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When you put less than 20% as your down payment most banks require that you pay for Private Mortgage Insurance (PMI). This insurance protects the lender (not the borrower) in case the borrower doesn’t make their mortgage payments, but it only covers the difference of up to 20% of the loan. Therefore, if the borrower puts 5% down the insurance covers 15%. Keep in mind if the borrower defaults (stops paying), the bank can still repossess their home, and the insurance will pay the bank their 15% difference of the typical 20% down.

Since I received several similar questions regarding my last blog about Private Mortgage Insurance (PMI), I figured I would share the question with...."What happens if you purchase a house with 20% down and you don't need PMI, but over time your house drops in value and you've lost the 20% equity you had, and no you have zero equity? Does the bank make you get PMI at that point"

To the best of my knowledge, the answer is no. I've never heard of a case like that where the bank made someone get PMI after the fact.

I received a good question the other day from a reader of Keith’s Blog and thought I would share it with you. The question was, “can I put 15% down on a loan and still get a good rate?” The answer is yes. Depending on your FICO (credit score), you can even put as little as 10% down and still get a great rate. The way it works is there is an adjustment matrix of "points", or I like to call them hits, based upon what your credit score is and how much you’re putting down.