WHAT IS MORTGAGE INSURANCE?
On FHA loans, the Federal Housing Administration, an agency within the U.S. Department of Housing and Urban Development, provides mortgage insurance.
On Veterans Administration (VA) loans, the insurance is provided by the U.S. government in the form of a loan guarantee based on the veteran’s entitlement. No mortgage insurance is required, but a one-time VA Funding Fee is added to the loan amount.
The mortgage insurance on conventional loans is typically referred to as PMI, or Private Mortgage Insurance. Private companies provide this type of mortgage insurance coverage.
As stated above, both PMI and FHA Mortgage Insurance protect the investor who owns the loan in the event of a default on the loan. These types of mortgage insurance are not “life insurance policies” and do not pay off the loan on your behalf if something should happen to you.