PMI — Private Mortgage Insurance Explained for Pennsylvania Buyers
Private mortgage insurance is one of those line items that shows up on a loan estimate and raises immediate questions. What is it, who does it protect, and how do you get rid of it? Here’s a plain-language breakdown for Pennsylvania buyers.
What PMI Is — and Who It Protects
Private mortgage insurance is a policy that protects the lender — not the borrower — in the event of default. When you put less than 20% down on a conventional loan, the lender is taking on more risk. PMI offsets that risk. You pay the premium, but the benefit belongs to the lender.
PMI applies specifically to conventional loans. FHA loans have their own version called Mortgage Insurance Premium (MIP), which works differently and is covered in a separate comparison below.
The cost of PMI varies based on three factors: your credit score, your loan-to-value (LTV) ratio, and the loan amount. As a rough range, PMI typically runs between 0.5% and 1.5% of the original loan amount annually. On a $350,000 loan, that means roughly $145 to $440 per month added to your payment — a meaningful number worth understanding upfront.
How PMI Is Paid
Lenders offer PMI in several structures, and each has tradeoffs:
- Monthly PMI — the most common structure. A separate monthly charge added to your mortgage payment. It adjusts as your LTV decreases.
- Single-premium PMI — a lump sum paid at closing (or rolled into the loan). Eliminates the monthly charge but requires more upfront capital.
- Lender-paid PMI (LPMI) — the lender covers the PMI cost but charges you a slightly higher interest rate in exchange. The "insurance" cost is embedded in your rate rather than itemized. This can make sense if you plan to stay in the home long-term at the higher rate, but it cannot be canceled like monthly PMI.
When PMI Goes Away
For monthly PMI on a conventional loan, federal law (the Homeowners Protection Act) gives you two paths to removal:
- Automatic cancellation — your servicer is required by law to cancel PMI when your LTV reaches 78% based on the original purchase price and original amortization schedule. This happens automatically; you don’t need to request it.
- Request at 80% LTV — you can request PMI removal once your loan balance reaches 80% of the original purchase price. The lender may require a current appraisal to confirm value hasn’t declined.
If your property has appreciated significantly, a new appraisal may allow earlier PMI removal than the standard amortization schedule would produce — a conversation worth having with your loan servicer.
PMI vs. FHA MIP — Why the Comparison Matters
FHA loans in Pennsylvania carry a different type of mortgage insurance called MIP. The critical difference: FHA MIP is harder to remove.
For FHA loans originated after June 2013 with a down payment below 10%, MIP remains for the life of the loan. The only way to eliminate it is to refinance into a conventional loan once you have sufficient equity.
Conventional PMI, by contrast, is cancellable. This makes a conventional loan in Pennsylvania potentially less expensive over the long term for borrowers who can meet the credit and LTV requirements — even if the upfront rate or payment is slightly higher than an FHA option.
The 80-10-10 piggyback loan is another PMI-avoidance strategy: you take a first mortgage at 80% LTV and a second mortgage for 10%, and put 10% down. This eliminates PMI entirely but adds a second loan with its own rate and payment structure.
Lena Polnet at DFS helps buyers run the actual numbers — not just the payment on day one, but the total cost over a 5-year or 10-year horizon — to determine whether PMI, a higher rate, or a piggyback structure produces the best outcome for their situation. You can also explore options through the how to remove PMI guide if you’re already in a loan and looking to shed the cost.
Questions about PMI and how it affects your buying options in Pennsylvania? Call Lena Polnet at (215) 364-7171 or visit dynamicfunding.net. Dynamic Funding Solutions, Inc. — NMLS #17144 | Licensed in Pennsylvania and Florida.
Helpful Resources
PMI Alternatives for Pennsylvania Homebuyers
If you want to put less than 20% down but avoid paying monthly PMI, a few alternatives are worth understanding. A lender-paid mortgage insurance structure rolls the insurance cost into a slightly higher interest rate. You pay more in rate, but there is no separate PMI line item on your monthly payment. This can make sense if you plan to stay in the home long enough that the rate difference becomes manageable.
An 80-10-10 piggyback loan uses a first mortgage at 80%, a second mortgage at 10%, and a 10% down payment. Since the first mortgage is at 80% LTV, no PMI applies. This structure requires qualifying for two loans simultaneously, which affects your debt-to-income ratio.
For buyers in Pennsylvania who qualify, PHFA programs sometimes offer down payment assistance that can help you reach 20% or minimize the period during which PMI applies. These programs have income and purchase price limits, but for first-time buyers in many Pennsylvania counties, the numbers often work. Dynamic Funding Solutions will show you the comparison across all options so you can choose the structure that costs you the least over your expected holding period.