A contract that protects a lender in case a borrower defaults on a FHA mortgage
If you have a loan that's insured by the Federal Housing Administration (FHA), you'll be required to give monthly payments for MMI. So, if you default on a loan, the lender has two ways to get their money back - sell your property or ask for repayment from the FHA, which will use the money collected from MMI. On top of MMI, you have to pay a one-time fee, about 2 1/4% of the loan amount, on the closing date. You can also choose to tack this fee onto the loan amount and pay it over time.