Understanding choices in mortgage insurance

Part 6: Finding the right home loan

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(This is Part 6 of a seven-part series. See Part 1: Mortgage shopping: what you should know before you begin; Part 2: Pros and cons of fixed, adjustable mortgages; Part 3: Three options available on most mortgages; Part 4: How long should you take to pay off your mortgage? Part 5: Investment returns influence real estate down payment and Part 7: Navigating real estate loan locks, docs.) Borrowers who make down payments of less than 20 percent are charged for the risk they impose on lenders. The charge can take three different forms: private mortgage insurance (PMI), lender-provided mortgage insurance (LPMI), and a higher-rate second or "piggyback" mortgage. Borrowers often have a choice between two and sometimes all three. With PMI, the borrower pays a premium to a mortgage insurance company selected by the lender. The premium covers the entire loan amount, is not tax deductible, and is in force until terminated. PMI can usually--although not always--be terminated when the loan b...