PMI, or Private Mortgage Insurance, is used when buyers have less than 20% down when buying a home. Do all buyers purchase PMI? Many Americans seem to think so.
Last week I read an article in a real estate publication quoting a Zillow survey stating that 41% of home buyers believe that everyone has to purchase private mortgage insurance, or PMI.
Who needs PMI?
If you have 20% to put down (your down payment), and it’s a regular or conventional loan (not FHA), you do not need to pay for PMI.
If you’re purchasing with FHA backed financing, there’s mortgage insurance built into the product.
Who is protected with PMI?
This type of insurance does not protect the consumer. Instead, it protects lenders in case of a default by the borrower.
Related reading:
What is mortgage insurance and how does it work? (From the Consumer Financial Protection Bureau)
