What is PMI and how do I avoid it?
Rob Miller explains Private Mortgage Insurance (PMI), exactly what it costs Wisconsin buyers, and the strategies we use to eliminate or avoid it entirely.
Rob Miller, Branch Manager at MadCity Home Loans, answers one of the most asked questions from Wisconsin buyers putting less than 20% down.
What is PMI and how do I avoid it?
Private Mortgage Insurance (PMI) is a monthly fee that protects the lender — not you — if you default on your loan. It kicks in any time you put less than 20% down on a conventional loan. On a $350,000 home with 5% down, PMI typically runs $100–$200 per month.
How to Avoid PMI Entirely
- Put 20% down: The traditional route — no PMI, period.
- VA Loan: Zero down, zero PMI. If you served, this is the best deal in lending.
- USDA Loan: No traditional PMI — there's a small annual "guarantee fee" instead, but it's much cheaper than conventional PMI.
- Lender-Paid PMI (LPMI): We wrap the PMI into a slightly higher interest rate. You pay no monthly PMI line item, though your rate is a touch higher.
- Piggyback Loan (80/10/10): We structure an 80% first mortgage, a 10% second loan, and you put 10% down. No PMI on the primary loan.
When Does PMI Go Away?
On conventional loans, PMI automatically terminates once your loan balance hits 78% of the original purchase price. You can also request cancellation at 80%. I recommend calling us once you've built 20% equity — we'll walk you through the fastest path to remove it.
Note: FHA loans work differently. FHA's Mortgage Insurance Premium (MIP) lasts the life of the loan if you put less than 10% down — which is one reason buyers with 680+ scores often do better on a conventional loan.
Related Guide: Want to compare FHA vs. Conventional to find which saves you more? Read our Loan Program Comparison Guide.