Private mortgage insurance is a type of insurance homeowners are expected to pay if they do not have the standard 20% for down payment. PMI protects the lender in the event that the buyer cannot make payments on the loan. One way to avoid PMI is to have 20% for the down payment or until the loan-to-value ratio reaches 78%. When this happens, PMI can be eliminated.

Read more: First-Time Homebuying Guide