Private Mortgage Insurance (PMI)

The private mortgage insurance is required if the down payment is less than 20 percent. The coverage protects the lender from financial loss due to default. PMI charges,which the borrower pays, vary depending on the amount of the down payment. These costs may be paid in full at the closing or are sometimes financed over the life of the mortgage, depending on the type of financing. It's important to note that after build up 20 to 30 percent equity in a home the buyer may cancel the private mortgage insurance.