What is mortgage insurance?

Mortgage insurance is an insurance policy that a lender may require a homebuyer to purchase to protect the lender against the loss of principal when a homebuyer provides less than 20% of the purchase price of a house as a down payment. The lower the down payment provided by the homebuyer, the higher the mortgage insurance premium required by the lender. The lender is paid only if the borrower defaults on the mortgage. Mortgage insurance is not required when a homebuyer provides a down payment of 20% or more than the purchase price of the house.