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.