Why might a buyer choose a 90% LTV loan that requires PMI over an 80% LTV loan that does not?

A buyer might choose a 90% LTV (Loan-to-Value) loan that requires Private Mortgage Insurance (PMI) instead of an 80% LTV loan that does not primarily because a 90% LTV loan allows them to make a smaller down payment. This can be particularly appealing for buyers who may not have enough funds saved to make a larger down payment of 20% or more required for an 80% LTV loan. By opting for the 90% LTV loan, the buyer can enter the housing market sooner and preserve more cash for other expenses or investments.

While it is true that PMI adds an extra cost to the monthly mortgage payment, it also makes homeownership accessible to those who might not have the savings for a larger down payment. Consequently, the flexibility of making a smaller down payment can be a significant factor in a buyer's decision, as it allows them to purchase a home without the need for a substantial upfront investment. This aligns with the financial goals and circumstances of many buyers who prioritize homeownership over waiting until they can afford a larger down payment.