What is PMI? PMI is Private Mortgage Insurance which insures the lender against loss if the borrowers defaults on the mortgage loan.  PMI is usually required when the borrower’s down payment or equity is less than 20% of the loan value.  Of course, not all lenders require PMI, although those that  follow the Fannie Mae and Freddie Mac guidelines for loan approval do require PMI.

The mortgage insurance is usually escrowed into your mortgage payment, and when a borrower reaches 20% equity, they no longer need mortgage insurance.  PMI is the equivalent of FHA or VA insurance on government mortgage loans.

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