Most mortgage lenders require mortgage insurance if the loan-to-value (LTV) ratio is greater than 80%. When you close a mortgage loan, the ratio may be greater than 80% but it may be reduced in a few years as you pay off your loan principal and the value of your home appreciates.
You may have to pay for an appraisal to substantiate that your home's loan-to-value ratio is 80% or less. The Homeowner's Protection Act (HPA) mandates that lenders cancel private mortgage insurance when the loan-to-value ratio reaches 78% based on the original amortization of the loan and without regard to the current value of the property as long as the borrower is current with the mortgage payments unless your loan is backed by the FHA.
This tool estimates your monthly payment for private mortgage insurance (PMI) over a range of down payments. If your down payment is at least 20% of the purchase price of your home, your lender does not require you to obtain mortgage insurance.