Most people know that when they become homeowners, they'll need to have homeowner's insurance. What they don't realize is that they may also be required to pay private mortgage insurance (PMI) too. The difference between the two: who gets protected.

Homeowner's insurance protects you if something happens to your home. Private mortgage insurance protects the lender if you are unable to make mortgage loan payments; It's an extra expense that can drive up monthly mortgage payments but the good news is that not all mortgage loans require private mortgage insurance. Most often, lenders will only require private mortgage insurance when a down payment of less than 20% of the purchase price is made. Certain lenders may also require PMI for buyers with less than desirable credit.

Very few people today have tens of thousands of dollars in the bank to dole out for a home loan down payment so mandatory PMI is common. If you're told that you'll need to pay PMI, be sure to get a mortgage payment quote from your lender that includes the PMI...as well as property taxes...so that can confirm that the home and the loan fits your budget.

Though having to pay private mortgage insurance may be an unpleasant surprise, there is good news: You won't have to pay PMI for the life of the mortgage loan! Under current regulations, PMI is no longer required once you've paid 22% of the home loan off. You can also request that the private mortgage insurance requirement be rescinded once the property has appreciated by 20% or more.

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