Private
Mortgage Insurance (PMI) Explained
Private
mortgage insurance is a type of insurance that helps
protect the mortgage company against losses due
to foreclosure. This protection is provided by private
mortgage insurance companies and allows mortgage
companies to accept lower down payments than would
normally be allowed.
Private
mortgage insurance also enables mortgage companies
to grant loans that would otherwise be considered
too risky to be purchased by third party investors
like the Federal National Mortgage Association (FNMA)
and the Federal Home Loan Mortgage Corporation (FHLMC).
The ability to sell loans to these investors is
critical to maintaining mortgage market liquidity,
which in turn, allows mortgage companies to continue
originating new loans.
