The Quick Read: PMI is added to your monthly mortgage payment as a separate line, charged when your down payment is under 20%. Some borrowers pay the premium up front at closing, or split it between closing and the monthly payment. The premium counts toward your qualifying housing payment, so it can limit how much home you qualify for. It can come off later, once you build enough equity.
What Is PMI, and When Does a Conventional Loan Require It?
Private mortgage insurance (PMI) is a policy that protects the lender, not you, if payments stop. The CFPB says you might have to buy it on a conventional loan when your down payment is under 20% of the purchase price. It does not stop a foreclosure if you fall behind. It also is not homeowners insurance, which covers your house.
Conventional payment estimate
The starting figures are an example price at the first-time buyer’s minimum down payment. Replace them with yours.
Editable benchmark: 7.32% as of October 22, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not a conventional loan quote.
Estimate seeded at the low end of Fannie Mae’s published range (0.58%–1.86% a year); the insurer prices the actual premium on the score and the leverage. Applies only above 80% loan-to-value.
Illustrative starting assumptions: a $350,000 price, the first-time buyer’s minimum down payment, a thirty-year term at the current Freddie Mac benchmark, mortgage insurance at the low end of Fannie Mae’s published range, and property taxes and insurance estimated at typical national rates. Every field is editable.
Illustrative estimate only — not a Loan Estimate, approval, quote, or commitment to lend. The rate field carries the weekly Freddie Mac thirty-year conventional benchmark, a market reference and not a conventional loan quote; your rate is set by the lender at lock. The mortgage insurance figure is an editable estimate seeded from Fannie Mae’s published typical range, not a premium quote; the insurer prices the actual premium, and the cancellation month assumes scheduled payments with no extra principal and no change in value. Taxes, insurance and dues are editable estimates; closing costs are not included. Conforming loan limits apply by county. Licensed in sixteen states for consumer mortgages.
The lender arranges PMI. A private insurance company provides it. You pay for it, but you are not the one it protects.
The trigger is loan-to-value, or LTV, which compares the loan to the home’s value. Across the wholesale programs I place conventional files with, mortgage insurance is required above 80% LTV. That means a down payment under 20%. On a purchase, the value used is generally the lower of the price or the appraisal.
The same rule often applies to a refinance. If you have under 20% equity when you refinance a conventional loan, expect PMI again.
Leverage depends on how you use the home. These are the common purchase limits on conventional loans, subject to lender guidelines:
| Property use | Max LTV | Down payment |
|---|---|---|
| One-unit home, first-time buyer, fixed rate | 97% | 3% |
| One-unit home, other buyers | 95% | 5% |
| Two- to four-unit primary home | 95% | 5% |
| Second home | 90% | 10% |
Fannie Mae and Freddie Mac set these limits. You can see how the main options fit your file on Lendmire’s conventional loan programs page.
How Does PMI Get Into Your Monthly Payment?
The insurer sets an annual premium. Your servicer divides it into twelve parts and adds one part to each monthly payment. You never write a separate PMI check in most cases.
Picture the payment as a stack:
1. Principal and interest on the loan
2. Property taxes
3. Homeowners insurance
4. PMI
Taxes and homeowners insurance are often collected in escrow, which is an account the servicer uses to pay those bills for you. PMI usually rides along in that same monthly payment. Ask your loan officer how your servicer will bill it, because setups differ.
The premium is not a flat fee. Published typical annual premiums run from 0.58% to 1.86% of the loan balance. Treat that as a range, not a quote. Where you land depends on your credit score, your LTV, the coverage level, and the insurer. A bigger down payment and a stronger score generally mean a lower premium.
Coverage matters too. Fannie Mae sets coverage in a table by LTV band, term and program. Higher LTV means more required coverage. For some loans you can choose standard coverage or a lower minimum level. The minimum option carries an extra pricing adjustment, so cheaper insurance can cost more somewhere else. (Cheaper on one line, pricier on another. That is how this usually goes.)
Monthly, Up-Front, Split, or Lender-Paid: Which Structure Applies?
You have more than one way to pay. The structure changes both your monthly payment and your cash due at closing.
| Structure | How it is paid | Main trade-off |
|---|---|---|
| Monthly | Added to each payment | Higher payment, less cash at closing |
| Up-front | One payment at closing | More cash at closing, lower payment |
| Split | Part at closing, part monthly | Blend of the two |
| Lender-paid | Built into the loan terms | Usually a higher note rate |
The CFPB says monthly is the most common way to pay. An up-front premium shows at closing and you might not get a refund if you move or refinance soon after.
Lender-paid mortgage insurance (LPMI) sounds free. It is not. Someone other than you makes the payments, and the usual trade-off is a higher interest rate on the loan. Because the cost lives in the loan terms, you generally cannot cancel it without refinancing. The federal cancellation rules below cover borrower-paid insurance, not this version.
You can also finance a single or split premium into the loan in some cases. Fannie Mae allows it for purchases and limited cash-out refinances on a one-unit principal residence or second home. The loan amount, premium included, still has to fit under the loan limit. That raises the balance rather than the cash you bring. The trade-off is that you carry the premium inside the loan.
How Does PMI Affect What You Qualify For?
PMI counts as part of your housing payment when a lender decides if you qualify. Fannie Mae’s Selling Guide lists mortgage insurance among the items in the monthly housing expense. That total feeds your debt-to-income ratio, or DTI, which compares your monthly debts to your monthly income.
A higher payment means a higher DTI. So PMI affects eligibility, not only your budget.
On the wholesale conventional programs I work with, the automated underwriting finding governs most files. The total ratio ceiling is 50%. Manually underwritten loans run tighter, at 36% or 45%, with reserve and score requirements. The wholesale floor starts at a 620 decision score. All of this is subject to lender guidelines and full file review.
Consider a buyer with a 5% down payment and a decent but not high score. That buyer might clear the ratio with room to spare, or might sit right at the edge once PMI is added. The same buyer with a 10% down payment often sees a smaller PMI line and a bit more breathing room. Neither outcome is certain. Your lender runs the file.
This is why you should ask for the PMI structure early. Comparing a monthly premium against an up-front one can change the ratio the lender sees.
Where Do You Find PMI on Your Loan Documents?
PMI shows up in two places you can check. The CFPB says a monthly premium appears on page 1 of the Loan Estimate and the Closing Disclosure, in the Projected Payments section. An up-front premium appears on page 2, in section B.
| Document | Where to look |
|---|---|
| Loan Estimate | Page 1, Projected Payments |
| Closing Disclosure | Page 1, Projected Payments |
| Closing Disclosure | Page 2, section B (up-front premium) |
Lender-paid insurance may not appear the same way. One mortgage insurer’s Q&A says it need not appear on the Loan Estimate and shows only on the Closing Disclosure. Treat that as background and ask your loan officer directly.
Your PMI disclosure at closing should also show the first date you can ask to cancel. Keep that page.
How and When Does PMI Come Off?
You have three federal paths, set by the Homeowners Protection Act (HPA), plus a final backstop. The CFPB’s HPA examination procedures lay out the thresholds, all measured against the original value of the home:
- At 80%: you can request cancellation once the balance reaches, or is first scheduled to reach, 80% of the original value.
- At 78%: the servicer must end PMI automatically on the date the balance is first scheduled to reach 78%, if you are current.
- At the midpoint: if neither happens, Federal Reserve guidance says the servicer must end PMI by the first day of the month after the loan’s midpoint, if you are current.
Notice the difference between asking and automatic. PMI does not drop at 80% on its own. You have to ask, and the 78% date is the one that triggers without a request.
To request cancellation at 80%, the CFPB says you need to:
1. Send the request in writing to your servicer.
2. Have a good payment history.
3. Certify that you have no subordinate liens, such as a second mortgage or HELOC.
4. Show that the home’s value has not declined below the original value.
Your servicer may require an appraisal for that last step, and may charge you for it. A second lien is the one that surprises people. A HELOC can block the request.
After PMI ends, the servicer may not require further payments more than 30 days later. Unearned premiums are returned through the servicer and refunded to you.
Making extra principal payments can help you hit the threshold sooner. Under the standard schedule, the date is based on the original amortization. Whether extra payments move it depends on how you and the servicer handle the request. Ask before you count on it.
Can Rising Home Values Remove PMI Earlier?
Sometimes. Fannie Mae and Freddie Mac have a separate path based on current value, not original value. The servicer gets a new valuation to confirm the home is worth at least what it was originally. If it is, PMI can end sooner than the schedule says. Seasoning and LTV tests apply, and they differ by occupancy and unit count. Check Fannie Mae’s servicing rules for the current tests.
Policy here has moved. Secondary legal and trade sources report that Fannie Mae now lets servicers proactively reach out to borrowers who may be eligible based on current value. Freddie Mac reportedly already allowed that. This is outreach, not automatic removal. As Florida Realtors notes, coverage does not end automatically when value rises. You still have to qualify, and the process may carry a cost. Confirm current rules with your servicer, because the wording can change.
Where the Rules Change
The 80%/78% rules cover primary-residence, single-family loans. Other cases differ:
- Second homes, investment properties and multi-unit homes: The HPA does not apply as written. Fannie Mae and Freddie Mac have their own, stricter cancellation tests, so expect a lower LTV before PMI can come off. Occupancy decides the leverage, as the table above shows.
- High-risk loans: the 80% and 78% provisions do not apply, but final termination at the midpoint still does.
- Modifications: if you and the loan holder change the terms, the cancellation dates are recalculated.
- Lender-paid PMI: generally not cancellable without a refinance.
- FHA loans: FHA charges its own mortgage insurance premium, called MIP. It follows different rules from conventional PMI, so do not assume one tells you about the other. Lendmire’s piece FHA MIP vs Conventional PMI for a Buyer With a Small Down Payment covers the comparison for a small down payment.
Is PMI Worth Paying?
For many buyers, yes. PMI is the cost of buying with less than 20% down. The alternative is saving longer while prices and rents move around you. A smaller down payment gets you into the home sooner, and PMI can come off later. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
The downside is real. It raises the monthly payment, can raise your DTI, and may add cash at closing. If you want to avoid it, there are routes. One is a larger down payment. Another is a piggyback structure, which uses a second loan to fill the gap. Lendmire’s comparison of a piggyback second versus a conventional loan with PMI walks through the trade-off. Each route has its own costs, so compare full terms rather than one line.
Key Terms Defined
PMI: private mortgage insurance, a policy that protects the lender if you stop paying, usually required with under 20% down.
LTV: loan-to-value, the loan amount compared to the home’s value.
DTI: debt-to-income ratio, your monthly debts compared to your monthly income.
Escrow: an account your servicer uses to collect and pay taxes and insurance.
LPMI: lender-paid mortgage insurance, where the cost is built into the loan, usually through a higher note rate.
Original value: the lower of the price or appraised value when you bought, used for cancellation tests.
Servicer: the company that collects your payment and handles PMI cancellation.
Questions to Ask Your Loan Officer
- Is my PMI monthly, up-front, split or lender-paid?
- Where does it appear on my Loan Estimate?
- Does the minimum-coverage option change my pricing elsewhere?
- How does PMI change my DTI?
- What is the first date I can request cancellation?
- Will a future HELOC affect cancellation?
Frequently Asked Questions
Is PMI included in my escrow?
Often it is collected with the monthly payment, but setups vary. Taxes and homeowners insurance are the usual escrow items. Your Loan Estimate shows what is included in the payment, and your loan officer can confirm how your servicer bills PMI.
Does PMI change over time?
It depends on the policy. Many borrower-paid monthly premiums are set at closing and stay level until the insurance ends. The payment can still change for other reasons, such as taxes and homeowners insurance moving in escrow. Ask which type of policy you are getting.
Can I get my up-front PMI premium back?
Not necessarily. The CFPB says you might not get a refund if you move or refinance. Unearned premiums on borrower-paid insurance are returned when PMI ends under the federal rules, but treat the up-front premium as a cost you may not recover.
Does PMI drop off automatically at 80%?
No. At 80% you have to request cancellation in writing and meet the conditions. Automatic termination comes at 78% of the original value, if you are current. The midpoint of the loan term is the last backstop.
Does PMI count against me when I apply?
Yes. It is part of your qualifying housing payment, so it raises your DTI. That can reduce the price you qualify for. Programs and ratio limits are subject to lender guidelines and full file review.
If you are buying a home and want to see whether a conventional loan fits your file, Lendmire can help you compare the options and what each one asks of the file.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage serving homeowners and home buyers in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending channels; Lendmire brokers the financing and the lender underwrites each application. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. The CFPB
2. Fannie Mae Selling Guide B3-6-03
3. CFPB – HPA Examination Procedures
4. Federal Reserve – HPA attachment (CA 04-5)
5. Fannie Mae Servicing Guide B-8.1-04
6. Orrick InfoBytes (law firm)
This article is part of Lendmire’s conventional loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Conventional Loan PMI Cancellation Rules and Payment History · Can You Double Your Payment on a Conventional Loan Without a Penalty? · Conventional Loan PMI Requirements for First-Time Buyers
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.