What is Private Mortgage Insurance (PMI)?

Hey folks! Have you ever heard of Private Mortgage Insurance, or PMI for short? It's something that comes into play when you're buying a home and can't put down at least 20% of the purchase price upfront. Basically, it's insurance that protects the lender in case you default on your mortgage.

So, why do you need it? Well, lenders consider mortgages with smaller down payments riskier. Having PMI reduces their risk and makes it possible for them to get approved for a loan even if they can't hit that 20% mark. It does add a bit to your monthly payments, but it's not forever. Once you build up enough equity in your home, usually around 20-22%, you can request to have it removed.

Think of PMI as a stepping stone to getting you into your dream home sooner rather than later. Not ideal, but sometimes necessary!

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