Home Possible PMI Overview
Home Possible loans are conventional mortgages, so they require private mortgage insurance (PMI) when the down payment is less than 20%, or when loan-to-value is over 80% for a refinance.
Because Home Possible is designed as an affordable program, its PMI requirements are less expensive than standard conventional loans. Like other conventional loans, Home Possible PMI can be canceled once the homeowner reaches 20% equity.
📊 Key Statistic
Home Possible PMI Savings by LTV
One way Freddie Mac lowers costs for Home Possible borrowers is by requiring less PMI coverage compared to standard conventional mortgages. Lower coverage means smaller monthly premiums for homeowners.
Home Possible PMI costs are based on a borrower's:
- Loan-to-value ratio (LTV)
- Credit score
- Loan term
- Coverage level
Home Possible PMI vs Conventional PMI by Down Payment Amount
The table below compares annual PMI rates for Home Possible and standard conventional loans at different loan-to-value (LTV) ratios for a 30-year fixed-rate purchase at a 620 credit score:
| LTV | Standard PMI | Home Possible PMI | Annual Savings |
|---|---|---|---|
| 97% | 1.95% | 1.45% | 0.50% |
| 95% | 1.30% | 1.15% | 0.15% |
| 90% | 0.90% | 0.90% | 0.00% |
| 85% | 0.41% | 0.41% | 0.00% |
PMI savings are greatest at higher LTVs, where reduced PMI coverage has the biggest effect.
Home Possible PMI Savings by Credit Score
PMI premiums also vary by credit scores. Borrowers with lower credit scores pay more for their mortgage insurance, but nearly all Home Possible borrowers pay less than comparable conventional loan borrowers.
Home Possible PMI vs Conventional PMI by Credit Score
| Credit Score | Standard PMI | Home Possible PMI | Annual Savings |
|---|---|---|---|
| 760+ | 0.55% | 0.44% | 0.11% |
| 740-759 | 0.69% | 0.52% | 0.17% |
| 720-739 | 0.76% | 0.59% | 0.17% |
| 700-719 | 0.90% | 0.68% | 0.22% |
| 680-699 | 1.20% | 0.91% | 0.29% |
| 660-679 | 1.65% | 1.20% | 0.45% |
| 640-659 | 1.80% | 1.27% | 0.53% |
| 620-639 | 1.95% | 1.45% | 0.50% |
When Can You Remove PMI on a Home Possible Loan?
Home Possible is a conventional mortgage so, like all conventional mortgage, its PMI is cancelable. Here are the three checkpoints at which Home Possible PMI can be canceled:
| PMI Checkpoint | Type | How It Works |
|---|---|---|
| 80% LTV | By request | Ask your servicer to drop PMI at 80% of home value. |
| 78% LTV | Automatic | PMI drops off at 78% if payments are current. |
| Loan Term Midpoint | Automatic | PMI ends halfway through the loan if payments are current. |
Not sure if you qualify for Home Possible? Check the Home Possible Income Limits Guide to see if your income is within the 80% AMI cap, and review the Loan Requirements Guide for the full eligibility checklist.
Key Takeaway
Home Possible requires PMI with less than 20% down, but at lower rates than comparable conventional loans. Like all conventional mortgages, PMI can be removed once you reach 20% equity, helping lower monthly payments over time.
Frequently Asked Questions About Home Possible PMI
Find answers to common questions about PMI for the Home Possible mortgage program.
Does Home Possible require PMI?
Yes. All Home Possible loans with less than 20% down require private mortgage insurance.
Is Home Possible PMI cheaper than standard conventional?
Yes. PMI coverage is reduced, resulting in lower monthly premiums compared to a similar standard conventional loan.
Can I cancel Home Possible PMI?
Yes. PMI can be canceled once your loan reaches 80% loan-to-value (LTV) or automatically drops off at 78% LTV.
Does credit score affect PMI costs?
Yes. Higher credit scores usually mean lower PMI premiums, even under Home Possible.
Is PMI tax-deductible?
PMI may be tax-deductible depending on current federal tax law. Check with a tax professional.
