What is a private mortgage insurance?

Private mortgage insurance (PMI) is a type of insurance required by lenders when borrowers take out a home loan and are unable to make a large enough down payment on the property. It protects the lender in the event of a borrower defaulting on their mortgage. PMI is typically required by lenders when a borrower has less than 20 percent equity (the difference between the purchase price and the appraised value of the home) in their home. The cost of PMI depends on the loan amount and the borrower’s credit score. Generally, PMI can range from 0.5 percent to 1.15 percent of the cost of the loan. PMI is typically paid in monthly installments but may also be paid as a single lump sum. PMI premiums can be paid up front or added to the loan. In Virginia, the requirements for PMI are the same as other states. For buyers who have no equity or a down payment of less than 20 percent, PMI will likely be required by their lender. PMI is an additional cost to consider when buying a home, but it can provide borrowers with a lower down payment option when they may not have the funds to make a traditional down payment.

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What is a private mortgage insurance?

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