Private mortgage insurance

When a conventional loan is made with a relatively small down payment, the lender’s cushion against the property value is thinner. PMI is the private insurance many lenders then require. The borrower typically pays for it; the coverage runs to the lender. Consumer materials often mention a down payment under 20% of property value as the setting where PMI may or commonly appear. That is a familiar household rule of thumb, not a statement that the law always requires PMI at that line, and not a statement that PMI never appears in any other structure. FHA loans use a different federal insurance program. Freddie Mac’s Guide heading “MI” names a mortgage insurer as a counterparty. That heading is not PMI evidence and is not cited here.

CFPB also discusses mortgage insurance more broadly, including government programs. This canary stays on private mortgage insurance for conventional loans.

PMI changes the monthly cost of many conventional loans and is a standard contrast with FHA insurance. Mixing the two programs produces false product comparisons.

A hypothetical conventional purchase with a modest down payment includes a PMI line on the Loan Estimate. The same borrower looking at an FHA option would be looking at a different insurance program, not “PMI by another name.”

• Conventional loan
• Escrow account
• FHA loan
• Loan-to-value ratio
• Mortgage insurance

• FHA mortgage insurance premium
• Mortgage insurance

Related mortgage FAQ: What is mortgage insurance and how does it work?