Private Mortgage Insurance (PMI)
Conventional-loan mortgage insurance that is typically required below 20% down.
Definition
PMI is insurance that protects the lender on many conventional loans when the borrower puts down less than 20%.
Category: Mortgage Insurance
When PMI applies
On most conventional purchases, PMI is required when your down payment is under 20%. The cost depends on factors like credit score, occupancy, down payment size, and loan type.
Why it is different from FHA MIP
PMI is private, risk-based insurance. Borrowers with stronger credit often pay much less than FHA borrowers would for MIP, and PMI can usually be canceled once enough equity is reached.
How to get rid of it
PMI can often be removed at 80% loan-to-value by request and must drop automatically at 78% based on the original value, assuming the loan is current.
Related glossary terms
- Mortgage Insurance Premium (MIP) - The FHA version of mortgage insurance.
- Debt-to-Income Ratio (DTI) - A percentage showing how much of your income goes toward monthly debt obligations.
- Closing Costs - The collection of fees charged to finalize your mortgage and transfer ownership.
Related loan programs
- Conventional Loans - Conventional loans aren't backed by a government agency, follow Fannie Mae and Freddie Mac guidelines, and reward strong credit with the lowest rates and most flexible terms available.
- Jumbo Loans - Jumbo loans finance home purchases above the annual conforming loan limit set by the FHFA. They require stronger credit and reserves but offer competitive pricing on luxury and high-cost area properties.
- Refinance Loans - Refinancing replaces your current mortgage with a new one — to lower your rate, shorten your term, switch loan types, or pull cash out of your equity. The right refinance depends on your goal, not just current rates.