PMI (Private Mortgage Insurance)
Insurance the borrower pays on conventional loans with less than 20% down, protecting the lender against default loss.
PMI applies to conventional loans when the down payment is below 20%. It is paid as a monthly premium added to PITIA, typically 0.3-1.5% of loan balance per year depending on FICO and LTV. PMI can be removed once you reach 20% equity (78% LTV) automatically by federal law, or earlier if you request and pay for an appraisal showing 20% equity.
Example
5% down on a $400,000 home: PMI roughly 0.5-1.0% of $380,000 = $158-$317/month.
Related terms
MIP (Mortgage Insurance Premium)
FHA's version of mortgage insurance. Includes both an upfront premium and an annual premium for the life of the loan if down < 10%.
LTV (Loan-to-Value)
Loan amount divided by property value, expressed as a percentage. Lower LTV usually means lower rate and easier qualification.
Conventional Loan
Mortgage not insured or guaranteed by the federal government. The standard mortgage product, sold to Fannie Mae or Freddie Mac.
Ready to get a rate?
Compare live mortgage rates from hundreds of lenders, no signup required.
Get instant pricing