What Is PMI and How Can You Avoid It?

Private mortgage insurance can apply to a conventional loan depending on the lender's program, loan-to-value calculation, and the complete borrower and property scenario.

A lender-issued Loan Estimate explains the applicable mortgage-insurance and payment assumptions for a particular scenario.

There are several strategies to avoid PMI:

• Review lender requirements: Mortgage-insurance treatment depends on the selected program and the complete scenario.
• Compare loan structures: A lender can explain how different lien structures affect cost and mortgage-insurance treatment.
• Review VA program rules: Eligibility, program costs, and lender requirements vary by transaction.
• Lender-paid PMI: The lender pays PMI in exchange for a slightly higher interest rate. Makes sense if you plan to sell or refinance within a few years.

If you're stuck with PMI, here's when you can get rid of it:

• Automatic cancellation: Federal requirements and loan terms can govern when mortgage insurance ends.
• Request cancellation: Ask the lender about its current loan-to-value, payment-history, and property-review requirements.
• Refinance: A different loan structure may have different mortgage-insurance treatment, subject to lender review.