Private Mortgage Insurance (PMI)

Private Mortgage Insurance (PMI)

The short version: PMI is a monthly cost on most conventional loans with less than 20% down. It protects the lender, it’s temporary, and it’s the reason many people can buy a home years before a 20% down payment would be saved. It’s not the villain it’s made out to be — but it’s worth understanding before you decide how much to put down.

What PMI is

When your down payment is under 20% of the purchase price on a conventional loan, the lender takes on more risk. Private mortgage insurance covers part of the lender’s loss if the loan defaults. You pay for it; the lender is the beneficiary.

PMI applies only to conventional loans. FHA, VA, and USDA loans have their own mortgage-insurance or guarantee structures with different rules, which we’ll walk through if one of those programs fits you better.

What it costs

PMI is priced by the mortgage-insurance company, not by us, and the premium depends on four things:

• Your down payment. Less down means a higher premium.
• Your credit score. Stronger credit means a lower premium.
• Your loan type and term. Adjustable-rate and longer-term loans generally cost more to insure.
• Occupancy and property type. A primary-residence single-family home prices best.

Because those inputs are different for everyone, the honest answer to “how much is PMI” is a quote for your file, not a number on a web page. We price it across multiple mortgage-insurance providers and show you the figure on your Loan Estimate before you commit to anything.

How it’s paid

• Monthly (most common). The premium is added to your monthly payment alongside principal, interest, taxes, and insurance. Nothing due at closing; it drops off once it’s cancelled.
• Single premium. One payment at closing instead of a monthly charge. Lower monthly payment, more cash up front, and it’s generally not refundable if you sell or refinance early — so it only wins if you keep the loan a long time.
• Lender-paid. The lender covers the premium in exchange for a somewhat higher interest rate. No separate PMI line, but the higher rate lasts for the life of the loan and can’t be cancelled the way monthly PMI can.

We’ll run all three against your expected time in the home. The right structure depends on your timeline, not on which one sounds cheapest.

How to get rid of it

Monthly PMI on a conventional loan is temporary. The Homeowners Protection Act gives you two routes:

• You can request cancellation once your loan balance reaches 80% of the home’s original value, provided your payments are current and there are no other liens. Some servicers will also consider a new appraisal if the home has appreciated — ask.
• The servicer must cancel it automatically when the balance reaches 78% of the original value and you’re current on payments.

Paying extra toward principal moves both dates up. If you’re already a homeowner wondering whether yours can come off, that’s a five-minute question — ask us.

Should you wait to avoid PMI?

Sometimes. Usually not. The honest comparison is the cost of PMI for the years you’d pay it versus the rent and the price appreciation you’d miss while saving to 20%. For most buyers in West Michigan, PMI is the smaller number. We’ll show you both and let you decide.

Two other ways to avoid or reduce it: a larger down payment (if the savings are there without draining your reserves), or an 80-10-10 “piggyback” structure — a first mortgage at 80%, a second mortgage at 10%, and 10% down. The piggyback avoids PMI but the second mortgage carries its own rate and payment, so it isn’t automatically cheaper. It’s a compare-the-math decision.

Your rights under the Fair Credit Reporting Act

Because PMI pricing uses your credit, it helps to know you’re entitled to a free copy of your credit report from each bureau, to dispute inaccurate information, and — if an application is denied based on credit — to be told which agency supplied the report. The official source for free reports is annualcreditreport.com.

Program guidelines current as of October 2026 and subject to change. This page is educational and is not a loan offer, approval, or commitment to lend. All loans subject to underwriting approval.

Bastien Mortgage LLC · NMLS #2852005 · Joe Bastien, NMLS #2392887 · Equal Housing Opportunity