What percentage of a loan does private mortgage insurance typically insure to protect the lender?

Private mortgage insurance (PMI) is typically required when a borrower makes a down payment of less than 20% of the home's purchase price. The primary purpose of PMI is to protect the lender in the event that the borrower defaults on the loan. While the insurance covers a portion of the loan amount, it generally does not cover a full percentage like the answer provided would suggest.

In many cases, PMI protects the lender for a percentage of the loan amount that can range between 20% to 30% of the total loan. Therefore, the correct understanding is that PMI usually insures the lender for a percentage closer to the lower end of that range, often about 20%, rather than the higher percentages suggested in the other options.

So, when it comes to PMI, considering the context and standard practices, the answer typically aligns closer to around 20% of the loan, which signifies that once the borrower reaches 20% equity in their home, they may be able to cancel PMI. Understanding this ensures that borrowers are better informed about their obligations and potential costs associated with their loans.

Your choice of 30% does not align with standard PMI coverage, and reflecting on the typical practices, the correct answer to how much of