Mortgage insurance is a type of insurance policy that protects a mortgage lender if the borrower defaults on their payments, or is otherwise unable to fulfill the contractual obligations of the mortgage.

If a homebuyer makes a down payment of less than 20% of the purchase price of a home or is the recipient of an FHA or USDA loan, they’ll usually be required to pay mortgage insurance. It lowers the risk of a lender giving you a loan, but it also increases the cost of the loan.