What Is PMI & When Does PMI Go Away in Texas? (2026)

If you have been saving for a home in Texas, you have probably heard a warning that sounds like common sense: never buy until you have 20% down, or you will get stuck paying PMI. It is one of the most repeated rules in homebuying, and it keeps people renting for years longer than they need to.

Here is the part that rule leaves out. Private mortgage insurance is not a fine, and it is not money thrown away. It is the trade-off that lets millions of buyers, including plenty of well-qualified ones, purchase a home with 3%, 5%, or 10% down instead of waiting to save six figures in cash. On a conventional loan it is also temporary, which is the detail most people never hear. Understanding how it actually works can change how you think about your down payment, your monthly payment, and how soon you can stop renting.

Three things people get wrong about PMI

Most of the fear around PMI comes from a few beliefs that simply are not accurate:

• “PMI means I’m doing something wrong.” No. It is a standard, well-understood part of low-down-payment conventional lending. It exists so you do not have to choose between renting indefinitely and writing a 20% check.
• “PMI never goes away.” That is true for some FHA loans, not for conventional PMI. Conventional PMI comes off, by your request at 80% equity and automatically at 78%.
• “I have to put 20% down to buy.” You do not. Twenty percent down only removes PMI. Many qualified Texas buyers purchase with as little as 3% down and treat PMI as the cost of getting in the door sooner.

If any of those have been holding you back, it is worth a couple of minutes to see where you actually stand before you rule yourself out.

What is PMI, exactly?

Private mortgage insurance is insurance that protects the lender when you put down less than 20% on a conventional loan. Because the lender is financing a larger share of the home’s value, PMI offsets part of that added risk. As the Consumer Financial Protection Bureau (CFPB) explains, PMI protects the lender, not you, if you stop making payments.

That sounds one-sided, and in a narrow way it is. But the practical effect is in your favor: PMI is what makes a low down payment possible at all. Without it, the only conventional path to a home would be a full 20% down. For most Texas families, that is the difference between buying now and buying years from now, if at all.

Do all conventional loans require PMI?

No. PMI generally applies only when your down payment is under 20%. Once you cross 20%, it is not required at all.

How much you pay is risk-based, not a flat fee. The biggest drivers are your credit score, your down payment, the loan amount, the property type, and how you will occupy the home. As a general rule, the stronger your credit, the lower your PMI cost, which is why two buyers purchasing the exact same home can end up with noticeably different monthly payments.

How much does PMI cost?

There is no single PMI number that applies to everyone, and any site quoting one flat rate is guessing. Your cost depends on the same risk factors lenders weigh on the loan itself:

• Credit score
• Down payment percentage
• Loan amount
• Property type
• Occupancy (primary residence vs. second home or investment)

A buyer with a 760 score will usually pay meaningfully less PMI than a buyer with a 620 score on an otherwise identical loan. That is also why pulling your real numbers matters more than any online estimate. The CFPB notes that lenders may even offer conventional loans with no separate PMI line in exchange for a slightly higher interest rate, so it is worth asking a participating lender to show you the total cost a few different ways.

When does PMI go away?

This is the part that should change how PMI feels. On a conventional loan, it is built to end. Under the federal Homeowners Protection Act, the rules the CFPB lays out for removing PMI work in your favor:

• You can request cancellation at 80% LTV. Once your balance is scheduled to reach 80% of the home’s original value (and you are current, with a good payment history), your servicer must grant a written request to cancel.
• It cancels automatically at 78% LTV. Even if you never ask, your servicer must automatically terminate PMI when your balance reaches 78% of the original value, as long as you are current.
• It also ends at the loan’s midpoint. On a 30-year loan, PMI must end after year 15 even if you have not hit 78% yet.

Can rising home values remove PMI faster?

Possibly. If your home’s value has climbed since you bought, you may reach the equity threshold sooner than your original payment schedule suggested. Many servicers let you request a new appraisal to document the higher value, and if it shows enough equity, removal may come earlier than projected. Texas home values have moved a lot in recent years, so it is worth reviewing your equity position periodically rather than assuming you are locked into the original timeline.

PMI vs. FHA mortgage insurance

This is where conventional financing and FHA financing genuinely diverge, and it is a difference that can be worth real money over time. FHA loans, insured through HUD’s Federal Housing Administration, carry their own mortgage insurance that works very differently from conventional PMI.

For a buyer with stronger credit, the removable nature of conventional PMI, plus no upfront premium, is often the deciding factor. For a buyer rebuilding credit, FHA’s more flexible qualifying can still be the better door in. Neither is universally “better,” which is exactly why comparing both on your real numbers beats following a rule of thumb. We go deeper on this in our guide to conventional vs. FHA loans in Texas.

Is it better to put 20% down just to avoid PMI?

Not always, and this is one of the most expensive assumptions in homebuying. Chasing 20% to dodge PMI can leave you house-rich and cash-poor on day one. Before draining your savings, it is worth weighing PMI against the things 20% down would cost you:

• Emergency reserves after closing
• Home maintenance and the inevitable first-year repairs
• Moving and furnishing costs
• Future goals and flexibility
• Your comfort with the monthly payment

For many buyers, putting 5% or 10% down, keeping a healthy cushion, and paying PMI for a few years is the financially calmer choice. We walk through every tier in how much you really need for a down payment in Texas.

Can you use down payment assistance with PMI?

Yes. Many Texas down payment assistance programs are built on conventional financing, so it is common for a buyer to use assistance toward the down payment and still carry PMI on the loan. Having PMI does not disqualify you from assistance. Programs through TSAHC and TDHCA may provide up to 5% of the loan amount toward your down payment and closing costs, and a participating lender can confirm how that fits with PMI in your specific scenario. If you are a first-time buyer, a Mortgage Credit Certificate (MCC) may add an annual federal tax credit on top.

A quick note for Texas buyers

ShopDPA is The Texas Down Payment Assistance Marketplace. We help you compare your real options, conventional, FHA, VA, USDA, and the state assistance programs, in one place, and connect you with licensed mortgage professionals in our network who work with these programs every day. Not every lender handles down payment assistance, and not every loan officer will model PMI removal or compare it honestly against FHA for you. The ones in our network will. That difference is the whole reason the marketplace exists.

Frequently Asked Questions

† ShopDPA is a home loan and down payment assistance referral service. We are not a mortgage lender, mortgage broker, or loan officer, and we do not originate, fund, or service loans. We connect Texas homebuyers with licensed mortgage professionals and with down payment assistance programs. We are not affiliated with TSAHC, TDHCA, HUD, the CFPB, or any government agency. Program terms, income limits, and PMI rules are set by the applicable lender, insurer, or agency and may change; confirm current details with a participating licensed lender. Equal Housing Opportunity.