Borrowers who secure an FHA loan to finance their home purchase are required to pay an upfront mortgage insurance premium (UMIP) at closing and then a monthly mortgage insurance premium (MIP) for the duration of the loan. Additionally, borrowers with conventional loans who do not put down 20% are required to pay private mortgage insurance (PMI). You can drop PMI by refinancing once your home equity reaches 20%, or, in most cases, your loan servicer will automatically drop PMI once your mortgage reaches a loan-to-value ratio (LTV) of 78%.