“PMI” (private mortgage insurance) comes up when buyers make small down payments; lenders use it to reduce risk when the borrower’s equity is low. PMI adds a monthly cost until you reach a threshold of equity. Understanding this concept helps you decide whether to save for a bigger down payment or accept the temporary extra cost to move sooner. This question focuses on the conceptual role of PMI so you can interpret mortgage offers without getting tripped up by acronyms.