What benefit does Private Mortgage Insurance provide to borrowers?

Private Mortgage Insurance (PMI) primarily benefits borrowers by enabling a smaller down payment. When a borrower is unable to make a conventional down payment of 20% or more on a home, lenders often require PMI. This insurance protects the lender in case the borrower defaults on the loan. By having PMI, borrowers can minimize their initial cash outlay, which makes home purchasing accessible for those who may not have substantial savings.

This option is particularly advantageous in competitive housing markets, where even small amounts of additional savings can make the difference between securing a mortgage and being passed over. While higher loan amounts, reduced application fees, or more flexible loan terms may also be associated with certain loans, they are not directly related to the fundamental function of PMI in supporting borrowers with lower down payments. Thus, option B correctly highlights the primary benefit that PMI provides.