What Is Mortgage Insurance
by FHA Homeowner
Ask Kate: What is mortgage insurance and does it protect me? Kate, I took out an FHA loan through a bank with the PMI included. I don't have to get the mortgage insurance myself correct, that is all handled through the bank?
Because now I'm getting cards for mortgage protection insurance in the mail? Thanks, FHA Homeowner
Kate Answers: What is mortgage insurance and does it protect me?
Dear FHA Homeowner, Let me set your mind at ease! Well, maybe I can, that is. Here's the thing. When you got your home loan, yes the bank made sure they included mortgage insurance. You know this because you are paying for it in your monthly house payments every month. Otherwise you would not have an FHA mortgage loan!
But the questions remain: What is
mortgage insurance? Does it protect homeowners? What are its benefits?
Here is what the FHA website says: All FHA borrowers pay mortgage insurance premiums to offset potential claims to the FHA insurance fund and ultimately prevent risk to the taxpayer.
This means the FHA mortgage insurance you are required to have protects the lender, not you.
I have heard TV ads ending with "...and it's FHA insured" using a reassuring voice. That's misleading unless they are advertising to mortgage companies!
But don't get me wrong! I am a fan of FHA. By charging mortgage insurance, FHA is able to insure lenders, allowing them to offer more favorable terms to borrowers with minimal down payment or equity. That benefit is unmeasurable. However, homeowners also need to understand FHA mortgage insurance will not insure or protect them in times of need.
So what is mortgage insurance NOT? Not job loss mortgage payment protection. Not death insurance. Not life insurance. Not term insurance. Not temporary time off the job due to sickness or injury insurance. And that is why you are getting so many offers for these policies in the mail.
I hope that answers your question. For more information on FHA, I recommend looking over the links at the bottom of this page. They lead to other pages on my website with surprisingly simple facts on FHA mortgage loans and mortgage insurance. I hope you will let me know if you have more questions.
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