When applying for a real estate mortgage, there are four requirements that should be considered in the transaction:
(1) a mortgage or deed of trust must be created or retained;
(2) the property securing the loan must be a single-family dwelling;
(3) the single-family dwelling must be the primary residence of the borrower; and
(4) the purpose of the transaction must be to finance the acquisition, initial construction, or refinancing of that dwelling.

The amount of the loan will greatly depend on the credit score of the mortgagee. As a protection of the lenders against default, insurance must be applied for by the mortgagee. The Private Mortgage Insurance (PMI) is an extra insurance that lenders require from most homebuyers who obtain loans that are more than 80 percent of the value of their home. In other words, buyers with less than a 20 percent down payment are normally required to pay PMI.

Benefits of PMI

PMI plays an important role in the mortgage industry. It helps both lenders and borrowers.

It protects the lender against loss if a borrower defaults on a loan and by enabling borrowers with less cash to have greater access to homeownership.

For the borrowers, with this type of insurance, it is possible for the borrower to buy a home with as little as a 3 percent to 5 percent down payment. This means that you can buy a home sooner without waiting years to accumulate a large down payment.

You can learn more about PMI and take advantage of its benefits by contacting your friendly realtor.