Private Mortgage Insurance (PMI) is a type of insurance that a borrower might be required to buy if they take out a conventional loan with a down payment of less than 20% of the purchase price. PMI protects the lender, not the borrower, if the borrower stops making payments on their loan. The requirement to buy PMI usually also applies to refinancing a conventional loan when the borrowers equity is less than 20% of the value of their home. PMI is arranged by the lender and provided by private insurance companies.

Here are some key points about PMI:

• PMI is an added insurance policy for homeowners who put less than a 20% down payment and is designed to protect the lender if the borrower is unable to pay their mortgage.
• PMI is not the same thing as homeowners insurance.
• PMI can be a nominal price to pay for being able to secure a home loan with todays mortgage rates.
• PMI can help borrowers qualify for a loan that they might not otherwise be able to get, but it can increase the cost of the loan.
• PMI can be paid for in different ways, such as a monthly premium or a one-time up-front premium paid at closing.
• The amount paid for PMI can vary, but borrowers can expect to pay approximately between $30 and $70 per month for every $100,000 borrowed.
• PMI is not forever. Once the borrower has built equity of 20% in their home, they may be able to cancel their PMI.

Its important to discuss PMI with lenders in advance so that borrowers know what to expect in terms of their monthly payments and interest rate.