When is PMI typically required?

Private Mortgage Insurance (PMI) is typically required when a borrower puts down less than 20% for a conventional loan. This requirement exists because a lower down payment represents a higher risk for lenders, as it indicates less equity in the property from the outset. By requiring PMI, lenders protect themselves against potential losses if the borrower defaults on the loan. Essentially, PMI serves as a safeguard that allows lenders to provide loans to borrowers who may not have substantial savings for a larger down payment, thus helping them achieve homeownership even with less equity upfront. In most cases, once the borrower reaches 20% equity in the home through paying down the loan or appreciation in property value, they can request to have the PMI removed.