Private mortgage insurance, or PMI, is insurance on a conventional loan that protects the lender, not you, if the loan defaults. Fannie Mae and Freddie Mac generally require it when the loan-to-value is above 80 percent at the time they buy the loan. You can pay it monthly, all at once at closing, as a split of both, or have the lender pay it in exchange for different pricing. Borrower-paid PMI on most loans for a primary home can be cancelled later under federal law, and it's different from FHA's mortgage insurance, which follows HUD's rules.
Fannie Mae's charter-based rule is that a conventional first mortgage with a loan-to-value above 80 percent needs a primary mortgage insurance policy, unless the lender has provided another charter-compliant form of credit enhancement (Selling Guide B7-1-01). The insurance covers part of the lender's loss if the home goes to foreclosure. That's what makes conventional loans with smaller down payments possible. See conventional loans explained for the rest of the program.
PMI is not homeowners insurance and it doesn't pay your mortgage if you lose your job. It's coverage for the lender, paid for by you directly or indirectly.
The mortgage insurance company prices the coverage, so the premium is a quote, not a fixed table I can print. The main things that move it:
Your Loan Estimate shows which structure the quote uses. Comparing a monthly-PMI quote to a lender-paid quote means comparing the whole loan, the pricing and the cash at closing, not just the line that says mortgage insurance.
For borrower-paid PMI on a single-family primary residence loan that closed on or after July 29, 1999, the Homeowners Protection Act gives you these rights (12 U.S.C. 4902, CFPB explainer):
"Original value" generally means the lower of the sales price or appraised value at purchase. Some servicers and investors also allow removal based on a new appraisal and current value under their own rules. That's a servicer or investor policy, not the federal right, and it has its own seasoning and loan-to-value tests. The details are in how to get rid of PMI.
FHA loans don't have PMI. They have an upfront premium and an annual premium, called MIP, set by HUD. The Homeowners Protection Act cancellation rules don't apply to FHA MIP. How long MIP lasts depends on HUD's table, the loan term and your loan-to-value at the start. Switching programs doesn't remove mortgage insurance. It changes which rules you're under. See which mortgage insurance applies to my loan.
VA loans don't have monthly mortgage insurance, but most have a funding fee. USDA loans have their own guarantee fee. Each program is different, so compare them side by side.
This example is made up to show the comparison, without any premium figures.
Jordan is buying a $320,000 home in Benbrook as a primary residence and has enough for a conventional loan at 95 percent loan-to-value. The findings come back approved with monthly PMI. Jordan asks to "use FHA so there's no PMI." I explain that FHA would replace PMI with an upfront premium and annual MIP, and at that loan-to-value on a long term, FHA's annual premium lasts for the life of the loan under HUD's table. On the conventional side, Jordan's PMI can be cancelled on request at 80 percent of original value or ends automatically at 78 percent on the scheduled path. We put two Loan Estimates next to each other, one with monthly PMI and one with a single premium paid by the seller as part of allowed concessions, and look at cash to close and how long each premium lasts.
Trying to decide between conventional with PMI and another program, or between monthly and single-premium PMI? I'll put real quotes side by side for your price and down payment so you can see the cash at closing and how long each premium lasts. Schedule a call, or when you're ready, start an application.
Links checked Oct 21, 2026.
About the author: McKade Lively, NMLS 2704474, American Pacific Mortgage Corporation dba True North Home Loans, NMLS 1850.
Equal Housing Opportunity.
Last reviewed: Oct 2026