Mortgage Insurance

Mortgage insurance, both government or privately issued, protect the lender by guaranteeing a portion of the loan amount against losses. For example, if a lender holds an $80,000 mortgage (with expenses) and sells a foreclosure home for only $75,000, the mortgage insurance would reimburse the lender for that $5,000 short-fall. FHA and VA loans are essentially mortgage insurance programs; conventional loans require private mortgage insurance (PMI). With conforming loans, mortgage insurance is required whenever the LTV ratio exceeds 80%. For more information, see the "Mortgage Insurance" article in the "Mortgage Industry" section.

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