Buying your first home is exciting, but it also comes with new terms and costs you may not have heard of before. One of those is mortgage insurance. If you’re putting less than 20% down, chances are you’ll come across it — but don’t worry, it’s not all bad news. In fact, mortgage insurance can be the very thing that helps you become a homeowner sooner.
In this post, we’ll break down the top three things every first-time homebuyer should know about mortgage insurance.
1. What Is Mortgage Insurance?
Mortgage insurance is an added cost that protects the lender if you stop making your payments. While it may feel like “just another expense,” it actually opens the door to homeownership for buyers who don’t have 20% saved for a down payment.
👉 In short: mortgage insurance gives you the ability to buy a home with a smaller upfront investment — sometimes as little as 3% down.
2. How It Works Depending on Your Loan Type
Not all loans handle mortgage insurance the same way:
Conventional Loans: If your down payment is less than 20%, you’ll need Private Mortgage Insurance (PMI).
FHA Loans: These always include Mortgage Insurance Premium (MIP), regardless of how much you put down.
VA Loans: No monthly mortgage insurance! Instead, VA loans require a one-time funding fee that can often be rolled into your loan amount.
This is why it’s important to talk with a trusted mortgage professional — the type of loan you choose can make a big difference in how mortgage insurance affects your monthly payment.
3. How to Get Rid of Mortgage Insurance
The good news is that mortgage insurance doesn’t always last forever.
PMI (Conventional Loans): Drops off automatically once you reach 22% equity. You may also request removal once you hit 20% equity — especially if your home’s value has increased.
MIP (FHA Loans): If you put down at least 10% and make on-time payments, MIP may be removed after 11 years. Otherwise, it can remain for the life of the loan.
👉 Pro tip: If you’re in an FHA loan and your equity position improves, refinancing into a conventional loan could be a smart way to eliminate MIP earlier.
The Bottom Line for First-Time Buyers
Mortgage insurance may feel like an added cost, but it’s also the key that allows many first-time homebuyers to get into a home sooner. Understanding how it works — and how to remove it down the road — can help you make smarter financial decisions.
Ready to Take the Next Step?
At Morgan Financial, we walk first-time homebuyers through every step of the process. From understanding mortgage insurance to choosing the right loan program, we’ll help you feel confident about your path to homeownership.
👉 Contact us today to explore your options and get locked in!
