Private Mortgage Insurance helps you get the loan

Private Mortgage Insurance, also known as PMI, is a supplemental insurance policy you may be required to obtain in order to get a mortgage loan. PMI is provided by private (non-government) companies and is usually required when your loan-to-value ratio the amount of your mortgage loan divided by the value of your home is greater than 80 percent.

PMI allows you to make a lower down payment and still qualify for a mortgage loan. In fact without PMI, many of us would not be able to purchase our first home. Self-employed and low income borrowers may benefit more because PMI may lower your monthly payments. You need to ask your loan officer to calculate which option is better; PMI or a second trust which normally has a higher interest rate.

Your PMI premium is fixed based on plan type (loan-to-value ratio, loan type, loan term, property type, income, etc.) and is not related to your particular credit history or other individual characteristics. There are programs which lenders pay PMI for home buyers, it calculated into rate when loan to value is over 80%.