If you're putting less than 20% down on a conventional loan, PMI is going to show up on your payment. Most buyers hear the acronym, see the number, and assume it's just another fee. It isn't, and understanding what drives the cost can save you real money every month.
What PMI stands for
What PMI is actually for
Here's the part that catches people off guard: you pay for it, but it doesn't protect you. PMI protects the lender if you stop making payments.
The logic behind it is straightforward. When you put 20% down, the lender has a big cushion. If things go wrong and the home has to be sold, that 20% absorbs the loss. When you put 3% or 5% down, that cushion is thin. PMI fills the gap, so the lender is willing to approve a loan they otherwise wouldn't.
Reframe it before you resent it
PMI is the price of buying years earlier instead of waiting to save 20%. On a $400,000 home, 20% down is $80,000. If saving that takes you six more years, PMI is what lets you start building equity now instead of paying someone else's mortgage in rent.
How your credit score changes what you pay
This is the piece almost nobody explains, and it's the single biggest lever you control. PMI is priced by risk, and your credit score is the main input. Two buyers can purchase the identical house, put the identical amount down, and pay wildly different PMI.
| Credit score | Typical annual rate | Monthly on a $388,000 loan |
|---|---|---|
| 760+ | ~0.30% | ~$97 |
| 740 to 759 | ~0.40% | ~$129 |
| 720 to 739 | ~0.55% | ~$178 |
| 700 to 719 | ~0.70% | ~$226 |
| 680 to 699 | ~0.90% | ~$291 |
| 660 to 679 | ~1.15% | ~$372 |
| 620 to 659 | ~1.50%+ | ~$485+ |
Illustrative ranges on a $400,000 purchase with 3% down. Actual PMI is quoted per borrower and varies by insurer, loan-to-value, debt-to-income, occupancy, and property type. Use these to understand the pattern, not as a quote.
Look at the spread. Same house, same down payment, and the buyer at 760 pays roughly $97 a month while the buyer at 640 pays closer to $485. That's around $388 every month, or over $4,600 a year, purely from credit score.
Why 680 is the number to watch
Below 680, conventional PMI climbs fast enough that the loan can stop making sense. That's the point where an FHA loan often wins, because FHA's mortgage insurance costs the same regardless of your score.
The trade-off: FHA insurance usually stays for the life of the loan, while conventional PMI comes off. So the right answer depends on your score today and your plan for the next few years.
A few points can be worth thousands
If your score is sitting just under a tier break, 738 instead of 740, or 678 instead of 680, it is genuinely worth pausing to raise it before you apply. Paying down a card balance can move you a tier in one billing cycle and lower your PMI for years.
The good news: PMI ends
Unlike FHA mortgage insurance, conventional PMI is temporary. It comes off three ways:
That third one gets overlooked. In a market where your home gained value, you may already be past 20% equity without realizing it, and still paying PMI every month for no reason.
The bottom line
PMI is private mortgage insurance. You pay it, it protects the lender, and it's the trade-off that lets you buy with 3% down instead of 20%. The cost is driven mostly by your credit score, with a spread of several hundred dollars a month between the top and bottom tiers.
Two things worth acting on: raise your score before you apply if you're near a tier break, and check your equity once a year so you're not paying PMI you've already earned your way out of.
Want to see your actual PMI?
Let's look at your real score and down payment, compare conventional against FHA, and find the option that costs you the least each month.