what does mortgage insurance cover

Mortgage insurance covers the lender in the event that the borrower defaults on payments, fails to meet contractual obligations, passes away, or is unable to repay the mortgage for any other reason. It is designed to protect the mortgage lender or titleholder, not the borrower. Mortgage insurance lowers the risk to the lender of making a loan to the borrower, allowing individuals to qualify for a loan with a down payment of less than 20% of the purchase price of the home. There are different types of mortgage insurance, such as private mortgage insurance (PMI) and qualified mortgage insurance premium (MIP) insurance, each serving the same purpose of protecting the lender in case of borrower default or inability to meet mortgage obligations. Mortgage insurance is typically required on FHA and USDA loans, and it is an additional monthly expense for borrowers who put down less than 20% on a conventional loan. It is important to note that mortgage insurance does not protect the borrower from losing their home if they default on the loan.