Mortgage insurance protects lenders against the losses that result from defaults on home mortgages.

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FHA MORTGAGE INSURANCE

FHA insured mortgages require mortgage insurance. Mortgage insurance is a policy that protects lenders against some or most of the losses that result from defaults on home mortgages and it's required primarily for borrowers making a down payment of less than 20%.

The Mortgage Insurance charged is .5% per year of the loan amount and is charged to the homeowner each month. In addition, FHA charges an upfront mortgage insurance premium of 1.5%.

FHA's monthly mortgage insurance payments will be automatically terminated when these conditions occur:

For mortgages with terms more than 15 years, the annual mortgage insurance premiums will be canceled when the Loan to Value ratio reaches 78%, provided the mortgagor has paid the annual premium for at least 5 years.
For mortgages with terms 15 years and less and with Loan to Value ratios 90% and greater, then annual premiums will be canceled when the Loan to Value ratio reaches 78%, regardless of the amount of time the mortgagor has paid the premiums.
Mortgages with terms 15 years and less and with Loan to Value ratios of 89.99% and less will not be charged annual mortgage insurance premiums.

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	FREQUENT FHA HUD QUESTION # 1 [ -more questions- ] - - - - - - Q: How does purchasing a home compare with renting? A: The two don't really compare at all. The one advantage of renting is being generally free of most maintenance responsibilities. But by renting, you lose the chance to build equity, take advantage of tax benefits, and protect yourself against rent increases. Also, you may not be free to decorate without permission and may be at the mercy of the landlord for housing. Owning a home has many benefits. When you make a mortgage payment, you are building equity. And that's an investment. Owning a home also qualifies you for tax breaks that assist you in dealing with your new financial responsibilities- like insurance, real estate taxes, and upkeep- which can be substantial. But given the freedom, stability, and security of owning your own home, they are worth it.