Yes, PMI is based on credit score, along with your loan-to-value ratio. Private mortgage insurers use risk-based pricing, so your FICO score at application directly sets the percentage rate you pay. The spread is wide: a borrower with a score of 760 or above might pay around 0.46 percent of the loan amount per year, while a borrower in the 620–639 range could pay as much as 1.50 percent. On a $300,000 loan, that difference works out to roughly $260 a month.
How Credit Score Sets Your PMI Rate
Insurers group borrowers into pricing tiers that shift roughly every 20 points, such as 700–719, 720–739, and 740–759. A higher score signals a lower chance of default, so the insurer charges less to cover the risk. Moving up a single tier can produce a noticeable drop in your monthly payment, which is why pulling your score up before you apply is one of the highest-return steps you can take on housing costs.
The rate is expressed as an annual percentage of the loan amount, then divided into 12 installments that ride along with your mortgage payment.1U.S. Department of Housing and Urban Development (HUD). Monthly (Periodic) Mortgage Insurance Premium Calculation The insurer pulls your credit at the time of your loan application and uses that snapshot to set the rate. It does not float with your score afterward.
How Your Down Payment Combines With Your Score
The other main pricing input is your loan-to-value ratio, or LTV: the amount you borrow divided by the appraised value of the home. A larger down payment means a lower LTV, which lowers the insurer’s exposure and the premium. Put 3 percent down and you have a 97 percent LTV, which lands in the highest premium tier.2Fannie Mae. 97% Loan to Value Options Put 15 percent down and you have an 85 percent LTV, and the same credit profile pays noticeably less.
The required coverage amount also scales with LTV. On loans sold to Fannie Mae or Freddie Mac, coverage requirements run from as low as 6 percent for LTV ratios at 85 percent or below on shorter-term loans, up to 35 percent for loans above 95 percent LTV.3MGIC. Mortgage Insurance Coverage Requirements and Exposure Higher required coverage means a higher premium, because the insurer is on the hook for a larger share of the loan if you default.
Think of credit score and LTV as a grid rather than two separate dials. A high score with a very small down payment can still cost more than a mid-tier score with a bigger down payment. If your savings for a down payment are limited, focusing on your score before you apply can partially offset the LTV cost.
Loan Term and Rate Type
Two features of the mortgage itself also move the rate.
Shorter-term loans build equity faster, so the insurer carries risk for fewer years. A 15-year mortgage generally carries a lower PMI rate than a 30-year mortgage for the same borrower and down payment.4Freddie Mac. 15-Year vs. 30-Year Term Mortgage Calculator The required coverage percentage from the agencies is also lower for loan terms of 20 years or less.3MGIC. Mortgage Insurance Coverage Requirements and Exposure
Fixed-rate loans price better than adjustable-rate mortgages. When an ARM’s initial fixed period ends, the payment can rise, which raises the chance of a missed payment. Insurers price that uncertainty in. If you are considering an ARM for its lower introductory rate, work the higher PMI cost into the comparison.
How You Pay the Premium
Monthly borrower-paid PMI is the default, but it is not the only way to deliver the same credit-based rate.
Borrower-paid monthly is what most people have: the annual premium split into 12 installments added to the mortgage payment. It is the easiest to end once you build enough equity.
Lender-paid mortgage insurance, or LPMI, folds the cost into a higher interest rate. A borrower with strong credit and a 10 percent down payment might see the rate rise by roughly a quarter of a percentage point. There is no separate PMI line item, but the higher rate lasts the life of the loan because it is baked into the mortgage. You cannot cancel it the way you can with borrower-paid PMI.
Single-premium PMI is a lump sum paid at closing, which can be financed into the loan amount. The cost still depends on your credit score and LTV. This structure can pay off if you stay in the home long enough for the monthly savings to exceed the upfront cost, but if you sell or refinance early, the money spent upfront is gone.
Each option has a breakeven that depends on how long you keep the loan. If you expect to sell or refinance within a few years, LPMI or single-premium can end up more expensive than standard monthly PMI that you cancel once you reach 80 percent LTV.
Sidestepping PMI With a Piggyback Loan
Some borrowers avoid PMI entirely with a piggyback second mortgage that keeps the first loan at or below 80 percent LTV. In an 80/10/10 structure, the first mortgage covers 80 percent of the purchase price, a second loan covers 10 percent, and the buyer puts 10 percent down. Because the first mortgage does not exceed 80 percent LTV, no mortgage insurance is required on it. The second loan usually carries a higher interest rate, so the honest comparison is the total cost of both loans against a single loan with PMI.
FHA Loans Do Not Price by Credit Score
If you are comparing a conventional loan to an FHA loan, the credit-score answer flips. FHA loans carry a mortgage insurance premium, or MIP, set by HUD based only on your loan term, loan amount, and LTV. Credit score does not change the FHA MIP rate.
FHA borrowers pay two pieces. There is an upfront premium of 1.75 percent of the base loan amount, typically rolled into the balance. There is also an annual premium collected monthly. On a 30-year FHA loan with a base amount at or below $726,200, the annual MIP runs from 0.50 percent for LTV ratios of 90 percent or below to 0.55 percent for LTV above 95 percent. Shorter-term FHA loans of 15 years or less start at 0.15 percent for LTV ratios at or below 90 percent.
Cancellation is the other big difference. FHA MIP on loans originated after June 3, 2013, with less than 10 percent down, stays for the life of the loan. It goes away only if you refinance into a conventional loan, pay the mortgage off, or sell. Put 10 percent or more down on an FHA loan and MIP comes off after 11 years. Because FHA insurance is hard to cancel and includes the upfront premium, a borrower with a score above roughly 680 to 700 will often pay less over time with a conventional loan and PMI, even when the starting PMI rate looks higher than the FHA annual MIP rate.
What to Do Before You Apply
Because the insurer sets your rate from a single credit pull at application, the score you show up with is the score you are stuck with for the life of that PMI policy. Pay down revolving balances, avoid opening new accounts in the months before you apply, and dispute errors on your credit reports. If you are near the top of a tier, pushing into the next one up can be worth more than an equivalent bump in your down payment, and the two together compound.