What is Prepaid Mortgage Insurance?

Mortgage insurance is insurance purchased by a buyer to cover the lender's risk of loss. Mortgage Insurance is generally required by lenders when the down payment is less than 20% of the purchase price. When mortgage insurance is prepaid, it is paid at closing.  When paid monthly with the payments, one month is collected for reserves at closing.  You have the option of paying the full amount of the premium at closing and this would be considered prepaid.