What is Private Mortgage Insurance and How Does It Impact Buying a Home?

Rising home prices and higher mortgage rates have made it more difficult to afford a down payment large enough to avoid PMI.

wooden cubes spelling out the word mortgage surrounded by wooden houses
(Image credit: Getty Images)

If you’re unable to make a down payment of 20% or more on a conventional mortgage, there’s a good chance you’ll have to pay private mortgage insurance. 

PMI, which is arranged through a third-party insurance company, is designed to protect the lender if you’re unable to make payments. PMI doesn’t protect you against loss — if you don’t make payments, you could still face foreclosure — and it won’t prevent your credit score from dropping if your mortgage payments are late. 

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Ella Vincent
Staff Writer

Ella Vincent is a personal finance writer who has written about credit, retirement, and employment issues. She has previously written for Motley Fool and Yahoo Finance. She enjoys going to concerts in her native Chicago and watching basketball.