Private Mortgage Insurance (PMI) is insurance for the lender that is required on Fannie Mae or Freddie Mac loans when the borrower has a down payment less than 20% of the purchase price.
It is also required on all FHA loans even if the borrower does have 20% for a down payment.
Many people have the impression that PMI protects the borrower but that is not true. PMI is charged either monthly or in advance as security for the lender and is one of the best reasons to have a 20% down payment.
