Mortgage insurance protects the mortgage lender against loss if a borrower defaults on their loan. Private mortgage insurance is required for borrowers of conventional loans with a down payment of less than 20%. FHA loans and VA loans are essentially public mortgage insurance as borrowers pay higher insurance premiums in exchange for a low down payment. These funds allow the FHA to insure lenders against losses if borrowers default on FHA-approved loans. Mortgage insurance costs are included as part of the monthly loan payment. FHA-insured loans have two mortgage insurance components: an up-front mortgage insurance premium and a monthly mortgage insurance payment. The upfront payment is a one-time premium and is paid at closing or may be financed into monthly payments. Borrowers pay a monthly mortgage insurance payment until they reach 78% loan-to-value ratio from the final sale price of the home.