If you’re buying a Houston home with less than 20% down, your lender will almost certainly add private mortgage insurance — PMI — to your monthly payment. The good news: it isn’t permanent. Here’s how to get rid of PMI, what it costs while you have it, and the one loan type where “getting rid of it” usually means refinancing out entirely.
Quick disclaimer before we start: I’m a real estate broker, not a lender. The numbers below are illustrative to show you how this works — your loan officer will give you the exact figure for your situation.
What is PMI, and why is it on my payment?
Private mortgage insurance protects the lender, not you, if you stop paying and the loan goes into default. On a conventional loan, it’s the trade-off for putting down less than 20% — the lender takes on more risk with a smaller down payment, and PMI offsets that risk. It’s bundled into your monthly mortgage payment, so you may not even notice it as a separate line until you look closely at your loan estimate.
The important thing to understand: PMI is not a penalty and it’s not money you get back. It’s the cost of buying sooner instead of waiting years to save a full 20%. For a lot of Houston buyers, paying PMI for a few years beats sitting on the sidelines while home prices and rents keep climbing. If you’re weighing how big a down payment to make, I walk through the real math in how much you really need to put down.
How much does PMI cost?
PMI usually runs about 0.5% to 1.5% of your loan amount per year, and three things drive where you land in that range: your credit score, your down payment, and your loan size. A stronger credit score and a larger down payment both push the rate down.
Let’s price it on a $340,000 house — right around Houston’s median. Put 10% down and you’re borrowing about $306,000. Here’s roughly what PMI looks like:
- Strong credit (around 0.5%): about $1,530 a year, or roughly $128 a month.
- Average credit (around 1%): about $3,060 a year, or roughly $255 a month.
A smaller down payment or a lower credit score can push it higher; a bigger down payment or excellent credit brings it down. Either way, that’s real money — which is exactly why you want a plan to remove it. If you’re still shopping the loan itself, it’s worth checking where Houston mortgage rates sit this week, since a lower rate and dropping PMI both attack the same monthly number.
How to get rid of PMI on a conventional loan
This is the part most buyers don’t realize is spelled out in federal law. The Homeowners Protection Act gives you three ways off PMI on a conventional loan, all measured against your home’s original value — generally the lower of your purchase price or the appraisal at closing:
- Request it at 80%. Once your loan balance is scheduled to hit 80% of the original value, you can ask your servicer in writing to cancel PMI. On our $340,000 example, that’s paying the balance down to about $272,000. You’ll usually need to be current on payments and have a clean recent history.
- Automatic termination at 78%. Your servicer must cancel PMI on its own once the balance reaches 78% of the original value — about $265,200 on our example — as long as you’re current.
- The halfway point. Even if you’re somehow not at 78% yet, the servicer must drop PMI the month after you reach the midpoint of your loan’s schedule (year 15 of a 30-year loan).
There’s also a faster route some homeowners miss: if your home has gained value or you’ve made real improvements, you can ask about canceling based on the current value with a new appraisal. Lenders set their own seasoning rules for this — often two to five years — so call your servicer and ask exactly what they require. The federal rules are laid out plainly by the Consumer Financial Protection Bureau.
FHA loans are different — and this catches people
If you’re using an FHA loan, you don’t pay PMI — you pay a mortgage insurance premium, or MIP, and the rules are stricter. There’s an upfront premium of 1.75% of the loan (usually rolled into the balance) plus an annual premium, currently 0.55% for most borrowers. Here’s the catch buyers don’t hear until later: if you put down less than 10% on an FHA loan, that annual MIP lasts the entire life of the loan — it never cancels on its own, no matter how much equity you build. Put 10% or more down and it drops after 11 years.
So on most FHA loans, “getting rid of it” actually means refinancing into a conventional loan once you’ve built 20% equity. That can be well worth it, but it’s a real transaction with its own costs, so run the numbers. The FHA’s own rules are published by HUD.
VA loans: no monthly mortgage insurance at all
One bright spot for Houston’s many veterans and active-duty buyers: VA loans carry no monthly mortgage insurance, even with zero down. There’s a one-time VA funding fee instead, and it can often be rolled into the loan or waived for veterans with a service-connected disability. If that’s you, it’s one of the best deals in lending — I break it down in VA loans in Houston.
What I tell Houston buyers
Don’t let PMI talk you out of buying, and don’t let it hang around longer than the law requires. Know your original value, know your two key balances — 80% to request, 78% for automatic cancellation — and put a reminder on your calendar. If your home has appreciated, ask your servicer about an early cancellation with a new appraisal. And if you’re on an FHA loan, keep an eye on when a refinance into a conventional loan starts to pencil out. A few minutes of attention here can quietly take a hundred or two hundred dollars a month off your payment. For the bigger picture on financing your purchase, my Mortgage Information page pulls the key pieces together.
Thinking about buying in the Houston area and want to map out your down payment, your PMI, and how fast you can shed it? Call or text me, Kevan Pewitt, at (281) 500-7077, or email kevan@houstonprimerealty.com. I’m glad to walk through your numbers with no pressure and no obligation.
Last updated: September 2026
