New homebuyers are sometimes confused about the different types of insurance discussed with them during the home buying process. These include:

Private mortgage insurance helps protect the mortgage company (lender) against financial loss if a homeowner stops making mortgage payments, and/or defaults on their home loan. This protection is provided by private companies and allows mortgage companies to accept lower down payments than would normally be allowed.

Private mortgage insurance also enables mortgage companies to grant loans that would otherwise be considered too risky, by allowing these loans to be purchased by third-party investors like the Federal National Mortgage Association (Fannie Mae®) and the Federal Home Loan Mortgage Corporation (Freddie Mac).

Homebuyers must make a down payment of at least 3% of a home's value to qualify for private mortgage insurance. However, under some programs, the buyer may be allowed to use a gift or grant to cover some, or all of the down payment requirement. The gift or grant may come from a friend, relative, community group or other organization.

Private mortgage insurance is available on a wide variety of home loans.

Private mortgage insurance premiums will be included in your monthly home loan payment. Premiums are based on the amount and terms of the home loan, will vary according to the amount and type of loan, and the amount of coverage required.

Monthly plans allow a borrower to just pay one or two months premiums at closing, with additional payments made with the regular monthly mortgage payment. Typically, home buyers choose to add the amount of the mortgage insurance premium to the loan amount. By doing this, homebuyers can reduce their closing costs and increase their interest tax deduction. (Consult a tax professional.)

A title search is performed to examine the public records, laws, and court decisions to ensure that no one, except the seller, has a valid claim to the property, and to disclose past and current facts regarding ownership of the property. The title insurance policy is a contract in which the insurer agrees to pay the insured a specific amount for any loss caused by defects of title to real estate. You'll pay the premium once as part of your closing costs. Rates for title insurance vary by state, typically in the 0.4% - 0.7% range, or $600 to $1,050 for a $150,000 loan.

Even in you are required to pay title insurance, consider the following ways to lower your cost:

As a borrower, you'll be required to purchase homeowner's insurance. When you insure your home, you should buy sufficient coverage for the total cost you'd pay to rebuild your home if it were destroyed, as well as replace your contents. If you don't have sufficient coverage, your insurance company may only pay a portion of the cost for repairing damage to your home. Check with me for coverage requirements. Consider the following ways to insure your home:

It is extremely important that you understand flood insurance. A standard homeowner's insurance policy does not cover damage from flooding. To determine if you are required to carry flood insurance, a flood certificate will be ordered to determine whether the home/property is located in a flood zone. Flood insurance is available only where the local government has adopted adequate flood plain management regulations under the National Flood Insurance Program (NFIP). For more information, call NFIP at 1-888-FLOOD29.