Question:

What is the private mortgage insurance coverage?

Answer:

The common private mortgage insurance coverage protects the top 20% of the loan to lenders. In comparison, government insured loans are secured 100%.

Private Mortgage Insurance Features

With private mortgage insurance coverage, lenders protect themselves from home value depreciation and foreclosure. This is also the reason lenders require the 20% down payment - they simply want their loans to be secured with some equity. If the borrower cannot come up with 20% equity, they need the PMI to kick in.

Private mortgage insurance coverage is not to be mistaken with homeowners insurance, or with mortgage life insurance. The private mortgage insurance does protect the lender only; the homeowners or hazard insurance and mortgage life insurance are designed to protect the borrower.

First-time homebuyers benefit with the private mortgage insurance coverage as they often cannot come up with the down payment.

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