difference between fha mortgage insurance and homeowner insurance?

They are not the same. Homeowner's Insurance protects your home against perils such as fire, theft or natural disasters (amongst other liabilities). FHA mortgage insurance protects the lender against borrower default. The insurance fee charged by the FHA is used to crate a loan guaranty fund. When a borrower defaults on a FHA mortgage, this fund is used to make the lender whole (as the lender will lose money in the foreclosure process. While nobody wants to pay mortgage insurance, having this type of loan is what allows a borrower to qualify with lower down payments, lower credit scores and more flexible approval guidelines.

Michael did an excellent job with the explanation.

Mortgage insurance is a policy issued by FHA that YOU pay for, that benefits the lender by paying for part of a loss due to a foreclosure or short sale of the borrower. Homeowners insurance pays to repair the home in the event there is damage caused by accident or weather. Two completely different things.. One more thing to note here.. FHA has the most expensive mortgage insurance rates of any loan product.. if you have good credit and at least 5% down payment, then you can use conventional financing and pay the lower MI rates. FHA =1.35% or $113 for every $100K financed.. and with FHA, in most instances, the premium is there for the life of the loan.. the only way to get rid of it would be to refinance or pay it off. With conventional, if your credit score is 720 or higher, then MI=0.62% or $52 for every $100K financed, and with conventional, once you have paid for 24 months, and once you have 20% equity or more, then you can ask your lender to remove the MI, and you wont have to refinance to do it.. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. William J. Acres, Lender411's number ONE lender in Arizona. 480-287-5714 WilliamAcres.com