Private Mortgage Insurance (PMI) is required for conventional loans with a down payment of less than 20%, providing protection to the lender in case the borrower defaults. Borrowers pay PMI as part of their monthly mortgage payment or as a separate premium, with costs varying based on loan amount, credit score, and mortgage terms.

PMI can typically be canceled once the borrower’s home equity reaches 20%, subject to lender approval. Alternatives to PMI include lender-paid mortgage insurance (LPMI) or a piggyback loan, where a second mortgage helps cover part of the down payment. Borrowers should consult a mortgage professional to explore the most suitable option for their needs.