PMI Costs Vary

• How much you pay for PMI depends on the size of your down payment. Most lenders require a minimum of 5 percent down, while others demand 10 percent. As an example, if you put $15,000 down on a house that costs $150,000, you would need to pay another $15,000 to reach the 20 percent down payment level to get rid of PMI payments. With a $20,000 down payment, you would pay a lower premium than if you put $5,000 or $10,000 down because there is less risk of default.
  
  

PMI Requirements

• Requirements to obtain PMI vary by lender. Those requirements usually include having enough income to cover the mortgage payments, a down payment and closing costs, which can run 2 to 3 percent of the price of the home. A good credit history and a low debt level are also important. In addition to a sufficient appraised value for the house, you should have cash available to cover two months or more of mortgage payments.
  
  

You Have Options

• Some lenders provide options, such as requiring payment of one year of premiums when the first mortgage payment is due, then requiring another annual premium the second year and so on until your equity goal is achieved. You can also pay the lender a lump sum premium or pay it monthly as part of your mortgage payment. If those signing a conventional mortgage earn less than $109,000, PMI payments are tax-deductible on loans originated or refinanced by Dec. 31, 2011.
  
  

FHA Insurance

• With an FHA mortgage, which is one guaranteed by the U.S. Department of Housing and Urban Development, you can qualify for a mortgage if you have a lower credit score and more debt, but mortgage insurance is required with the loan. The FHA requires a down payment of 3.5 percent.
  
  

FHA Insurance Costs

• When you sign the mortgage insured by the FHA, you must pay an upfront insurance premium equal to 1.0 percent of the home’s price. Additional monthly premiums run 0.90 percent to 0.85 percent of your outstanding balance (depending on your down payment) until your equity hits 78 percent. You must pay FHA mortgage insurance for a minimum of five years, regardless of how much equity you accrue. FHA-insured mortgages do not allow you to count home price appreciation as equity, as conventional mortgages do.