A borrower who wants to finance more than 80% of his or her property must have private mortgage insurance (PMI) to cover the additional amount. PMI protects the lender from the borrower defaulting on payments. PMI costs vary, depending on the amounts of the loan and the down payment, but buyers can expect to pay about a half a point or .5% of the loan. Borrowers with good credit should be able to dispense with private mortgage insurance once they've built up 80% equity.
