Which of the following is an advantages of using private mortgage insurance from a borrower's perspective:

• A. It eliminates interest
• B. It allows for a smaller downpayment
• C. It guarantees loan approval
• D. It reduces appraisal cost

Answer: (B)

Private mortgage insurance makes it possible to buy with a down payment smaller than 20% by the borrower paying a premium to protect the lender in case of default. For someone needing to buy now but lacking a large down payment, this is the practical advantage because it keeps more cash on hand and can speed up access to homeownership. The presence of PMI doesn’t change the loan’s interest rate or the need for a full appraisal, doesn’t guarantee loan approval, and adds ongoing cost to the monthly payment. It mainly shifts some cost into the monthly premium while enabling a smaller initial down payment, which is why this is the best answer from the borrower’s perspective. You can typically cancel PMI later once enough equity is built, reducing long-term costs.