What is PMI and Why Am I Paying It?

We Hear This a lot From Clients Buying a Home

"Wait — what’s PMI and why is it on my mortgage quote?"

Totally fair question.

PMI stands for Private Mortgage Insurance, and if you’re buying a home with less than 20% down, there’s a good chance it’s showing up in your monthly payment.

But not all loans treat mortgage insurance the same and it’s not always a bad thing.

Let’s break it down simply: what it is, who has to pay it, and when it actually makes sense to go with a loan that includes it.

What You’re Really Paying

Let’s walk through how this works with different types of home loans:

Conventional Loans (with PMI)

• PMI is required if you put down less than 20%.

• It protects the lender, not you, in case you default.

• You’ll pay it monthly as part of your mortgage payment.

• The good news? You can remove it once you reach 20% equity.

• That could happen over time as you pay down the loan, or if your home’s value goes up.

• You have to ask your lender to remove it. It’s not automatic.

When this loan makes sense:

• You’ve got good credit and want a competitive interest rate.

• You don’t want to wait years to save 20%.

• You plan to stay in the home long enough to remove PMI later.

• You’re buying in a market (like Pembroke Pines) where values are rising, so equity can build quickly.

FHA Loans (with MIP)

• MIP (Mortgage Insurance Premium) is similar to PMI but it’s required for every FHA loan, no matter your down payment.

• You’ll pay an upfront fee and a monthly premium.

• Unlike PMI, FHA mortgage insurance doesn’t fall off. You’d need to refinance to get rid of it.

When this loan makes sense:

• Your credit isn’t perfect, and you want a more forgiving approval process.

• You’re a first-time buyer who needs to get into a home with minimal savings.

• You may not keep the home long term and plan to refinance later.

• You’re more focused on getting in now, not on removing insurance later.

VA Loans (No PMI or MIP)

• These loans are backed by the Department of Veterans Affairs.

• No monthly mortgage insurance at all, even with zero down.

• Instead, you’ll pay a one-time VA funding fee (which can be rolled into the loan).

✅ When this loan makes sense:

• You’re active duty, a veteran, or a qualified surviving spouse.

• You want to buy with no down payment and keep monthly costs as low as possible.

• You want one of the best loan options available, hands down.

What I’d Tell a Friend

Don’t let PMI scare you off.

It’s just one piece of the puzzle and sometimes, paying it means you get to buy sooner, start building wealth, and take advantage of market growth.

If you qualify for VA, take it.

If you’re torn between FHA and conventional, ask your lender to show you the full picture, not just the monthly payment, but the long-term cost too.

Buying a home is all about strategy. We can help you play it smart.

Buying Soon? Let’s talk Strategy

Want help sorting through the options? Let’s run the numbers together.

Let’s talk.

No pressure. No hard pitch. Just strategy.

Let’s schedule a Strategy Session.