Private mortgage insurance is commonly associated with conventional mortgages where the borrower begins with a relatively high LTV.
Who PMI Protects
PMI protects the lender or investor against certain losses if the borrower defaults. It does not protect the homeowner against being unable to make payments.
Why PMI Can Be Useful
PMI can make it possible to purchase without waiting until 20% down has been accumulated.
What Can Affect Cost
- Loan-to-value ratio
- Credit profile
- Loan type
- Mortgage term
- Other risk characteristics
Can PMI Be Removed?
Depending on the loan and applicable federal rules, conventional PMI may be cancellable or may automatically terminate after applicable conditions are met.
Homebuyer takeaway: Compare the cost of buying sooner with PMI against the cost and opportunity risk of waiting for a 20% down payment.
Sources
Fannie Mae Mortgage Calculator and PMI
Fannie Mae Homebuyer FAQ