Routing # 256078446
MORTGAGE KNOWLEDGE CENTER
PenFed Mortgage with Confidence
MORTGAGE
Mortgage Insurance: PMI vs. MIP
What you'll learn: The difference between PMI vs. MIP and how to get rid of mortgage insurance.
EXPECTED READ TIME: 3 MINUTES
Updated November 22, 2023
Mortgage insurance is an added cost for many homebuyers, required in many homebuying scenarios to protect mortgage lenders. For conventional loans, this premium is commonly called private mortgage insurance (PMI), and for FHA loans it’s called mortgage insurance premium (MIP). Borrowers may benefit from more lenient down payment requirements in exchange for added mortgage insurance requirements.
In general, conventional mortgages require a 20% down payment of the sales price to avoid PMI. For example: If you're purchasing a $300,000 home, you'll need a down payment of at least $60,000. Saving that much cash is not an easy feat for most people. Both conventional and FHA loans also offer special mortgage programs that require lower than 20% down. Qualified borrowers can get approved for a conventional loan with as little as 3%-5% down, or 3.5% down for FHA.
Low down payment offerings create added risk for the lender. That's where the PMI mortgage insurance comes in, protecting the lender from borrower default. By balancing risk with mortgage insurance protection, lenders can confidently offer lower down payment options.
What is the cost of mortgage insurance?
On average, mortgage insurance costs between 0.5% and 1% of the mortgage amount per year. On a $300,000 loan, a borrower could expect to pay somewhere between $1,500 and $3,000 toward mortgage insurance premiums per year. That amount is split up into 12 monthly payments, on top of your mortgage payments.
The exact rate you pay depends on a few factors like your credit score, down payment amount, lender, and loan program. It's smart to shop and compare loan programs, especially when you have a small down payment.
PMI vs. MIP: What’s the difference?
There's a big difference between FHA's MIP and conventional PMI — the ability to remove it. One of the best things about conventional PMI is that you can ask your lender to remove it once you have 20% equity in your home.
All FHA loans have an up-front payment and a monthly mortgage insurance premium (MIP). Your MIP upfront payment will be equal to 1.75% of the total value of your loan and will be due at closing.
How to remove PMI and MIP
For conventional mortgages, you’ll need to wait until you have at least 20% equity to have your PMI removed by your lender. When it comes to FHA MIP, if a borrower puts down 10% or more, they may have the option of removing MIP after 11 years. However, if you put down less than 10%, the only way to remove it is to refinance to a conventional loan.
Explore all of your home loan options
It’s always smart to compare your options and find the best course of action for your unique situation. Whether you want to reduce mortgage payments by removing PMI or MIP, need a new mortgage, or you’re thinking about refinancing, be sure to explore every possibility.
SIMILAR ARTICLES
Mortgage Calculator - Know Your Options
Use PenFed's free mortgage calculator and determine your monthly payment, including principal and interest. Calculate conventional, VA, and jumbo home loans.
Why Should You Choose an FHA Loan?
Think buying a home is out of reach? If you have a low or no credit score, high amounts of debt, or little savings, an FHA loan could be the solution for you.
Can I Afford to Buy a Home?
Find out if you're financially ready to buy a home. Use our affordability calculator to list your current income and bills and determine how much home you could afford.
Cancelling PMI: How to Know When You Qualify
PenFed offers the option to automatically remove your PMI once your mortgage loan reaches a certain value. Here is a look into the details and conditions to receive this removal.
Home Buying Steps
Mortgage Products
Disclosures
1Conventional Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.0 discount point, which equals 1.0 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $400,000; loan-to-value ratio of 75%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.
2FHA Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.0 discount point, which equals 1.0 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $400,000; loan-to-value ratio of 96.5%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.
3VA Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.125 discount point, which equals 1.125 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $450,000; loan-to-value ratio of 95%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of $995.
4Jumbo Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 0.625 discount point, which equals 0.625 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, non-conforming, fixed-rate loan. Loan amount of $1,009,000; loan-to-value ratio of 70%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.
Fixed Rate Advance Lock-In You may lock in an Annual Percentage Rate for Advances during the Advance Period. During your Advance Period, you may choose to have three separate Fixed Rate Advances locked in at any one time, with a maximum of two new Fixed Rate Advances per calendar year. Each Fixed Rate Advance must equal or exceed Ten Thousand Dollars ($10,000.00) and you may not request a Fixed Rate Advance that would cause the amount you owe to exceed your Credit Limit. The only term option for your Fixed Rate Advance is 240 months (“Fixed Rate Advance Term”). However, the term of your Fixed Rate Advance cannot exceed your Repayment Period.
Routing #256078446
©2026 Pentagon Federal Credit Union