What is mortgage insurance and why do I need it?

Mortgage insurance benefits the buyer by allowing him or her to purchase a home with less than 20% down. When a homebuyer borrows more than 80% of the purchase price, the lender has a concern that if the buyer defaults and the lender forecloses, the lender may not be able to re-sell the property for as much as the buyer owes. Mortgage insurance, whether VA, FHA, or private, protects the lender in this situation and pays the amount of any shortfall to the lender.