Private mortgage insurance – what does that mean?
If your down payment is less than 20% of the price of the home you're buying, you could be required to obtain private mortgage insurance (PMI). The insurance protects the lender against the risk of default by the borrower.
PMI costs vary, depending on the size of the loan and other factors. Typically PMI is about one-half of one percent of the loan principal, paid monthly.
Government-sponsored home loans, such as VA or FHA loans, may require mortgage insurance on their loans as well.