Purchase and financing

Mortgage insurance and program fees, explained

Private mortgage insurance (PMI) is extra money you may have to pay with a common kind of home loan called a conventional loan. It helps protect the bank or loan company if you cannot pay the loan back. It does not protect you or your home. The money you pay for the home at the start is your down payment. If your down payment is 20% or more of the home price, you are less likely to need PMI. The bank or loan company makes the final decision. Other loan types can have different costs. A Federal Housing Administration (FHA) loan uses a mortgage insurance premium (MIP). A U.S. Department of Agriculture (USDA) loan uses a guarantee fee. A U.S. Department of Veterans Affairs (VA) loan does not have monthly mortgage insurance.

Published and maintained by Kevin Song for Your Home Cost. Last reviewed: September 1, 2026. How guides are reviewed.

7 cited sources

Why it changes your estimate

A recurring charge raises the monthly home cost. The calculator shows a planning loan-to-value ratio (LTV), meaning the starting loan divided by the home price, to describe how much of the price is borrowed. A real lender may instead compare financing with an appraised property value and apply more detailed program rules.

What to enter

For a conventional loan, enter the annual PMI rate from the lender's Loan Estimate or quote. For this estimate, the calculator applies any rate above 0% to the starting loan amount; enter 0 only when your lender confirms that PMI does not apply. The calculator supplies cited effective-dated FHA MIP and USDA annual-fee planning rates, so those fields are read-only. VA remains zero because VA has no monthly mortgage insurance. Ask the lender separately about upfront fees and whether they will be paid in cash or added to the loan.

Good to know

For a conventional loan, the Urban Institute's 0.394% figure is a 2024 premium yield across an in-force insured-mortgage portfolio—not an average new-borrower rate or a quote. A 2026 Federal Housing Finance Agency analysis cites a much broader 0.3% to 1.5% illustrative annual borrower-rate range; credit, down payment, loan, and insurer drive the actual price. Twenty percent is not a required down payment, although conventional private mortgage insurance (PMI) is often required below that point. The calculator does not use 20% as an automatic on-or-off switch; it applies the conventional PMI rate you enter to any starting loan amount above $0. For many eligible conventional mortgages, cancellation may be requested at 80% of original value and automatic termination is generally scheduled at 78% if legal conditions are met. For Federal Housing Administration (FHA) loans, the calculator uses the HUD annual mortgage insurance premium (MIP) table effective March 20, 2023 and selects a tier from the term, starting balance, and initial LTV; the separate 1.75% upfront MIP is not added. U.S. Department of Veterans Affairs (VA) loans have no monthly mortgage insurance, but a one-time funding fee may vary by down payment, first or later use, and exemption status; it is not guessed here. For U.S. Department of Agriculture (USDA) guaranteed loans, the calculator approximates the first year with the 0.35% annual fee in the current cited instruction and the starting balance; the separate 1% upfront guarantee fee is not added. A lender's exact balance, duration, exemptions, and financed-fee treatment can differ from this planning estimate.

Verify the charge, its base, and when it can end

Use the lender's Loan Estimate to identify whether a charge is monthly, upfront, financed, or paid in cash. For conventional PMI, request the quoted annual or monthly amount, the balance used to calculate it, and the lender's cancellation process. For FHA, VA, and USDA offers, distinguish the recurring charge from the separate upfront premium or funding fee and confirm whether that upfront amount increases the loan balance.

Compare complete offers rather than treating mortgage insurance as an isolated penalty. A different down payment can change the rate, program, cash reserve, and insurance price at the same time. Ask the lender for scenarios using the same property and quote date, then record the projected payment and cash to close. Keep any cancellation milestone as a future review reminder, not a guaranteed date, because payment history, value definitions, and program rules matter.

Locate every recurring and upfront insurance or guarantee charge on the Loan Estimate.
Ask which balance or value drives the charge and whether an upfront fee is financed.
Document cancellation or duration rules without assuming the charge ends automatically early.

Worked example

A $40,000 down payment on a $400,000 home leaves a $360,000 starting loan, so the calculator's planning LTV is 90%. At a 0.5% annual conventional PMI rate, the simple estimate is $1,800 per year, or about $150 per month.

Sources and citations

These references support the definitions, planning guidance, and program rules above. A citation does not mean its publisher endorses this guide.

Original planning exercise

Translate a quoted monthly PMI charge into the rate field

A lender quotes $150 monthly conventional PMI on a $360,000 starting loan. A second otherwise comparable quote lists $105 a month. These are invented quote amounts, not published PMI pricing or an eligibility rule.

Illustrative assumptions, not quotes or forecasts. Calculations by Your Home Cost; mortgage payment examples use the calculator's shared fixed-rate formula.

Comparison using the assumptions above
Option or step	Calculation	Planning result
First quote	$150 × 12 ÷ $360,000 × 100	0.50% annual planning rate
Second quote	$105 × 12 ÷ $360,000 × 100	0.35% annual planning rate
First-year difference	($150 − $105) × 12	$540 less recurring PMI in the second quote

What the comparison tells you

This conversion reproduces the monthly charge on the starting balance; it does not tell you when PMI will end or whether a different premium structure is available. A second quote with lower PMI can still have higher interest or upfront fees.

Evidence to collect

Confirm the premium amount, whether it is borrower-paid monthly PMI, any upfront premium and the lender's cancellation information. Compare principal and interest plus PMI, along with cash to close.

Apply it in the calculator

For these inputs, enter 0.50% or 0.35% in Conventional PMI rate. Enter an explicit zero only if that is the intended assumption; leaving the field empty keeps PMI marked unknown.

Original planning exercise added September 11, 2026. Source-review dates above are maintained separately.