Almost every first-time buyer I sit down with in Seattle asks some version of the same question: do I really have to put 20 percent down? The answer is no. You have not needed 20 percent to buy a home in a long time.

The follow-up question is the one that actually matters, and most people do not know to ask it. If I put less down, what does that cost me every month? That cost usually has a name: private mortgage insurance, or PMI.

I want to walk through what PMI is, what it runs on a real Seattle purchase, and how you get out from under it. Because here is the part that gets lost in the noise. On most loans, PMI is temporary. Treating it like a permanent penalty keeps people renting for years longer than they needed to.

What PMI Is and Who It Protects

PMI protects your lender, not you. If you put less than 20 percent down on a conventional loan and you later default, the policy covers the lender's loss. You pay the premium. They get the protection. That sounds lopsided the first time you hear it, and I understand the reaction.

But look at what PMI actually buys you. It is the thing that lets you purchase an $850,000 house with $60,000 instead of $170,000. With the Seattle median sale price sitting near $869,500 this August, that gap is often the difference between buying this year and buying in 2030.

What PMI Costs on a Seattle Home

PMI on a conventional loan generally runs between 0.3 percent and 1.5 percent of your loan amount per year. Where you land depends mostly on two things: your credit score and how much you put down.

Put real numbers on it. Say you buy at $869,500 with 10 percent down. Your loan is roughly $782,550.

1. At 0.3 percent, with strong credit and a down payment close to 20 percent, PMI runs about $196 a month.
2. At 0.5 percent, which is a common middle-of-the-road rate, about $326 a month.
3. At 1 percent, with a lower credit score and a minimal down payment, about $652 a month.

That spread is not small. The distance between the top and bottom of that range is more than $450 a month, on top of a payment that is already stretching. This is why I push buyers to work on credit before they shop rather than after. A 40 point score improvement can do more for your monthly payment than another $10,000 of down payment would.

FHA Mortgage Insurance Works Differently

People use PMI as a catch-all term, but FHA loans carry a mortgage insurance premium, or MIP, and it behaves differently in one important way.

FHA charges an upfront premium of 1.75 percent of the loan amount, usually rolled into the balance, plus an annual premium you pay monthly. Here is the part that surprises people. If you put less than 10 percent down on an FHA loan, that annual premium stays for the life of the loan. It does not fall off when you hit 80 percent equity. The only exit is refinancing into a conventional loan.

That is not a reason to write off FHA. For buyers with credit in the low 600s, FHA is often the only realistic path into a Seattle home, and a loan you can actually get beats a loan you theoretically qualify for. Just go in knowing your exit is a refinance, not a phone call.

The Four Ways You Can Pay for PMI

Most buyers are only ever shown the default option. There are four, and your lender should walk you through all of them.

1. Borrower-paid monthly. The standard setup. It rides along with your payment and cancels when you hit the equity thresholds below.
2. Single premium paid upfront. You pay the whole thing at closing, often with seller-paid closing cost credits. Lower monthly payment, but the money is gone if you sell or refinance early.
3. Lender-paid. The lender covers PMI in exchange for a higher interest rate. There is no monthly PMI line item, but the higher rate never goes away, even after you cross 80 percent equity.
4. Split premium. Part upfront, part monthly. A reasonable middle path if you have some cash but not a lot.

There is also the piggyback structure, an 80 percent first mortgage with a 10 percent second and 10 percent down, which sidesteps PMI entirely. It is worth pricing out, though second mortgage rates in the current environment often make it a wash.

How to Get Rid of PMI

This is the section worth writing down.

1. Automatic termination. Your servicer has to drop PMI on its own once your balance reaches 78 percent of the original purchase price, as long as you are current on payments. No request required.
2. Request it at 80 percent. You can ask in writing once you reach 80 percent of original value with a good payment history. This is faster than waiting for the automatic date, so do not sit on it.
3. Request it based on a new appraisal. This is the one Seattle buyers miss most often. If your home has appreciated, you can order a new appraisal and ask your servicer to cancel based on current value. Fannie Mae and Freddie Mac generally allow this at 80 percent after two years, and at 75 percent between years two and five. An appraisal costs a few hundred dollars. If it kills a $326 monthly premium, it pays for itself in two months.
4. Midpoint of the loan term. Uncommon, but if you are somehow still above the threshold at the halfway point of a 30-year loan, PMI comes off then.

I have had clients carry PMI for two years past the point they could have cancelled it, purely because nobody told them the appraisal route existed. Put a calendar reminder eighteen months out from closing and check your numbers.

Here is how I think about all of it. PMI is a fee for entering the market earlier than your savings account would otherwise allow. Sometimes that is a bad trade. More often, in a market where the alternative is rent that builds you nothing, it is a very good one. The right answer depends on your numbers, your timeline, and how long you plan to stay, which makes it a conversation rather than a rule. If you are weighing a low down payment purchase, reach out. My team at Emerald Group runs this math with buyers every week, and I would much rather help you run it before you fall in love with a house than after.

Ready to buy in Seattle? Brennen Clouse at Emerald Group is here to help. Call or text 206-899-9101 or visit emeraldgroupre.com.