April 22nd, 2025
Purchase a HomeRefinance My Home
If you’re buying a home in Denver and planning to put down less than 20%, chances are you’ve heard the term “PMI” mentioned during the mortgage process. Private Mortgage Insurance, or PMI, is a concept many homebuyers encounter but don’t fully understand until they’re sitting at the closing table—or receiving their first monthly mortgage statement.
At Miranda Mortgage, we believe in helping our clients make informed financial decisions. This guide covers what PMI is, when it’s required, how much it costs, and how to remove it when the time is right.
Private Mortgage Insurance is a type of insurance that protects your lender—not you—in case you stop making mortgage payments. It is typically required on conventional loans when the borrower puts down less than 20% of the home’s appraised value.
While PMI doesn’t offer you direct financial protection, it plays an important role in helping buyers enter the housing market with a smaller down payment. However, it’s crucial to understand how PMI works so you’re not caught off guard by unexpected costs or payment terms.
PMI is generally required when your loan-to-value ratio (LTV) is above 80%. This means if your down payment is less than 20% of the home’s value, your lender will likely require PMI to offset their risk.
For example, let’s say you’re buying a $400,000 home. If you put down $40,000 (10%), your LTV is 90%—so PMI would apply. Even if the home is appraised at exactly the purchase price, PMI becomes a condition of your loan approval.
PMI is added to your monthly mortgage payment and can vary based on factors such as your credit score, loan amount, and overall risk profile.
There’s no universal rate for PMI. The cost depends on several elements, including your loan amount, creditworthiness, and down payment size. In some cases, PMI might only add a modest amount—perhaps $30 to $70 a month. In other situations, it could cost several hundred dollars each month or even thousands per year.
The good news is that your monthly mortgage statement will clearly outline the PMI portion of your payment. You can also find this breakdown in your closing disclosure and in the amortization schedule provided when you first close on your loan.
One of the biggest questions borrowers ask is: When can I stop paying PMI? Fortunately, there are a few ways to remove it, and doing so can significantly lower your monthly payment.
The key factor here is your loan-to-value ratio. Once your LTV reaches 80%—meaning you’ve paid down enough of the loan compared to your home’s original appraised value—you’re generally eligible to request PMI removal. You don’t have to wait until it happens automatically.
There are a few ways to reach this threshold faster:
Keep in mind that lenders don’t always remove PMI automatically once you hit the 80% mark. You may need to actively request it and, in some cases, pay for a new appraisal to confirm the current value of the property.
If you don’t take steps to remove PMI yourself, it will eventually fall off once your loan balance reaches 78% of the original appraised value. This usually occurs through standard mortgage payments over time, and lenders are required to cancel PMI at this point.
Your lender should provide you with a PMI disclosure letter during the closing process. This letter typically includes a projected date when PMI will end if you follow your original amortization schedule. Keeping an eye on this timeline can help you plan ahead and verify when the charges will stop.
It’s important to understand that PMI specifically applies to conventional loans. If you’re using a government-backed loan—such as an FHA or VA loan—the rules around mortgage insurance are different.
FHA loans require Mortgage Insurance Premiums (MIP), which may last for the life of the loan, depending on your down payment. VA loans, on the other hand, do not require PMI but often include a one-time funding fee that serves a similar risk protection purpose.
If you’re unsure about what type of mortgage insurance your loan includes, speak with your lender during the pre-approval or closing process. Knowing these details upfront can help you better estimate your monthly payments and long-term costs.
While nobody loves paying extra fees, PMI can be a helpful tool for homebuyers who want to enter the market sooner. Saving for a 20% down payment can take years, and in markets like Denver—where home prices continue to rise—waiting may actually cost you more in the long run.
PMI makes it possible to secure financing with a lower upfront investment. As long as you have a plan to remove it down the line, it can be a worthwhile trade-off for faster homeownership and building equity sooner.
At Miranda Mortgage, we prioritize transparency and education. We make sure our clients understand how PMI fits into their loan terms, when it will go away, and what options exist for managing or eliminating it.
We work with buyers of all experience levels, from first-time homeowners to seasoned investors. If you’re purchasing a home with less than 20% down, we’ll help you compare loan options and weigh the costs and benefits of PMI versus alternatives.
Private Mortgage Insurance may not be something anyone looks forward to, but understanding how it works can give you more control over your mortgage and your future financial plans.
If you have questions about PMI, down payment strategies, or loan options in Denver, reach out to Miranda Mortgage today. Call us at 303.520.1786 or email Naiely@BarrettFinancial.com to schedule your consultation.
Let’s work together to find the best path toward your homeownership goals—PMI and all.
