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Complete glossary lessonNational exam concept

Private mortgage insurance (PMI)

Private mortgage insurance protects a conventional mortgage lender against part of the loss if a borrower defaults.

Official area

Financing

Knowledge cluster

Mortgage finance

Learning sequence

Define, distinguish, apply, retrieve

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Exam purpose

Recognize the rule, then reject the nearest look-alike.

Georgia lens

Apply the state distinction only when the facts call for it.

Connected terms

Connected to 4 terms and one official content area.

What does Private mortgage insurance (PMI) mean in real estate?

Private mortgage insurance protects a conventional mortgage lender against part of the loss if a borrower defaults. The borrower commonly pays the premium when the loan-to-value ratio exceeds the lender's threshold.

How is Private mortgage insurance (PMI) different from the closest exam answer?

PMI protects the lender, not the borrower's equity or ability to make payments. Homeowners insurance protects against covered property losses and liability.

What is the Georgia-specific rule?

PMI is a national financing concept and does not change because Georgia uses a security deed. Federal cancellation rules and loan terms govern actual removal.

Worked exam example

Scenario

A buyer makes a 10 percent down payment on a conventional loan, and the monthly housing cost includes a lender-protection premium.

Decision rule

PMI protects the lender, not the borrower's equity or ability to make payments. Homeowners insurance protects against covered property losses and liability.

What is the most common exam trap?

Trap correction

The party paying the premium is not necessarily the party receiving the insurance protection.

Memory cue: The party paying the premium is not necessarily the party receiving the insurance protection.

Original exam check

Apply the definition

Which statement correctly explains Private mortgage insurance (PMI)?

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Related terms to learn next

Loan-to-value ratio

Loan-to-value ratio, or LTV, expresses the loan amount as a percentage of the lender's value base.

PITI

PITI stands for principal, interest, taxes, and insurance, the four common components included when estimating a borrower's total monthly housing payment.

Debt-to-income ratio

Debt-to-income ratio, or DTI, compares required monthly debt payments with gross monthly income.

Loan origination fee

A loan origination fee is a charge for the lender's work in making, processing, or underwriting a loan.

Recommended next complete lesson

Continue with Financing complete lesson. It places this term inside the full rule, worked examples, exam traps, and mixed practice required for mastery.
Previous termPITINext term Real Estate Settlement Procedures Act (RESPA)

Private mortgage insurance (PMI) quick answers

Facts checked against the current PSI Candidate Information Bulletin and GREC sources. Editorial standards.

What is Private mortgage insurance (PMI)?

Private mortgage insurance protects a conventional mortgage lender against part of the loss if a borrower defaults.

What is Private mortgage insurance (PMI) commonly confused with?

PMI protects the lender, not the borrower's equity or ability to make payments. Homeowners insurance protects against covered property losses and liability.

How does Georgia treat Private mortgage insurance (PMI)?

PMI is a national financing concept and does not change because Georgia uses a security deed. Federal cancellation rules and loan terms govern actual removal.