What is Private Mortgage Insurance? (PMI)
Buying a home usually has a monster obstacle — coming up with a sufficient down payment. You can put less than the traditional 20% down payment but the lender will likely require you to buy mortgage insurance.
The concept behind mortgage insurance is the same as with other insurance plans. You pay a monthly premium to the insurer who protects the mortgage lender in the event you default. There are two types of mortgage insurance: government and private.
What is private mortgage insurance? (PMI)
PMI is insurance for the mortgage lender’s benefit, not yours. It’s a concession often required when your down payment on the purchase of a home is less than 20%. Because the lender is assuming additional risk by accepting a lower amount of upfront money towards the purchase, they will often call for the borrower to purchase private mortgage insurance.
What is private mortgage insurance? (PMI)
PMI is insurance for the mortgage lender’s benefit, not yours. It’s a concession often required when your down payment on the purchase of a home is less than 20%. Because the lender is assuming additional risk by accepting a lower amount of upfront money towards the purchase, they will often call for the borrower to purchase private mortgage insurance.
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