When applying for a mortgage, one of the things you'll likely hear about is private mortgage insurance (PMI). PMI is typically required when a buyer has a down payment of less than 20% on a home. It's an additional insurance policy that protects the lender in the event that the borrower defaults on the loan. While the idea of having to pay for another insurance policy can be daunting, PMI isn't always a bad thing.

For buyers with good credit, the monthly costs for PMI can be minimal. In fact, the cost of PMI can be less than the savings a buyer would have by putting down a larger down payment. This is because buyers with good credit are considered lower risk and therefore, their PMI premiums will be lower.

Furthermore, buyers who put down a smaller down payment will have more opportunity with the saved funds. The return on capital for these buyers is typically better when they put down a lower down payment because they can invest the money they save in other investments that have a higher return.

It's also important to note that PMI is not a permanent requirement. Once the borrower has paid down the loan enough to have 20% equity in the home, PMI can be cancelled. This means that buyers who put down a smaller down payment will only have to pay PMI for a shorter period of time.

In conclusion, PMI is an additional insurance policy that's required when a buyer has a down payment of less than 20%. While the idea of having to pay for another insurance policy can be daunting, it isn't always a bad thing. For buyers with good credit, the monthly costs for PMI can be minimal and the return on capital is better when you put down a low down payment. Additionally, PMI is not a permanent requirement, and once the borrower has paid down the loan enough to have 20% equity in the home, PMI can be cancelled.