Mortgage insurance is an insurance policy which compensates lenders or investors for losses due to the default of a mortgage loan. Essentially, it lowers the risk to the lender of making a loan to you, so that you can qualify for a loan that you might not otherwise be able to get, but it increases the cost of your loan. Typically, anyone making a down payment of less than 20 percent of the purchase price of the home, will need this. Sometimes its included in your costs at closing, or included in your total monthly payment, or even both. While it may seem convenient, it protects the lender, not you, if you ever fall behind on your payments.