Mortgage insurance is a type of insurance policy that protects a lender or a mortgage holder in the event that the borrower defaults on the loan or is unable to repay it. It's typically required when the borrower's down payment on a home is less than 20% of the purchase price.

There are two main types of mortgage insurance:

1. Private Mortgage Insurance (PMI): This is typically required for conventional loans (those not insured by a government agency like the FHA or VA). PMI premiums are paid by the borrower and can be either a monthly premium added to the mortgage payment or a one-time upfront premium.

2. Mortgage Insurance Premium (MIP): This is required for FHA loans, which are insured by the Federal Housing Administration. MIP includes both an upfront premium, which is usually financed into the loan amount, and an annual premium that is paid monthly.

The purpose of mortgage insurance is to mitigate the risk for the lender by providing a financial guarantee, which allows lenders to offer mortgages with lower down payment requirements to borrowers who may not otherwise qualify for a loan. It's important for borrowers to understand the terms and costs associated with mortgage insurance when considering their home financing options.