What is a primary advantage of private mortgage insurance from the borrower's perspective?

A primary advantage of private mortgage insurance (PMI) from the borrower’s perspective is that it allows for a smaller down payment. When borrowers are unable to contribute a large down payment, PMI can make homeownership more accessible by enabling them to secure a mortgage even with a lower upfront investment. Lenders typically require PMI when the down payment is less than 20% of the home’s purchase price, which reduces the lender's risk.

This provision is particularly beneficial for first-time homebuyers or those who may not have saved enough for a larger down payment. It acknowledges that while these borrowers may present higher risk to lenders due to a smaller stake in the property, the insurance mitigates that risk, facilitating their ability to enter the housing market sooner.

The other options do not accurately describe the role or value of PMI. For instance, PMI does not eliminate the need for a down payment entirely; it instead allows for a lower amount to be put down. It does not directly influence interest rates to a significant degree, nor does it guarantee that there will be no loan defaults, as it mainly serves to protect the lender in case of borrower default rather than to ensure against it.