Private Mortgage Insurance, or PMI, is
generally required in the U.S. for home loans which are
greater than 80% of the purchase price of the home. PMI is a
credit enhancement which permits borrowers to get into homes
sooner and with less money down, however PMI can be avoided
by receiving an alternate form of housing such as an
80/20 housing.
This is insurance that a lender requires due to the risk of a loan going in default. The borrower pays the premium for the insurance, but the lender receives the benefits. Therefore, it is a fee that the borrower has to pay until they can prove that they are not a big risk of defaulting.