What does PMI stand for in the context of mortgage insurance?

In the context of mortgage insurance, PMI stands for Private Mortgage Insurance. This type of insurance is typically required by lenders when a borrower is unable to make a down payment of at least 20% of the home's purchase price. The purpose of PMI is to protect the lender in case the borrower defaults on the loan. Since the borrower poses a higher risk with a lower down payment, PMI helps mitigate that risk.

Private Mortgage Insurance is usually provided by private insurance companies, and the costs associated with it are often added to the borrower’s monthly mortgage payment. Understanding PMI is crucial for mortgage professionals, as it impacts borrowers' monthly costs and can influence their decision-making when it comes to down payments and loan terms.

The other options refer to concepts that do not exist within standard mortgage terminology. Public mortgage insurance is not a recognized form of mortgage insurance, while "preferred" and "proper" mortgage insurance do not have defined meanings or practices in the mortgage industry.