What’s PMI, and Can I Get Rid of It?

If your down payment is less than 20%, your loan probably includes PMI, or Private Mortgage Insurance. It’s one of those acronyms that confuses nearly every buyer—but once you understand it, it’s surprisingly simple to manage.

Here’s the deal: PMI doesn’t protect you. It protects your lender in case you default on the loan. But it’s also what allows buyers to purchase with smaller down payments—making homeownership accessible to more people across Lubbock County.

So while PMI feels like an extra cost, it’s often the very thing that gets you into your home sooner.

Here’s how it typically works:

• Conventional loans: PMI applies when you put down less than 20%. The cost ranges between 0.3% and 1.5% of your loan amount per year, depending on your credit score and down payment size.

• FHA loans: Use a version called MIP (Mortgage Insurance Premium), which includes an upfront fee and a small monthly amount.

• VA loans: No PMI at all—a major benefit for veterans and active-duty buyers.

Now for the good part—you can remove PMI once you reach 20% equity in your home. That can happen naturally through regular payments or faster if your home’s value increases.

You can:

1. Wait it out. Lenders automatically remove PMI when you hit 22% equity through normal amortization.

2. Request removal early. If your home’s value has risen, you can request a new appraisal to prove you’ve hit 20%.

3. Refinance. If rates drop and you refinance, you can remove PMI entirely if your new loan meets the 80% loan-to-value threshold.

In Lubbock’s appreciating market, many homeowners reach that point sooner than they expect.

When I work with buyers, I help estimate how long PMI will last and what steps to take later to eliminate it. Sometimes paying a slightly higher down payment upfront can shorten the timeline—or we can map out a refinance strategy before you even close.

The goal is to treat PMI like what it is: a stepping stone, not a penalty.

So yes, you might start with PMI—but you won’t have it forever. And if you play it smart, it’s one of the smallest trade-offs for owning your home years sooner.

— Insights from Tess Hernandez, Realtor | Reside Real Estate