What Is Private Mortgage Insurance (PMI)? | Insight from Kitsap County Real Estate Expert, Bre Enbom

If you are buying a home in Bremerton, Silverdale, Poulsbo, or Port Orchard, you may come across the term private mortgage insurance, commonly known as PMI. This is an important part of many home loans, especially for buyers who are putting less than 20 percent down.

Understanding how PMI works can help you plan your monthly payment and overall budget in the Kitsap County market.

What PMI Is and Why It Exists

Private mortgage insurance is a type of insurance that protects the lender, not the buyer. It is typically required on conventional loans when the buyer’s down payment is less than 20 percent of the home’s purchase price.

Because lower down payments create more risk for lenders, PMI helps offset that risk. While it benefits the lender, it allows buyers to purchase a home sooner without waiting to save a full 20 percent down payment.

How PMI Affects Your Monthly Payment

PMI is added to your monthly mortgage payment. The exact cost depends on factors like your loan amount, credit score, and down payment size.

In many cases, PMI can range from a small percentage of the loan annually, broken into monthly payments. While it does increase your monthly cost, it can make homeownership more accessible upfront.

How to Remove PMI

One of the key benefits of PMI is that it is not always permanent. Once you reach a certain level of equity in your home, typically 20 percent, you may be able to request removal.

In some cases, PMI is automatically removed once your loan balance reaches a specific percentage of the home’s original value. You can also reach this point faster if your home value increases or you make additional principal payments.

PMI vs Other Loan Types

Not all loans use PMI in the same way. FHA loans, for example, include a different type of mortgage insurance that may last longer. VA loans, commonly used in Kitsap County, do not require monthly mortgage insurance at all for eligible buyers.

Understanding the differences between loan types can help you choose the best option for your situation.

What Buyers Should Keep in Mind

PMI is a tool that allows many buyers to enter the market sooner. In a competitive area like the Kitsap Peninsula, this can make a difference in timing and opportunity.

While it does add to your monthly payment, it can also help you build equity sooner rather than waiting years to save a larger down payment.