What does PMI stand for?

PMI stands for Private Mortgage Insurance. This type of insurance is typically required by lenders when a borrower is unable to make a down payment of at least 20% of the home's purchase price. The purpose of PMI is to protect the lender in the event that the borrower defaults on the loan, thereby allowing lenders to extend credit to borrowers with lower down payments and reduce their risk.

Private Mortgage Insurance is essential for many first-time homebuyers or those purchasing homes in high-cost markets, where saving up for a substantial down payment can be challenging. By obtaining PMI, borrowers can access financing options that would otherwise be unavailable due to their lower equity position in the property. Once the borrower's equity in the home reaches 20% through payments or appreciation, they can typically request to have the PMI removed, thus lowering their monthly mortgage payment.

The other options do not accurately reflect the concept of PMI. Property Mortgage Insurance, Public Money Insurance, and Permanent Mortgage Insurance are not recognized terms within the mortgage industry, making Private Mortgage Insurance the correct and widely accepted term.