Private mortgage insurance (PMI)

[seneca]

I am rather confused with the concept of PMI and wonder what is the use of this instrument. Could you help to answer this question?

[tiara]

Unless you put down a minimum of 20% of the purchase price of the property, the lender will likely require you to pay for PMI. This insurance compensates the lender in case you default on your mortgage and your property does not fetch enough to pay off the outstanding loan in foreclosure.

[spacy]

Another way if you are close to meeting the the rate for not needing PMI is to try to come up with the additional downpayment so that you don't need to pay the monthly PMI or at least a reduced amount.