Mortgage Insurance (PMI)
Investor Term:
PMI
Definition:
Mortgage insurance is a type of insurance that protects the lender in case you default on your mortgage. It is typically required for borrowers with a down payment of less than 20% of the purchase price of the home.
Example:
There are two main types of mortgage insurance: private mortgage insurance (PMI) and government-backed mortgage insurance (FHA).
Private mortgage insurance (PMI): PMI is typically offered by private mortgage insurance companies. It is a monthly premium that is added to your mortgage payment. The amount of PMI you pay will depend on the size of your down payment, the amount of your mortgage, and your credit score.
Government-backed mortgage insurance (FHA): FHA is a government-backed mortgage insurance program. It is available to borrowers with a down payment of as little as 3.5% of the purchase price of the home. The amount of FHA mortgage insurance you pay will depend on the size of your down payment and the amount of your mortgage.