If your down payment is less than 20% of the value of the house, the lender will usually require mortgage insurance. The insurance policy covers the lender’s risk in the event that you do not make the loan payments. Typically, you will pay a monthly premium along with each month’s mortgage payment. Your private MI can be canceled at your request, in writing, when your reach 20% equity in your home, based on your original purchase price, if your mortgage payments are current and you have a good payment history. By federal law your private MI payments will automatically stop when you acquire 22% equity in your home, based on the original appraised value of the house, as long as your mortgage payments are current.

Estimated cost: 0.5% to 1.5% of the loan amount to pre-pay for the first year

Some lenders will pay for private MI--called lender’s private mortgage insurance (LPMI)--and in turn will charge a higher interest rate. Unlike private MI that you pay, there is no automatic cancellation once you acquire 22% equity. To eliminate the LPMI, you must refinance the loan, which in turn means carefully considering market interest rates and settlement costs at the time to see if refinancing would be an advantage, rather than keeping your current mortgage.

The Federal Housing Administration (FHA) offers insured mortgages and the Veterans Administration (VA) and the Rural Housing Service (RHS) offer mortgage guarantees. If you are getting a mortgage insured by the FHA or guaranteed by the VA or the RHS, you will have to pay FHA mortgage insurance premiums or VA or RHS guarantee fees. As with Private MI, insurance premium payments will stop when you acquire 22% equity in your home. FHA fees are about 1.5% of the loan amount. VA guarantee fees range from 1.25% to 2% of the loan amount, depending on the size of your down payment (the higher your down payment, the lower the fee percentage). RHS fees are 1.75% of the loan amount.

Imposed by your lender or broker, this charge covers the initial costs of processing your loan request and checking your credit report.

Estimatedcost: $75 to $300, including the cost of the credit report for each applicant