Posted by Brent_IL on July 12, 2003 at 08:11:28:
Because the lender is making the loan without a cushion of equity, PMI is purchased by the lender as a percentage of the top part of the loan to compensate them if the loan goes south. That translates into a fixed monetary amount. If the lender comes up short after default, the insurance company will pay up to the amount of the coverage.
PMI, which allows a buyer to get a high LTV loan, will impact the buyer because he is the one that pays for it. That’s his only involvement in the process.