What is Private Mortgage Insurance (PMI)?
On a conventional mortgage, when your loan-to-value ratio is greater than 80%, mortgage lenders usually require you get Private Mortgage Insurance (PMI) to protect them in case you default on your mortgage. Sometimes you may need to pay up to 1-year's worth of PMI premiums at closing which can cost several hundred dollars. The best way to avoid this extra expense is to keep your LTV under 80%. or take out a second for the funds in excess of the 80%.
On FHA loans, monthly PMI is always required regardless of LTV, and 1.75% addition must be paid at closing. This PMI stays with the loan for its entire duration.
On VA loans, PMI is never required.