Three kinds of mortgage insurance can appear on a low-down-payment loan: borrower-paid PMI (conventional), FHA MIP, and lender-paid LPMI (conventional with the MI baked into the rate). Each has different cost, different rules, and different ways to get rid of it. Picking the wrong one can cost $30,000+ over the life of the loan.
Worked example: $350,000 loan, 95% LTV, 720 FICO. Conventional BPMI at 0.75% = $219/mo, removable at 80% LTV. FHA MIP at 0.55% annual + 1.75% upfront = $160/mo + $6,125 upfront, permanent. LPMI ~0.375% rate premium = effective $108/mo equivalent, permanent unless you refi.
How each type works
- Conventional BPMI — paid monthly as a line item, 0.3-1.5% of loan balance per year depending on credit/LTV. Drops off automatically at 78% LTV, removable earlier at 80% LTV with appraisal.
- FHA MIP — paid monthly (0.55% annual) plus 1.75% upfront financed into loan. Permanent for life of loan when putting less than 10% down; drops at year 11 with 10%+ down.
- LPMI — lender pays the PMI in exchange for a higher rate (typically +0.25-0.5%). You pay via rate forever unless you refinance. No removable.
When each wins
- Conventional BPMI wins when your credit is 720+ and you expect to hit 80% LTV within 3-5 years (appreciation + paydown). You drop it and save.
- FHA MIP wins when your credit is under 700 — conventional PMI pricing gets punitive at lower scores, FHA pricing is flat.
- LPMI wins when you'll stay 10+ years with no refi and hate the idea of a monthly line item. Also sometimes in high-LTV scenarios where BPMI pricing would be extreme.
Shop at the lender level
PMI pricing differs wildly between lenders because they use different MI companies (MGIC, Radian, Essent, Arch, National MI, Enact). A 720 FICO at 95% LTV might get 0.59% at Lender A and 0.82% at Lender B — $80/mo difference on a $350K loan. Ask each lender's LE for the PMI line item specifically.