The Definition of MMI Insurance

by Debbie Mcrill ; Updated July 27, 2017
Recent homebuyers stand next to their new home as the movers help carry their furniture and belongings inside

Mutual mortgage insurance is set up as part of the purchase agreement between the borrower and lender, typically when using a Federal Housing Administration loan. The insurance guarantees the lender the money for the loan in case the borrower does not pay the mortgage.

Benefit to Borrower

If a borrower does not obtain mortgage insurance, the down payment is typically about 20 percent of the home price. With MMI, the borrower often can reduce the down payment to 5 to 10 percent.

Ways to Pay

MMI can be paid in several ways, depending on the agreement between the borrower and the lender. Monthly payments typically can be rolled into the mortgage payment, and the lender sends the money to the insurance company. The home buyer also can make payments annually or as a one-time fee.

Misconceptions

MMI should not be confused with homeowner’s insurance, which covers loss of property due to events such as fire, theft or injury. MMI does not take the place of this type of insurance; it protects the lender only in case of default by the borrower. However, the borrower is responsible for paying the premiums.

About the Author

Debbie McRill went from managing a Texas Department of Criminal Justice office to working for Compaq and Hewlett-Packard as a technical writer and project manager in 1997. Debbie has also owned her own businesses and understands both corporate and small business challenges. Her background includes Six Sigma training, and an Information Development career with journalism and creative writing as her passion.

Photo Credits

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