A:
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PMI or Private Mortgage Insurance is
normally required when you buy a house with less than 20% down.
Mortgage insurance is a type of guarantee that helps protect lenders
against the costs of foreclosure. This insurance protection is
provided by private mortgage-insurance companies. It enables lenders
to accept lower down payments than they would normally accept. In
effect, mortgage insurance provides what the equity of a higher down
payment would provide to cover a lender's losses in the unfortunate
event of foreclosure. Therefore, without mortgage insurance, you
might not be able to buy a home without a 20% down payment.
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