Conventional
- PMI required when you put down less than 20 percent
- Comes off at 80 percent on request, 78 percent automatically
- Offered by private lenders, with no government agency fees
PMI, and how to stop paying it
If you are putting down less than 20 percent, you will probably be asked to carry private mortgage insurance. It protects your lender, not you — but it is often the thing that gets your loan approved, and it is not permanent.
Under 20% down
the usual trigger for requiring PMI
.05% to 1%
typical annual cost, based on the loan amount
78%
the balance at which your lender must drop it
The Basics
It protects the lender, not you
Private mortgage insurance is often an important part of the loan process. In some cases it is the difference between an approval and a denial. Also known as home loan or mortgage guarantee insurance, it makes it possible for a buyer to be approved for a mortgage they might not otherwise get.
It works by decreasing the chance the lender loses money if a buyer defaults. That is the whole idea: it guarantees lenders a return on their money even if the borrower cannot make the payments. It is typically used when the buyer cannot come up with at least a 20 percent down payment.
Worth being clear about, because it surprises people: you pay the premium, but the policy pays your lender. It does not cover your payments if you lose your job, and it does not pay off your loan.
Who it protects
The lender. If the loan goes bad, the policy covers their loss. You pay for it, but you are not the beneficiary.
Why it helps you anyway
It lowers the lender's risk enough that they can say yes. That means buying years sooner instead of waiting to save a full 20 percent.
When it applies
Typically when your down payment is under 20 percent. It is usually required on USDA and FHA loans, and not required on VA loans.
How It Works
What happens, using real numbers
The math is easier to follow with an actual loan attached to it. Here is a $150,000 purchase with 10 percent down.
You apply with less than 20 percent down
This is what triggers the requirement
Say you borrow $150,000 but can only put down $15,000, which is 10 percent. That leaves a balance of $135,000 and puts you under the 20 percent threshold, so a PMI policy is required.
Your lender buys a policy on the balance
It covers what you borrowed, not the purchase price
Your lender purchases a PMI policy for $135,000 — the amount still owed, not the full price of the home. PMI generally covers the top 25 to 30 percent of the loan, so the lender is guaranteed at least that much back.
You pay the premium monthly, or once upfront
Set by the loan amount and your down payment
At 1 percent of the loan, mortgage insurance on that $135,000 runs about $1,350 a year, which is roughly $112.50 a month. You also have the option to buy it upfront in one lump sum, paid at closing or financed into the loan.
You request removal at 80 percent
Once you have paid the balance down far enough
The good news is PMI is typically not required for the entire term. Once enough payments have brought the balance below 80 percent of the home's value, you can request that your lender remove it.
At 78 percent, it comes off automatically
Your lender is required to drop it
Once your balance gets below 78 percent of the home's value, the lender is required to eliminate the need for PMI. You are not dependent on remembering to ask, though asking earlier at 80 percent saves you the difference.
Five Things Worth Knowing
What actually affects your bill
PMI is one line on a mortgage statement, but a few details decide how much you pay and how long you pay it.
The cost is a percentage of the loan
Typically .05 to 1.0 percent of the loan. The amount and cost of the policy are determined by the amount of the loan and the size of your down payment, so a bigger down payment cuts the premium as well as the balance.
Monthly is not your only option
Borrowers can also purchase PMI upfront with a single lump sum, paid at closing or financed into the loan. Which one wins depends on your cash at closing and how long you expect to keep the loan.
The rules change by loan program
Mortgage insurance is usually required on both USDA and FHA loans. On a VA loan it is not required at all, because the VA already guarantees the loan. The program you choose can matter as much as your down payment.
It is temporary, not a life sentence
It is typically not required for the entire term of the loan. Request removal once your balance is under 80 percent of the home's value; at 78 percent your lender must remove it.
It is not homeowners insurance
These two get confused constantly. Homeowners insurance covers your home against perils like fire and storms. Mortgage insurance protects the lender if you stop paying. Your lender may require both.
Two Different Things
Mortgage insurance vs. homeowners insurance
Private mortgage insurance and homeowner's insurance are often confused; however, they are two very different types of insurance. Homeowner's insurance provides coverage in case your home suffers a loss due to covered perils like fire, storm, and the like.
Mortgage insurance is a policy that protects the lender from loss if you fail to make your mortgage payments. Your lender may well require both, and they will often be bundled into the same monthly payment, but it is important not to confuse one with the other.
“One protects your house. The other protects the person who lent you the money for it.”
By Loan Program
Which loans require mortgage insurance
The requirement is not the same everywhere. Here is where each program stands, and where to read the full details.
FHA
- Mortgage insurance is usually required
- Charged as a premium with an upfront and a monthly part
- The trade-off for lower credit and down payment requirements
VA
- No mortgage insurance required
- The VA already guarantees the loan
- For eligible service members, veterans, and surviving spouses
USDA
- Mortgage insurance is usually required
- Built for eligible rural and suburban areas
- Check the property's eligibility before you plan around it
Not sure which applies to you?
We will look at your down payment and eligibility and tell you what mortgage insurance would actually cost on each program.
Schedule a ConsultationCommon Questions
Questions I hear about PMI
Private mortgage insurance, or PMI, is a policy that protects your lender if you stop making payments. It is also called home loan or mortgage guarantee insurance. It does not protect you, and it does not pay off your loan for you.
It exists so lenders can approve buyers they would otherwise turn down. Because it lowers the lender's risk, PMI can be the difference between an approval and a denial. It is typically required when you cannot put at least 20 percent down.
Wondering whether PMI is worth it in your case?
Waiting to reach 20 percent down is not automatically the cheaper path. We will run your numbers both ways so you can see the real difference.
Let's Run Your Numbers
Your Phoenix mortgage lender
Learning more about PMI, and when it's required, can speed up the lending process and help you become an informed buyer getting the most for your money.
The right question is rarely whether PMI is good or bad. It is what it costs you on your loan, how long you will carry it, and whether a different program or a slightly larger down payment leaves you better off. Bring us your numbers and we will work through it with you.
A track record you can verify
2026 Scotsman Guide Top Originator
James Vercellino was listed among Scotsman Guide's 2026 Top Originators.