Buying a home usually has a monster obstacle — Thinking of an adequate initial installment. You can put not exactly the customary 20% initial installment but the lender will probably require you to purchase mortgage insurance.
The idea behind mortgage insurance is the same as with other insurance plans. You pay a monthly premium to the insurer who protects the mortgage lender in the event you default. There are two types of mortgage insurance: government and private.
What is private mortgage insurance? (PMI)
PMI is insurance for the mortgage lender’s benefit, not yours. It’s a concession often required when your initial installment on the purchase of a home is less than 20%. Because the lender is assuming additional risk by accepting a lower amount of upfront money towards the purchase, they will often call for the borrower to purchase private mortgage insurance.