Understanding Mortgage Insurance: What It Is and How It Works
🛡️ What Is Mortgage Insurance?
Mortgage insurance is a policy that protects the lender, not the borrower, in case you default on your loan. It’s typically required if you put down less than 20% on a conventional mortgage or use certain government-backed loans.
The good news? It often helps you qualify to buy a home sooner with less money upfront.
🔍 Types of Mortgage Insurance
1. Private Mortgage Insurance (PMI)
Used with conventional loans. Required if your down payment is less than 20%.
Monthly premium is added to your mortgage payment
Can be removed once you reach 20% equity
2. FHA Mortgage Insurance Premium (MIP)
Required for all FHA loans, regardless of down payment.
Includes an upfront premium (typically 1.75%)
Monthly premium lasts for 11 years or the life of the loan, depending on LTV and down payment
3. VA and USDA Loans
Don’t require monthly mortgage insurance.
VA has a one-time funding fee
USDA has a guarantee fee (upfront + annual)
💸 How Much Does It Cost?
Mortgage insurance rates depend on:
Loan type (Conventional, FHA, etc.)
Down payment
Credit score
Loan-to-value (LTV) ratio
Typical PMI costs range from 0.3% to 1.5% of your loan amount annually.
📌 Example:
On a $300,000 loan, PMI could cost $75–$375 per month depending on your profile.
✂️ Can You Remove Mortgage Insurance?
Yes — but how and when depends on your loan type:
Loan TypeRemoval OptionConventionalAutomatically at 78% LTV or by request at 80%FHAUsually after 11 years or by refinancingVA / USDANo monthly insurance required
To remove PMI early:
Request cancellation in writing once your loan reaches 80% LTV
Get a new appraisal if your home has increased in value
Stay current on all payments
💡 Final Thoughts
While mortgage insurance adds to your monthly cost, it can make homeownership possible sooner for many buyers. And with the right planning, it doesn’t have to stick around forever.
🎯 Want to know if you can remove PMI or qualify without it?
Contact Tim Lyons today for a review of your mortgage and a plan to build equity faster.
⚠️ Required Disclosure
These materials are not from HUD or FHA and were not approved by HUD or a government agency. Tim Lyons | NMLS #2182927 | Licensed in FL & OH
