PMI

Hi,

Private Mortgage Insurance or PMI is required if you go for a loan with more than 80% LTV. The benefits of PMI are actually enjoyed by the lenders. It protects the lenders against any default by the borrower i.e. in case the borrower defaults on the loan the lender get paid to cover their loss. From a borrower's point of view, a PMI is not a very good thing as the cost of it is borne by him, while the lenders benefit from it.

there is a decided benefit to a borrower as well. without mortgage insurance, lenders would be less apt to entertain the notion of providing loans when a borrower had less than 20% down payment. because they've been able to obtain MI, which covers the eventuality of a loss for the lender, millions of people who otherwise wouldn't have been able to purchase have been afforded that ability.

The benefits:

Less money down. In some cases, customers can put as little as 3-5% down.
Increased buying power. With PMI customers can afford a larger loan because it gives them more leverage: for instance, $10,000 will constitute a 20% down payment on a $50,000 house (without PMI), but a 5% payment on a $200,000 house (with PMI).
A shorter wait for a more expensive house. A 20% down payment for a $100,000 house is $20,000; a lot of money to save before being able to purchase your home. With PMI, that dream is realized much faster.

All PMI does is protecting the lender from looisng some of his / her money

and at the same time helping the buyer with low doen payment to get aloan to buy the house