Private Mortgage Insurance (PMI)

What Is PMI?

PMI is insurance that protects the lender, not you, if a borrower stops making payments. Lenders usually require it on conventional loans when the down payment is less than 20%. FHA, VA and USDA loans have their own versions of mortgage insurance or guarantee fees, which work differently.

How PMI Works

When you put less than 20% down, the lender takes on more risk. PMI covers part of that risk. If a loan goes into foreclosure and the lender loses money, the insurance company pays the lender a portion of the loss. Because the lender is protected, it's willing to approve you with a smaller down payment.

Can PMI Help Me Qualify for a Larger Loan?

PMI itself doesn't raise how much you can borrow, since the premium is added to your monthly payment. What PMI does is let you buy with less cash. Instead of waiting years to save 20%, you can buy with 3% to 5% down on many conventional loans (as of 2026, subject to change) and start building equity now.

How Much PMI Costs

PMI usually costs somewhere between about 0.3% and 1.5% of the loan amount per year (as of 2026, subject to change). The exact price depends on your credit score, down payment, loan type and loan size. Higher scores and larger down payments mean lower PMI.

For example, a 0.5% annual premium on a $300,000 loan would be about $1,500 a year, or $125 a month.

How PMI Is Paid

• Monthly: The most common option, added to your mortgage payment.
• Single premium: Paid once at closing, by you, the seller or through a lender credit.
• Split premium: Part paid upfront, with a smaller monthly amount.
• Lender-paid: The lender pays PMI in exchange for a higher interest rate. This can't be canceled later.

How Buyers Get PMI

You don't have to shop for PMI yourself. Your lender arranges it with a mortgage insurance company as part of your loan approval. We compare pricing and include the cost in your Loan Estimate so you can see it clearly.

A Short History of PMI

Private mortgage insurance started in the U.S. in the late 1800s, disappeared during the Great Depression, and was reborn in 1957 when a new company began insuring home loans in Milwaukee. Since then it has helped tens of millions of families buy homes with smaller down payments. In 1998, Congress passed the Homeowners Protection Act, which set clear rules for canceling PMI.

Canceling PMI

Under the Homeowners Protection Act, for most conventional loans:

• You can ask to cancel PMI once your balance reaches 80% of the home's original value, if you have a good payment history.
• PMI ends automatically when your balance is scheduled to reach 78% of the original value.
• If your home has gained value, you may be able to cancel based on a new appraisal. Lenders often require at least two to five years of ownership for this.

Lender-paid PMI and FHA mortgage insurance follow different rules. Refinancing is another way to remove mortgage insurance.

PMI Companies

A handful of national companies provide most private mortgage insurance, including Arch MI, Enact, Essent, MGIC, National MI and Radian. They're approved by Fannie Mae and Freddie Mac. Your lender works with them behind the scenes, so all you'll see is the premium in your loan paperwork.