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Understanding When Mortgage Insurance May Be Required

07/07/2010
Thinking about becoming a first time home buyer? Don't forget to think about buying mortgage insurance, too. It's an added cost that many homebuyers forget to consider. With more buyers unable to come up with a down payment equal to 20 percent of the amount borrowed, more lenders are requiring the purchase of mortgage insurance. This is happening despite signs that the housing market may be recovering.

Where to get mortgage insurance

Back a few years ago when the housing market collapsed, many homebuyers turned to the Federal Housing Administration (FHA) for the mortgage insurance they needed to purchase a new home. However, times are different now and the FHA has begun offering fewer mortgage insurance policies than it used to. According to information reported by the New York Times, homebuyers can now turn to private insurers for their mortgage insurance needs.
With financial conditions improving and the real estate market stabilizing, companies that offer private mortgage insurance have begun to simplify their criteria. The result of this easing of standards is that many can now offer homebuyers more options than they could before.

The greater availability of mortgage insurance is great news for homebuyers who aren't in a financial position to put the amount lenders require towards a down payment because it helps them get their mortgages approved.
But homebuyers should be aware that mortgage insurance isn't the only type of insurance they'll need. Before their mortgage applications are approved, they'll likely also need to purchase homeowner's insurance. Before purchasing, they should ensure that the insurance policy covers damage resulting from a natural disaster.

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