Private  Mortgage Insurance may help you qualify for the loan

Most people have a negative perception of Private Mortgage Insurance, PMI. PMI is required when you finance your home using a single loan of greater than 80% of the value of the property. In other words if you do not have a 20% down payment you may be required to purchase PMI, which is an insurance policy to protect the lender should you default on your mortgage payment.

The premium on the policy is paid monthly as part of your mortgage payment. It is calculated based on the type of loan and loan to value ratio.

However, PMI is not necessarily a bad thing. PMI has enabled numerous individuals who did not have a 20% down payment to afford a new home. Also, because the policy takes away some of the lenders risk, it is often easier for the borrower to qualify for the loan.

In addition, a recent law has been passed which will allow PMI payments to be tax deductible, with certain limitations for borrowers with adjusted gross income over $100,000.

See PMI handbook and Eliminating PMI for more information.