Paragraph 1: Private mortgage insurance (PMI) has become a popular form of financing for first-time homebuyers. PMI is an insurance policy that protects the lender in case the buyer defaults on a loan payment. It can be included in a homeowner’s monthly mortgage payment and helps buyers with limited down-payment funds to purchase a home.

Paragraph 2: PMI can also help borrowers with a lower-than-average credit score to qualify for a loan, and most mortgage lenders now require PMI when a borrower’s down payment is less than 20%. PMI also allows lenders to offer smaller loan restrictions, which can give first-time homebuyers access to more affordable mortgage options.

Paragraph 3: In addition to helping borrowers acquire a home loan, PMI can help protect the housing finance system by providing reduced risk to lenders. PMI helps cover the lender’s risk in case of a borrower defaults, which makes it easier them to approve loans or offers more attractive interest rates. By decreasing the risk, PMI creates an opportunity for lenders to offer a greater number of loans with lower monthly payments to a wider range of borrowers.

Paragraph 4: PMI benefits a wide range of potential homeowners and helps to increase the level of housing supply. Lower monthly mortgage payments mean that more first-time buyers can enjoy the benefits of homeownership. It also lowers the risk for lenders, making it easier for them to offer more affordable mortgages to more borrowers. Overall, PMI is a valuable tool for making the home buying process more accessible and for stabilizing the housing finance system.

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