Frequently asked questions
- What is private mortgage insurance (MI)?
- Private MI protects a lender's investment in the event a homeowner should default on a home loan. Mortgage insurance is a financial guaranty business in which the insurer assumes a portion of a lender's risk in making a mortgage loan. Lenders and investors typically require mortgage insurance for loans with down payments of less than 20%.
- Why is private MI needed?
- Experience shows that homeowners with less than 20% invested in the cost of a home are more likely to default, making low-down-payment mortgages riskier for lenders and investors. To offset that risk, lenders and investors typically require mortgage insurance for loans with down payments of less than 20%.
- What's the difference between private MI and FHA insurance?
- Private MI is the private sector alternative to Federal Housing Administration (FHA) mortgage insurance, which is a government program backed by taxpayers. Private MI typically may be cancelled sooner than FHA and is often less expensive.
- Are private mortgage insurance and mortgage life insurance the same thing?
- No. Private MI is not mortgage life insurance, which pays off a mortgage if the homeowner dies or becomes disabled.
- Are private MI and homeowners insurance the same thing?
- No. Homeowners insurance protects homeowners from loss due to theft, fire or other disaster. Private MI protects the lender and investor from loss, not the borrower.
- How do borrowers benefit from private MI?
- Private MI makes it possible for families to buy homes with a low down payment, helping them become homeowners sooner than otherwise possible.
For first-time buyers, private MI helps clear the biggest hurdle to homeownership: coming up with a 20% down payment.
For trade-up buyers, private MI allows them to consider a wider range of homes and leverage their investment in their homes.Plus, both first-time and move-up buyers can benefit by putting less money down and keeping cash for other uses: making investments, paying off debt, paying for home improvements or covering emergencies.
- Are MI premiums tax-deductible?
Note: Legislation is still pending to determine if MI will be an allowable deduction in 2017.
Households with adjusted gross incomes of $100,000 or less will be able to deduct 100% of their MI premiums. The deduction is reduced by 10% for each additional $1,000 of adjusted gross household income, phasing out after $109,000.
Married individuals filing separate returns who have adjusted gross incomes of $50,000 or less will be able to deduct 50% of their MI premiums. The deduction is reduced by 5% for each additional $500 of adjusted gross income, phasing out after $54,500.The deduction is not restricted to first-time homebuyers.
- Who orders the MI?
- MI is generally ordered by the lender while the loan is being underwritten. The loan originator consults with the homebuyer to determine which loan product best meets their needs, and then determines the MI requirements.
- How much does private MI cost?
- Premium prices vary. They are based on a variety of factors such as the size of the down payment, the borrowers' credit score, type of mortgage and amount of insurance coverage. Typically, premiums are included in the monthly mortgage payment.
- Who determines the amount of MI coverage needed for the loan?
- The investor typically determines the amount of MI coverage required for each specific loan product. Since Fannie Mae and Freddie Mac are the most prominent investors in the marketplace today, they set the standard minimum coverage requirements for the industry. We recommend lenders consult with their investors to determine the appropriate amount of coverage to order.
- Can private MI be cancelled?
- Most private MI programs allow for cancellation. However, it is not the MI company's decision whether or not to cancel coverage. As the insured, it is the decision of the lender or investor. Mortgage lenders will typically permit the cancellation of private MI when the homeowner builds up enough equity in the home.
Investors establish criteria for private MI cancellation, and most will cancel private MI upon request for borrowers who have a good payment history, more than 20%-25% equity, and have had the mortgage for at least two to three years.
Lender-paid MI may not be cancelled by the borrower since the lender pays the premium.
Under federal law, private MI on most loans made on or after July 29, 1999, will end automatically on the date the mortgage is scheduled to reach 78% of the original value of the house. See our Homeowners Protection Act brochure or read our How do I cancel MI? page for more details.
Learn more about cancelling mortgage insurance at homediggidy.com.
- Are MI premiums refundable?
- Although refundable premiums are available, generally non-refundable premium plans are selected for monthly payment policies. Mortgage insurance premiums paid in a single sum at closing or annually may be partially refundable upon cancellation, but non-refundable premiums are often selected in order to reduce closing costs.
- Do I have to pay a fee to take the Homebuyer Education test?
- No, MGIC provides the test at no cost.
- Is the test open book?
- Yes. Feel free to refer to any of the website content and materials when taking the test to help you answer the questions correctly.
- What score do I need to pass the test?
- You must achieve a score of 80% or greater.
- How is the test scored?
- You will answer four questions for each of the five Homebuyer Education chapters. If you don't answer enough of the questions correctly, you will receive additional questions until you have achieved a total score of 80%.
- Can I begin the test now and complete it later?
- You need to finish the test during the session you begin taking it. If you exit the test without completing it, you will need to start over and re-take the entire test.
- Can my co-borrower and I take the same test, or do we have to take separate tests?
- You may enter up to 6 borrower names on the test, and each co-borrower will be listed on the Certificate of Achievement. However, you'll need to verify test requirements with your lender to determine whether you and your co-borrower(s) should take the same or separate tests.
- Will I receive a copy of my Certificate of Achievement?
- Yes. You will be e-mailed a PDF of the Certificate of Achievement to the e-mail address you provide.
- What if I enter my name wrong on the Certificate of Achievement?
- A preview of your Certificate of Achievement will be generated for you. You may edit your name on the PDF to ensure it's spelled correctly for your lender's records.
- Can I save a copy of my Certificate of Achievement?
- A PDF of your Certificate of Achievement will be generated for you and you may view, print or save this PDF. You will also be e-mailed a copy.
- How do I change my name or add a co-borrower name after I received the final Certificate of Achievement?
- Contact MGIC Customer Service, 1-800-424-6442.
- I received an English copy of my Certificate of Achievement, but I would like it in Spanish.
- Contact MGIC Customer Service, 1-800-424-6442.
- How long does it take to review the content and complete the Homebuyer Education test?
- Most people review the content and complete the test within 60 minutes, but it may take you a longer or shorter amount of time. The test is not timed; however, your web browser could time out after a few hours of inactivity. If this should happen, you'll need to retake the entire test from the beginning.
- I lost my Certificate of Achievement. How can I re-print it?
- Open the original e-mail notification that was sent to you after you completed the test, and re-print your certificate. If you no longer have the original e-mail, you will need to contact Customer Service at 1-800-424-6442.
- I never received a Certificate of Achievement via e-mail.
- The e-mail may be in your spam filter. Check to see if you received an e-mail from firstname.lastname@example.org.
- How can I find out if my e-mail address is already registered as a Homebuyer Education code?
- Contact Customer Service, 1-800-424-6442.
- Can you register my e-mail address as a rush?
- Yes. Contact Customer Service, 1-800-424-6442.
- I registered my e-mail address awhile back, do I need to register it again? (Does the Homebuyer Education code expire?)
- The registration codes fall off after one year of inactivity and you would need to register again at that point.
- Is there a cost to offer your Homebuyer Education test to our borrowers?
- No, the test is free for your organization to use for any and all borrowers.
- Is the Homebuyer Education process HUD-approved?
- The Homebuyer Education content and test are not specifically endorsed by HUD.
- My borrower said they completed the test, but I didn't receive a Certificate of Achievement.
- Contact Customer Service, 1-800-424-6442.
- My customer will be taking the test in Spanish, but I need an English copy of the Certificate of Achievement for my records.
- All lenders are automatically sent an English copy of the Certificate of Achievement.
- How will I know my borrower completed the test?
- You will automatically receive an e-mail notification after a borrower completes the test.