Lenders Mortgage Insurance

For most first time home buyers, saving enough money for a sizeable down payment is the greatest barrier to home ownership. Traditionally, lenders have required a down payment percentage of the home's purchase price. However, lenders will now approve a mortgage with a smaller down payment if the mortgage is covered by lender's mortgage insurance.

Lenders Mortgage Insurance is insurance that protects a lender in the event that a homeowner defaults on a loan. Lenders generally require mortgage insurance on low downpayment loans because experience and studies show that a borrower with less than 20 percent invested in a house is more likely to default on a mortgage. In effect, the mortgage insurance company shares the risk of foreclosure with the lender.