 TITLE: How Are Homeowners Insurance and Mortgage Insurance Different? CONTENT: Is Mortgage Insurance Required?\n-------------------------------\nYou can usually sidestep mortgage insurance altogether if your down payment is at least 20%, but the kind of mortgage you get also plays an important part. Here's how mortgage insurance works for these four common types of home loans.\n*   **Conventional loans:** Borrowers who put down less than 20% will likely need to purchase private mortgage insurance (PMI). PMI generally ranges anywhere from 0.5% to 2% of your total annual loan amount, though factors like your credit score and length of the loan also come into play when determining your rate. Many lenders wrap the cost into your monthly mortgage payment and allow you to do away with PMI once your home equity reaches the 20% mark.\n*   **FHA loans:** Guaranteed through the Federal Housing Administration, FHA loans have less stringent requirements when it comes to income, credit score and down payment. However, borrowers are on the hook for paying a mortgage insurance premium (MIP). This translates to an upfront premium of 1.75% of the loan amount, along with an annual fee included in your monthly payment that ranges from 0.45% to 1.05%.\n    There's one catch: If your down payment is less than 10%, you'll pay mortgage insurance for the entirety of the loan. One workaround is to refinance into a conventional loan once you hit 20% equity. Meanwhile, borrowers who put down 10% or more can cancel their MIP after 11 years.\n*   **USDA loans:** These loans, which require no down payment, are insured by the U.S. Department of Agriculture and are available in specific rural and suburban areas. In lieu of mortgage insurance, borrowers are required to pay guarantee fees—one upfront fee of 1% of the total loan amount, plus a 0.35% annual fee included in your monthly payment that applies for the life of the loan.\n*   **VA loans:** Backed by the U.S. Department of Veterans Affairs, VA loans are designed for military families and don't require a down payment. Instead of buying mortgage insurance, borrowers pay a funding fee that's either paid at closing or folded into the loan balance. Rates range anywhere from 1.4% to 3.6%.\nWill you have to pay mortgage insurance if you refinance your loan? It depends on how much equity you have in your home at the time you refinance. Even if you weren't responsible for paying mortgage insurance on your original loan, you may get stuck with it when refinancing if you have less than 20% equity in your home.\nThe Bottom Line\n---------------\nHomeowners insurance and mortgage insurance are two very different parts of the homebuying journey. While you'll be hard-pressed to find a lender that doesn't require a homeowners policy, you have more flexibility when it comes to mortgage insurance. Your loan type and down payment carry the most weight here.\nA little bit of knowledge goes a long way—and understanding how these two types of insurance are different can only make you feel more confident when navigating the mortgage application process. No matter what, your credit score is an important factor in getting approved for a mortgage. Check your credit score and credit report for free with Experian to get yourself moving in the right direction. END