Private mortgage insurance lowers the risk to the lender by protecting them against payment default, so you can qualify for a loan that you might not otherwise be able to get with less money down. 

Typically, borrowers making a down payment of less than 20 percent of the purchase price of the home will need to pay for private mortgage insurance with most loan programs.

If you are required to pay private mortgage insurance, it will be included in your total monthly payment that you make to your lender, your costs at closing, or both.

Conventional Loans

Your lender typically arranges for mortgage insurance with a private insurance company.  Private Mortgage Insurance (PMI) rates vary by down payment amount and credit score.

PMI is paid monthly and can be cancelled once you hit the equity threshold required by the lender.

FHA Loans

Private mortgage insurance is required with all FHA loans.

It costs the same regardless of your credit score and changes slightly depending on your down payment amount.

FHA private mortgage insurance cannot be cancelled and lasts for the duration of an FHA loan.

In addition, FHA loans have an up-front MIP (Mortgage Insurance Premium) fee that is financed on top of the base loan amount.

VA Loans

VA loans do not require private mortgage insurance, but may require an up-front financed VA guarantee fee if the Veteran is not exempt.  This fee is financed on the base loan amount.

USDA Loans

USDA loans do require Private Mortgage Insurance, but at a reduced rate.

There is also a USDA funding fee that is financed on top of your loan required by USDA Rural Housing.