Ask a Realtor®: What Is Mortgage Insurance?

📅 October 2026
By Sherell Joseph Wolford, REALTOR®

Q: My lender says my payment may include mortgage insurance. What is it, and should I try to avoid it?

A: Mortgage insurance is generally an added cost that protects the lender when a buyer purchases with a smaller down payment. On a conventional mortgage, Private Mortgage Insurance, or PMI, is commonly required when the down payment is less than 20%. But that does not automatically mean putting 20% down is the best choice for every buyer.

PMI can make it possible to buy sooner rather than waiting years to save a larger down payment. Depending on the loan amount, credit profile, and available cash, a buyer may decide that keeping more money in reserve for closing costs, repairs, emergencies, or other expenses is worth the additional monthly cost. In some cases, stretching to avoid PMI can leave a buyer with too little cash after closing.

The important thing is to understand how much mortgage insurance will cost and how long you are likely to pay it. On many conventional loans, PMI can eventually be removed after enough equity has been built. FHA and USDA loans have different mortgage-insurance rules, while VA loans do not charge monthly mortgage insurance.

Mortgage insurance is not necessarily a one-size-fits-all charge, either. The cost can vary based on factors such as your credit profile, down payment, loan amount, and loan program. That is another reason it helps to compare actual loan scenarios instead of assuming every low-down-payment mortgage will affect your payment the same way.

This is where comparing loan options becomes important. A lower down payment with PMI may make sense for one buyer, while another may benefit from putting more money down or choosing a different loan program. Two buyers purchasing homes at the same price can end up with very different monthly payments depending on the financing structure they choose.

The monthly payment is only one part of the equation. Buyers should also consider the cash needed at closing, money left in reserve, interest rate, and the long-term cost of the loan. The goal is not simply to avoid mortgage insurance—it is to choose financing that works for your overall budget.

Before deciding how much to put down, talk with a knowledgeable mortgage professional who can show you the numbers side by side. I can help connect you with trusted lenders who will explain your options clearly, so you can make an informed decision about the financing structure that works best for you.

Sources: Consumer Financial Protection Bureau and U.S. Department of Veterans Affairs.