PMI is Private Mortgage Insurance. PMI is required when you put less than 20% down payment on your purchase, it's important to remember this because PMI can be rather high. PMI is sort of the banks insurance for people with 'little' money to put down because there is a higher risk than those who put down a significant down payment.

PMI usually get's dropped after the first 20% of your principal gets paid, it is also important to realize that for the first several years that the majority of your monthly payments are applied towards your interest and not your principal therefore to reach 20% principle of $100,000 you might have to pay up to $60,000 before you can get PMI dropped.

Remember to keep on top of your bank, they often don't drop PMI unless you 'request' this on paper - they also seem to mis-manage their paper work so you should track this yourself. If you happen to come across money from somewhere and you want to pay off some of your mortgage be sure to put it in writting when you send a check in that you want it applied to your principal and not just another montly payment!

If you send in a significant sum of money to be applied towards your principal this will not necessarily reduce your monthly payments, check with your bank - you'll probably have to re-finance in order to affect your monthly payment and this means you have to pay another closing cost fee!