (LMI) Lender's Mortgage Insurance is an extra insurance that lenders require from most home buyers who obtain loans that are more than 80% of their new home's value. It is an insurance policy taken to protect the lender against loss if a borrower defaults on a loan and it enables borrowers with less cash to have greater access to home ownership.

The first mortgage insurance payment is paid at the time of closing. The rest will be made each month together with the principal and interest payment.

The insurance payment may be canceled if the borrower has completed the payment of 20% of the total property amount. However, the cancellation must be requested by the homeowners themselves. Consumers themselves have to keep track of their loan balance if they qualify to discontinue the PMI coverage. The borrower also needs to present payment receipts showing that there was no 30 days late payment within a period of 1 year of the request or 60 days late within two years. The lender may require evidence that the value of the property has not declined below its original value and that the property does not have a second mortgage, such as a home equity loan.

Refer to https://www.wellsfargo.com/mortgage/faq/privatemortgage for more information.  Or approach a Realtor to learn more about Mortgage Insurance.