What is "private mortgage insurance" or "PMI"?

What is "private mortgage insurance" or "PMI"?

Sam Friedman (Editor-in-Chief, National Underwriter, Property & Casualty Edition) gives expert video advice on: If I have a dog, can I get homeowner's insurance?; If I am turned down for homeowner's insurance, what can I do? and more...

Private mortgage insurance is basically required by a lender to cover their investment if you take out a mortgage and you only put a tiny bit of money down. It's usually people who put less than 2% down on a house may often be required to buy PMI insurance to protect the lender in case the homeowner defaults on their loan. There are various regulations in place through the federal government in terms of disclosure, how much this costs, why it's needed, things of that nature. But that's basically it. It's to protect the lender in case you default on your loan. And it can be made a condition of the loan--if you don't buy the PMI insurance, we don't give you the loan. So that's something you do have to watch out for.