Mortgage Insurance
Insurance that protects the lender if a borrower defaults on their mortgage loan, typically required for loans with less than 20% down payment.
Detailed Explanation
Mortgage insurance (MI or PMI) isn't homeowners insurance—it doesn't protect your property but rather the lender's investment. It's either paid as part of your monthly mortgage payment or as an upfront premium at closing.
Practical Example
Since Jennifer could only afford a 10% down payment on her home purchase, her lender required mortgage insurance, adding $150 to her monthly payment until she reached 20% equity in the property.
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