A Consumer's Overview of Private Mortgage Insurance (PMI)

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What Is "Private Mortgage Insurance?" (PMI)

Lenders require "private mortgage insurance" on "conventional"
mortgages when a borrower's down paymment is less than 20%.
Lenders' experience reveals a strong correlation between borrower
"equity" and "defaults". The less money a borrower has invested in a
home, the greater the probability of a default. Thus, "private mortgage
insurance" is a financial guaranty that protects lenders against loss in
the event that a borrower defaults. Without that financial guaranty,
lenders will typically require a down payment of 20% or greater.

• NOTE: Don't confuse "Mortgage Insurance" with "Mortgage Life
Insurance", which provides coverage in the event of a borrower's
death, or "Homeowners Insurance", which protects the homeowner
from loss due to damage from fire, flood, or other disasters.