By Andrew Dort | NMLS #1650297 | Last updated: October 28, 2026
What is PMI? It stands for private mortgage insurance, and it is the reason a lender can say yes to a loan when you put down less than 20%. It is also not permanent. Here is how PMI works at Pride Lending, what shapes its cost, and how to get it removed as early as possible.
- PMI is an insurance policy that covers the lender if a borrower stops paying, which lets lenders approve loans with smaller down payments.
- It is what makes 3% and 3.5% down payments possible, because lenders can take on that higher loan amount with the policy behind it.
- FHA mortgage insurance is set by the government and is the same at every lender. Conventional PMI pricing varies by provider.
- Credit score, down payment, debt-to-income ratio, and loan program all shape the price of conventional PMI.
- Conventional PMI ends automatically at 78% of the original value, or you can ask for removal at 80% once you meet the lender’s conditions.
- A current payment history, no second loan on the property, and a supporting home value put you in position to request removal.
What is PMI and why do lenders require it?
Private mortgage insurance is a policy that insures the lender in the event of a default. It lets us lend at higher loan-to-value ratios, meaning a bigger share of the home’s price, than a lender would typically take on by itself. When a lender is putting up 97% of a home’s value, the policy is what makes the loan possible.
That is the biggest win for borrowers. PMI is what lets a buyer get in with 3% or 3.5% down instead of waiting years to save 20%. The CFPB describes PMI as coverage arranged by the lender and provided by private insurers on conventional loans with less than 20% down.
On FHA loans, the same idea goes by the name mortgage insurance premium, or MIP. Those factors are set across the board and are the same at every lender. On a 30-year FHA loan there are two numbers, and which one you get depends on whether you put down 3.5% or 5% or more. Putting down 10% instead of 5% doesn’t change the FHA number.
Conventional loans work differently, and that is where the savings from a bigger down payment get large.
What shapes the cost of PMI
On a conventional loan, four things drive the price of PMI.
- Credit score: Your FICO scores can change the price substantially.
- Down payment: The more skin in the game you have, the more comfortable the lender is, and the policy reflects that with a lower monthly cost. The difference between 5% and 10% down can be hundreds of dollars a month.
- Debt-to-income ratio: This compares your monthly debts to your monthly income, and it feeds into the price too.
- Loan program: Affordable programs such as Fannie Mae’s HomeReady and Freddie Mac’s Home Possible offer reduced mortgage insurance coverage, which means a lower monthly payment.
Those factors set the rate. You also get to choose how you pay for it.
The four ways to pay for PMI
- Borrower-paid monthly: This is the most common type. It is built into your monthly payment and requires nothing out of pocket at closing.
- Single premium: You make one large, lump sum payment at closing and have no monthly PMI afterward. This is a strong fit if you plan to stay in the home and keep that mortgage for a long time.
- Split premium: A mix of the two. You pay a smaller amount up front and a reduced amount each month.
- Lender-paid: The lender covers the cost, typically through a higher interest rate. It removes the PMI line from your payment, so it is worth comparing the rate against how long you plan to keep the loan.
The right fit depends on how long you plan to keep the loan and how much cash you want to bring to closing. Our mortgage calculator shows how the payment changes with each choice.
How a broker shops PMI differently
On FHA and other government loans, mortgage insurance is the same at every lender, so the broker advantage shows up on conventional loans. Our post on mortgage broker vs. bank covers how that works more broadly.
Different wholesale lenders use different PMI providers, and those providers don’t all price the same. As a broker, Pride Lending can compare the PMI providers behind each lender and make sure PMI is calculated into your monthly payment when we line up options. The goal is the best deal for the client, not just a good-looking rate on paper.
How to remove PMI on a conventional loan
There are three ways PMI comes off a conventional loan: it ends automatically, you request removal, or you refinance.
Automatic removal at 78%
PMI is removed automatically when the loan balance reaches 78% of the original loan-to-value, meaning 78% of what the home was worth when you bought it. You don’t have to do anything, as long as you are current on your payments. The CFPB also notes that PMI must end once you pass the halfway point of the loan’s original term, if you are current.
Requesting removal at 80%
You can ask your servicer, the company that collects your payments, to remove PMI sooner, at 80%. The lender will want confirmation that you have 20% equity at the home’s current market value. A third party usually provides that, typically through a drive-by appraisal, and the borrower is sometimes the one who pays for it.
Many lenders also set a two-year waiting period before you can make the request. This is called seasoning, so it helps to know the date in advance.
Removing it with a refinance
A refinance replaces your loan with a new one. If the home’s value supports 20% equity at the time, the new loan won’t need PMI. Whether that makes sense depends on your new rate and the costs of refinancing, which we walk through in when does refinancing make sense.
What to have in place before you request removal
Removal is straightforward when a few things line up. Here is what lenders look at.
- Seasoning: Most lenders want two years before you request removal at 80%, even if you reach the number sooner. Knowing that date lets you plan around it.
- Payment history: You must be current. A 30-day late payment in the past 12 months can affect a request at 80%, and so can a 60-day late payment in the past 24 months. A clean recent record keeps that door open.
- Home value: A third party confirms the current value. Steady appreciation in your area works in your favor here.
- No second loan: The CFPB notes that you will certify there is no second lien, such as a second mortgage, on the property.
Automatic removal at 78% is always there as your safety net. Requesting removal at 80% is the faster route when these pieces are in place.
When another option may fit better
If you have enough to put 20% down on a conventional loan, doing so avoids PMI altogether. Whether that is the better move depends on your credit score and debt-to-income ratio, since those determine what PMI would have cost you. Some buyers prefer to put less down and keep more savings available for repairs and reserves, which is a fair choice too.
Lender-paid PMI is the other one to weigh. It takes PMI off your monthly statement, and the trade is a higher interest rate, so it is worth running the numbers against how long you will hold the loan.
Beyond a bigger down payment, I don’t see many situations where I would steer a borrower away from PMI. For most buyers who don’t have 20%, it is what gets them into the home sooner.
What to ask your lender about PMI and what to do after closing
Before you commit, ask how much of your monthly payment PMI makes up. Then ask when it could realistically come off, based on the current appreciation in your area.
After closing, stay in touch with your loan officer. Our annual mortgage review is the chance for both of us to check your equity and look at removing PMI as soon as possible. If you’re newer to all of this, our first-time homebuyer guide is a good place to start.
Frequently asked questions
PMI is private mortgage insurance. It is a policy that covers the lender if a borrower stops making payments, and it is usually part of a conventional loan when you put down less than 20%.
It depends on your credit score, down payment, debt-to-income ratio, and loan program. Putting more down lowers the cost, sometimes by hundreds of dollars a month. Your loan officer can price it for your exact situation.
On a conventional loan it ends automatically at 78% of the original loan-to-value if you are current. You can request removal earlier, at 80%, once you meet your lender’s conditions.
Yes. You need 20% equity at the current market value and to meet your lender’s requirements, which usually means a two-year seasoning period, a current payment history, and a third-party valuation. Refinancing is another route.
They do the same job but work differently. FHA’s premium is set at the same level at every lender, while conventional PMI varies by provider, credit, down payment, and program.
Ready to talk through your PMI options?
If you want to know what PMI would cost on your loan, or when it could come off the one you have, connect with one of our loan officers. You can reach out to Andrew Dort or meet the rest of the Pride Lending team and see who’s the right fit.