Putting less than 20 percent down on a home in Cincinnati? Then PMI will likely show up on your loan estimate and monthly payment. It can feel like one more line item to decode when you’re trying to budget. The good news is you can plan for it, compare options, and remove it later in many cases. In this guide, you’ll learn what PMI is, when it applies, how much it typically costs, how to estimate it, and how to cancel it, plus local resources in Hamilton County. Let’s dive in.
What PMI means
Private mortgage insurance, or PMI, protects the lender if you default on a conventional loan when your down payment is under 20 percent. You pay for it, but it reduces the lender’s risk and makes it possible to buy sooner with less cash down. The Consumer Financial Protection Bureau explains PMI and borrower protections in plain language in its overview of what private mortgage insurance is.
When PMI applies
Conventional loans and LTV
Most conventional loans require PMI when your original loan-to-value (LTV) is above 80 percent. That simply means you put less than 20 percent down. Lenders can also apply their own risk rules, which may change PMI pricing based on property type, occupancy, credit, and loan terms.
FHA, VA, and USDA basics
- FHA loans use mortgage insurance premiums (MIP), which are different from PMI and follow different removal rules.
- VA loans do not have PMI. They charge a funding fee for most borrowers, which may be waived for some veterans.
- USDA loans use guarantee and annual fees rather than traditional PMI.
How much PMI costs
PMI pricing depends on LTV, credit score, loan type and term, occupancy, property type, and the insurer’s rate card. Industry guidance shows annual PMI rates commonly range from about 0.2 percent to 1.5 percent of the loan amount, with many borrowers seeing 0.5 to 1.0 percent. Your exact quote is specific to your loan profile.
Here is a simple example:
- Purchase price: $300,000
- Down payment: 5 percent ($15,000)
- Loan amount: $285,000
- Assume PMI rate: 0.75 percent annually
- Annual PMI: 0.0075 × $285,000 = $2,137.50
- Monthly PMI: $2,137.50 ÷ 12 ≈ $178.13
That monthly PMI is added to your housing payment and included in your lender’s debt-to-income (DTI) calculations.
5 percent vs 20 percent down
- With 5 percent down: You’ll likely have a monthly PMI charge until you build enough equity to cancel.
- With 20 percent down: No PMI required on most conventional loans.
You can also structure PMI differently:
- Borrower-paid monthly PMI: The most common. You pay it each month until cancellation.
- Single-premium PMI: Pay it up front at closing or roll it into the loan. This can lower monthly payments but increases cash to close or your balance.
- Lender-paid PMI: The lender covers PMI and charges a higher interest rate. Compare the total cost over time, not just the monthly payment.
Estimate PMI step by step
A basic way to approximate PMI is to use the formula below and then add the result to your mortgage estimate.
- Formula: Monthly PMI ≈ loan amount × annual PMI rate ÷ 12
Steps to use a mortgage calculator effectively:
- Enter your purchase price and down payment to get your loan amount.
- Enter your interest rate and term to see principal and interest.
- Add your estimated PMI using the formula above. If your calculator accepts a PMI rate, it will compute it for you.
- Add property taxes, homeowners insurance, and any HOA dues to see your full monthly payment. For local taxes, the Hamilton County Auditor publishes assessed values and tax rates you can use to estimate.
Try a few scenarios with different down payments and credit scores. Ask your lender for multiple PMI quotes so you can compare monthly payments and total costs.
Remove or avoid PMI
You have two main paths to remove conventional PMI after you buy:
- Borrower-requested cancellation at 80 percent LTV: When your loan balance reaches 80 percent of the original value, you can request cancellation in writing if you are current on payments and meet your lender’s conditions. Lenders may require an appraisal or verification of value.
- Automatic termination at 78 percent LTV: For many conforming loans, PMI must end automatically when your balance hits 78 percent of the original value, assuming payments are current. See the CFPB’s guidance on when PMI can be canceled.
Ways to reach 80 percent sooner:
- Make extra principal payments.
- Recheck value if your home has appreciated and your lender allows appraisal-based cancellation.
- Refinance into a new loan with 80 percent LTV or lower when rates and costs make sense.
Important notes:
- Subordinate liens, property condition, or occupancy changes can delay or prevent cancellation.
- FHA MIP follows different rules and often cannot be canceled the same way as PMI. Refinancing from FHA to conventional after building equity is a common way to remove ongoing MIP.
PMI and your budget
PMI raises your total monthly housing payment, so your lender will include it in DTI when deciding how much you can borrow. A $250,000 loan with a 0.5 percent PMI rate equals about $1,250 per year, or roughly $104 per month. That can reduce your maximum qualifying amount.
Weigh the tradeoff between waiting to save 20 percent and buying sooner with PMI. Consider how fast you can save, expected appreciation, and how long you plan to stay in the home.
Cincinnati resources
- Property taxes: Use the Hamilton County Auditor website to review assessed values and tax rates for payment estimates.
- Down payment help: The Ohio Housing Finance Agency offers first-time homebuyer programs and down payment assistance. Review eligibility and how assistance interacts with your loan and PMI.
- Housing counseling: Find a HUD-approved counselor through the HUD counseling search for budgeting help and program guidance.
- Market updates: Check the Cincinnati Area Board of REALTORS® for local market reports and trends that can influence your equity timeline.
Ready to plan your next step?
You do not have to navigate PMI decisions alone. If you are weighing 5 percent down versus 10 or 20 percent, comparing PMI options, or planning how to reach 20 percent equity fast, we can help you map the numbers to your goals. Connect with The Woehrmyer Team to compare scenarios, understand local costs, and move forward with confidence.
FAQs
What is PMI on a conventional loan?
- PMI is insurance you pay that protects the lender when your down payment is under 20 percent on a conventional mortgage. It increases your monthly payment until you can remove it.
How much does PMI add to a payment?
- Many borrowers see PMI in the 0.5 to 1.0 percent annual range, though it can be as low as 0.2 percent or as high as 1.5 percent depending on credit, down payment, and loan details.
Can I avoid PMI without 20 percent down?
- You can choose single-premium PMI or lender-paid PMI to reduce or remove the monthly line item, but you will trade off higher upfront cost or a higher interest rate. Compare total costs over time.
When can PMI be removed from my loan?
- You can request cancellation at 80 percent LTV if you meet lender conditions, and many loans terminate PMI automatically at 78 percent LTV if you are current on payments.
Is FHA better than conventional if I have less than 20 percent?
- FHA uses MIP instead of PMI and has different credit and cost dynamics. Ask your lender for side-by-side quotes to compare payment, upfront costs, and long-term removal options.
Where can I find Cincinnati down payment assistance?
- Start with the Ohio Housing Finance Agency for state programs and use the HUD counseling search to connect with a local counselor who can review your options.
