PMI (Private Mortgage Insurance)
Insurance often required on a conventional loan above 80 percent LTV, protecting the lender if the borrower defaults.
Private mortgage insurance protects the lender, not the borrower, against loss if the borrower defaults. Many conventional purchase loans require PMI when the down payment is less than 20 percent, which places the original loan-to-value ratio above 80 percent.
For a mortgage covered by the federal Homeowners Protection Act, a borrower may request cancellation at the scheduled 80 percent point if the statutory conditions are met. The servicer generally must terminate PMI automatically on the date the principal balance is scheduled to reach 78 percent of the home's original value if the borrower is current.
On the exam
Exam trap
Tested in
Financing & Settlement (6% of the exam)
From definition to recall
See this term inside a real exam question.
Pass Texas gives you Texas-specific practice, diagnostics across the 14 exam areas, Trap Library, Math Coach, offline access, and one $59.99 purchase. No subscription. No copied exam questions.
Try 5 free questionsRelated terms
- Mortgage
A security instrument that pledges real property as collateral for a debt. In Texas, lenders use a deed of trust to play this role.
- Loan-to-Value Ratio (LTV)
The ratio of the loan amount to the property value, used to size a loan and to decide whether PMI applies.
- Conventional Loan
A mortgage that is not insured or guaranteed by a government agency and may require PMI when the original LTV exceeds 80 percent.
This definition is Texas real estate exam-prep education, not legal, tax, or professional advice. Verify current rules against the official source before relying on them for a real transaction. Back to the full glossary.