What can a borrower use to secure a conventional loan with a lower down payment?

A borrower can use private mortgage insurance (PMI) to secure a conventional loan with a lower down payment. PMI is typically required when a borrower is unable to make a down payment of at least 20% of the home's purchase price. This insurance protects the lender in case the borrower defaults on the loan. By having PMI in place, lenders are more willing to approve loans with lower down payments, as it mitigates their risk.

The use of PMI allows borrowers to enter the housing market sooner and with less upfront cash, facilitating homeownership for those who may not have substantial savings. Once the borrower reaches 20% equity in the home, they can typically cancel the PMI, which can help reduce monthly payments over time.

Other options, such as FHA insurance, pertain specifically to government-backed loans, and while they can also facilitate homeownership with lower down payments, they don't apply to conventional loans. Debt-to-income ratio is a measure used to assess a borrower's ability to repay a loan but does not directly relate to securing a lower down payment. Loan modification programs generally assist borrowers who are struggling to make payments after the loan has been originated, rather than facilitating the initial loan process.