How much is PMI on a mortgage?While the cost of PMI typically ranges from 0.5% to 1% of the loan balance each year, many factors can influence your monthly payment. PMI costs are calculated based on these criteria:
- Down payment amount: if you pay 20% or more of the purchase price of your home as a down payment, you will not have to pay PMI. For down payment amounts of less than 20%, the PMI rate varies.
- Credit score: The higher your credit score, the lower your PMI payments.
- Type of mortgage: PMI is associated with conventional loans only. The total amount of the mortgage loan: The more money you need to secure your new loan, the more PMI you will pay over the total life of the loan.
- Loan-to-value ratio: The percentage of your home's value that was issued to you as a mortgage loan.
How can I avoid PMI?Since PMI costs add to your monthly mortgage payment, it's understandable that you would want to avoid PMI. Thankfully, there are ways to get a mortgage loan without PMI, even if you can't put 20% down:
- Take out an FHA loan. You'll avoid PMI even with a lower down payment, but other associated mortgage insurance premiums could end up costing you even more.
- Take out a piggyback loan. A piggyback loan or 80-10-10 loan is a type of home loan that can help you avoid PMI, but could also end up costing you more if you don't have good credit.
- Consider a VA loan if you are an eligible servicemember, spouse, or veteran.
- Seek downpayment assistance. The U.S. Department of Housing and Urban Development provides downpayment and closing cost assistance to eligible low-income families that do not need to be repaid.