Insurance & Protection

There are three primary types: PMI (private mortgage insurance on conventional loans), MIP (mortgage insurance premium on FHA loans), and the VA funding fee (on VA loans). Each has different cost structures, payment methods, and cancellation rules.

Private mortgage insurance is required on conventional loans with less than 20% down. It protects the lender, not the borrower. PMI can be removed automatically when your loan-to-value ratio reaches 78%, or by request at 80% LTV. Costs typically range from 0.3% to 1.5% of the loan amount annually.

Flood insurance is required by federal law if the property is in a FEMA-designated Special Flood Hazard Area (zones starting with A or V). The lender determines flood zone status through a flood certification. If required, coverage must be in place before closing.

Hazard insurance covers damage to the physical structure from specific perils (fire, wind, hail). Homeowners insurance is broader, including hazard coverage plus liability protection and coverage for personal property. Lenders typically require homeowners insurance, which includes the hazard component.

An escrow account is a holding account managed by your mortgage servicer that collects monthly deposits for property taxes and insurance premiums. The servicer pays these bills on your behalf when they come due. Most loans require escrow, though some conventional loans allow waiver with sufficient equity.

Yes. Condo mortgages require both the HOA master policy (covering common areas and the building structure) and an individual HO-6 policy (covering your unit interior, personal property, and liability). Lenders verify both policies meet minimum coverage requirements before closing.

Standard homeowners insurance does not cover earthquake damage. If your property is in a seismically active area, lenders may require or strongly recommend a separate earthquake policy. Coverage is available through private insurers or state programs like the California Earthquake Authority.