If you’re buying your first home in Arizona, you’ve probably heard about PMI, or Private Mortgage Insurance. It’s one of those terms that gets thrown around in the mortgage process, but many buyers don’t fully understand what it is or why it matters.
At Ramon Espinoza Home Loans, we believe in making things simple. So let’s break it down—what PMI is, when you need it, and how you can avoid paying it longer than necessary.
What Is PMI?
PMI stands for Private Mortgage Insurance, and it’s an extra monthly cost that protects the lender—not you—if you default on your loan. Even though you’re the one paying for it, PMI doesn’t benefit you directly.
It’s required when you put down less than 20% on a conventional loan. With FHA loans, the equivalent is called Mortgage Insurance Premium (MIP), but it works the same way.
When Do You Have to Pay PMI?
If you’re getting a conventional loan and putting less than 20% down, you’ll have PMI added to your monthly mortgage payment.
If you’re getting an FHA loan, PMI (or MIP) is required no matter how much you put down, but how long you pay it depends on your down payment amount.
How Long Do You Have to Pay PMI?
This depends on your loan type:
- Conventional Loans – PMI automatically drops off once you reach 22% equity in your home, or you can request removal at 20% equity.
- FHA Loans (3.5% Down Payment) – PMI lasts for the life of the loan unless you refinance into a conventional loan.
- FHA Loans (5%+ Down Payment) – MIP lasts 11 years, after which it automatically falls off.
- VA Loans – No PMI required (one of the best perks of a VA loan).
How Much Does PMI Cost?
PMI costs vary based on your credit score, loan amount, and down payment, but it usually falls between 0.3% to 1% of your loan amount per year.
For example:
- On a $400,000 home, PMI could be $250 to $400 per month.
- Over five years, that adds up to $15,000 to $24,000—so it’s worth knowing how to remove it as soon as possible.
How to Get Rid of PMI Faster
If you want to stop paying PMI sooner, here’s what you can do:
- Make extra payments – The faster you reach 20% equity, the sooner you can remove PMI.
- Watch home values – If your home appreciates, you may hit 20% equity faster than expected.
- Request PMI removal – Once you hit 20% equity, contact your lender to remove PMI.
- Refinance to a conventional loan – If you have an FHA loan with lifetime PMI, refinancing could eliminate it.
The Bottom Line
PMI isn’t permanent, but it is an extra cost that can add up over time. The key is knowing how it works and what you can do to remove it as soon as possible.
If you’re unsure whether PMI will affect your loan or how to get rid of it, let’s talk. We’ll walk you through your options and help you find the best path to homeownership—without unnecessary costs.
📩 Contact us today at clemente@ramonespinozahomeloans.com or ramon@ramonespinozahomeloans.com.
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