Three Ways PMI Helps Make Homeownership Possible

If you’re a first-time homebuyer, you’ve likely heard about private mortgage insurance, or PMI. Here’s a quick breakdown of what PMI is and how it can help you become a homeowner sooner.

What is Private Mortgage Insurance?

PMI is an insurance policy that reduces risk for lenders, enabling them to offer loans with smaller down payments. Instead of requiring 20% down, PMI allows buyers to put down as little as 3%, making homeownership more accessible, especially when saving for a large down payment can be challenging.

Advantages of PMI for Borrowers

While PMI primarily protects the lender, it can benefit you in three major ways:

Buy a House Sooner
With PMI, you don’t need to wait until you’ve saved 20% to buy a home. For example, instead of saving $70,000 for a 20% down payment on a $350,000 house, a 3% down payment would be just $10,500, letting you move in sooner.
Afford More Home
Even with savings, PMI can help you buy a pricier home. For instance, if you have $30,000 saved, a 20% down payment limits you to homes around $150,000. With PMI, you could put down 10% on a $300,000 home instead, potentially finding something that better meets your needs.
Keep Cash on Hand
PMI allows you to put down less, freeing up funds for other needs—like home repairs, furnishings, or an emergency fund. This flexibility can be especially helpful as you settle into homeownership.

PMI: A Strategy for Financial Flexibility

Many buyers are able to purchase homes sooner thanks to PMI. In fact, nearly 39 million people in the U.S. have used PMI to achieve homeownership. If you’re considering PMI, talk with your loan officer to see if it’s a good fit for your goals.