What is private mortgage insurance (PMI) and do I need it?

Private mortgage insurance, commonly referred to as PMI, is a type of insurance that lenders typically require when a borrower is unable to make a significant down payment on a home. Specifically, it is often required when the down payment is less than twenty percent of the home’s purchase price. PMI protects the lender in case the borrower defaults on the loan, essentially covering part of the lender's losses. Whether you need PMI depends on your financial situation and the type of mortgage you secure. If you are putting down less than twenty percent, your lender may require PMI to mitigate their risk. It is important to note, however, that PMI is not a benefit to the borrower; it does not protect you as the homeowner. Instead, it is a cost that you will pay monthly, which can add to your total monthly mortgage payment. As you plan your home purchase, it is wise to consider making a larger down payment if possible to avoid PMI. You may also want to research various mortgage options, including those that do not require PMI with certain loan programs. For detailed information and options specific to your situation, it may be helpful to visit the Franklin American Mortgage website or consult a financial advisor.