Those that would not be capable of buying a home can when mortgage insurance is implemented.   But those buyers are more risk for a Lender, so the mortgage insurance provides them protection, should the Borrower default.  Buying/financing with mortgage insurance involved can be a "win win" for both Borrower and Lender ... and housing markets too ..

In theory, it allows the borrower to make a lower downpayment.   The insurance protects the mortgagee in case of default.

In reality, mortgage insurance lines the pockets of the investors behind FNMA and FHLMC.

It helps to get the loan.

Ask Jason E. Gordon As far as I see it, it's just another expense as a buyer. But, a necessary evil to get the loan approved.

It depends upon the terms and conditions of the insurance contract.

Mortgage insurance protects the investor/lender on high ration loans. It does have a benefit for the borrower in allowing less downpayment and higher loan to value ratios than are more commonly required.

Great question for a licensed mortgage broker...

See Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi answer.  He is mortgage expert.

If there is some claim to the property it will insure the lender and the borrower.

Do not give a hoot. Your question was be valid if the mortgage industry was regulated.  It sounds like your teaching material for studing exam is way dated. 

A deduction for a buyer, and the only thing allowing them to purchase with less than 20% down (even all those "10% down with no PMI" lenders are incorporating PMI into their rate), so it's a huge benefit to buyers without a large down payment.

To a lender, it's a security blanket, as they don't get fleeced in the instance of default.

lender only - they are planning on foreclosure on you at the closing.

It depends on the type of mortgage:   Mortgage insurance is a security benefit for the lender and a requirement for the buyers to pay in order to secure the loan... depending on the down payment percentage.

Covers a lot of risk for the lender.

Brian Burkhalter It allows buyers to put down less than 20% and protects lenders should the buyer default.

Brian,

Corinne Guest, Managing Broker answered the question. A

Mostly it protects a lender in case the borrow defaults on the loan.

Listen to Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi - He knows what he's talking about!

Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi answered your question

What Fred Griffin said.

Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi nailed this one!

Brian Burkhalter - well, lenders now trust the borrower with higher mortgage amount than otherwise they could qualify for.

Does nothing for the borrower

Benefits the lender if you default. Benefits the buyer if there is an issue with the deed. 

Thank you Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi !!

Borrower benefits because if it weren't available they likely couldn't purchase the home until they had 20% down payment mortgage insurance makes it possible to put down much, much less money when buying a house. The lender benfits from the security of the loan above 80% of the LTV in the event of the home buyer defaulting. need home buying or selling info in Northern Virginia? #ComeHomeVA

It was intended to restore the lender in the event of a default as original GSE guidelines only went to 80%.

The better question at this point might be, What is Fannie Mae?

You would think insurance covering the borrower would be a requirement.  Gap insurance that pays your mortgage in event you are unable to.

I only know of one company that advertises this but they talk out of both sides of their mouths so hard I am not sure I recommend them.

Make it a Great Day.

It benefits the lender.  But I suppose it benefits the borrow because they need it to get the mortgage. -kasey

It enables mortgage financing for many home buyers.

Gene has your answer.

Have one of the lender explain this.

If you are talikg PMI / MIP it has no benefit to the borrower. This normally includes a Funding fee and in some cases (FHA) a monthly payment. It only protects the lender in deal with less then 20 % down.

That would be a great question to ask your real estate instructor who could implement all of these great responses into their teaching ... and actually teach their students versus sending them here. 

It is my belief that mortgage insurance benefits the lender