What is the main benefit of private mortgage insurance?

The main benefit of private mortgage insurance (PMI) lies in its ability to enable higher loan amounts with lower down payments. When a borrower opts for a conventional loan and puts down less than 20% of the home's purchase price, lenders typically require PMI to mitigate their risk. This insurance protects the lender in case the borrower defaults on the loan.

By requiring PMI, lenders can offer financing options to buyers who might otherwise struggle to save for a substantial down payment. This means that borrowers can enter the housing market sooner, securing a mortgage that allows them to purchase a home with a lower upfront investment. Ultimately, PMI makes homeownership more accessible for many individuals and families looking to buy a home without a significant down payment.

The other choices, while they may have their own considerations in real estate and finance, do not accurately capture the primary function and advantage of private mortgage insurance.