Private mortgage insurance (PMI) is typically required for conventional loans when the down payment is less than 20% of the home's purchase price. PMI is insurance that protects the lender in case you default on your loan. The purpose of PMI is to reduce the risk for the lender, making it possible for you to obtain a mortgage with a lower down payment.
The cost of PMI varies depending on the loan amount, your credit score, and the type of mortgage you have. You can expect to pay between 0.3% and 1.5% of the loan amount each year in PMI premiums.
Keep in mind that some conventional loan programs, such as those offered by Freddie Mac and Fannie Mae, have alternative options to PMI that can reduce the cost of the insurance, such as lender-paid mortgage insurance (LPMI) or single-premium mortgage insurance (SPMI).
It's important to consider the cost of PMI when deciding whether a conventional loan is right for you. You can also work with a lender or a financial advisor to find the best mortgage option for you, taking into account your financial situation and goals.