PMI

What is PMI on a conventional loan?

Short answer

PMI is private mortgage insurance — a monthly (or upfront, or split, or lender-paid) charge that conventional loans require when the down payment is less than 20%. PMI protects the lender against default. Cost varies by credit score, LTV, coverage, and property type. Above 80% LTV at closing.

Plain-English explanation

Conventional PMI structures: 1) Borrower-paid monthly PMI (most common) — added to the monthly payment, removable later under rules; 2) Single-premium PMI — paid upfront in cash, no monthly charge; 3) Split-premium — partial upfront + smaller monthly; 4) Lender-paid PMI (LPMI) — built into a higher rate, can't be canceled later but no monthly charge to borrower. Cost varies by credit score, LTV, coverage percentage, occupancy, and property type. Subject to Fannie/Freddie PMI providers.

Practical example

A buyer at 740 credit and 5% down on a $400k home pays roughly $90-150/month in PMI depending on coverage. The same buyer at 90% LTV pays less; at 95% LTV pays more. PMI can be removed later when the loan reaches 80% LTV (borrower request) or 78% LTV (automatic).

What can change the answer?

Credit score, LTV, coverage percentage, occupancy, and PMI provider can change cost. PMI removal is governed by HPA and servicer policy.

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