Private Mortgage Insurance, commonly called PMI, is an insurance policy that safeguards lenders in the event of borrower default. It provides financial protection to the lender, allowing them to recover a portion of the outstanding mortgage balance if the borrower fails to make payments. PMI is typically required when the down payment is less than 20% of the home's purchase price.

Several factors influence the cost of PMI and the duration for which it is required:

• Loan-to-Value Ratio (LTV): A higher LTV ratio, resulting from a smaller down payment, generally increases the PMI premium.
• Credit Score: Borrowers with a lower credit score may face higher PMI rates, as it is perceived as a higher risk for the lender.
• Loan Program: Different loan programs may have varying PMI requirements and rates. FHA loans, for example, have their mortgage insurance known as MIP (Mortgage Insurance Premium).
• Property Type: Certain property types, such as investment properties or condos, may have different PMI requirements.
• Loan Term: The length of the loan may affect the PMI duration and cost.

Private Mortgage Insurance plays a crucial role in expanding homeownership opportunities for individuals who may not have a substantial down payment saved. It enables borrowers to secure a mortgage with a lower initial investment, making homeownership more accessible. In addition, PMI is an added layer of protection for lenders, reducing their risk in approving loans with higher LTV ratios.

• Access to Homeownership: PMI allows borrowers to purchase a home with a down payment of less than 20%.
• Loan Approval: PMI can increase the likelihood of loan approval, even for borrowers with limited upfront funds.
• Flexible Payments: PMI payments are often included in the monthly mortgage payment, making it convenient for borrowers.