What Is PMI?

By Harrison Lilly Realty | August 5, 2026

If you're buying a home in Monroe or West Monroe with less than 20% down, there's a good chance you'll be quoted a mortgage payment that includes a charge called PMI. Most buyers don't know what it is until they see it on their loan estimate — and then they're annoyed.

Here's the short version: PMI is mortgage insurance that protects your lender if you stop making payments. It does nothing for you. It just makes your monthly payment higher until you've built enough equity that the lender decides you're no longer a risk.

The good news is that Monroe-area buyers have more options to avoid PMI than buyers in most parts of the country. Some of those options are exclusive to Northeast Louisiana. Here's what you need to know.

What PMI Actually Is

Private mortgage insurance kicks in on conventional loans when your down payment is less than 20% of the purchase price. At that point, the lender sees you as higher risk and requires insurance to cover potential losses.

The cost runs between 0.3% and 1.5% of your loan amount per year, depending on your credit score, down payment, and lender. On a $230,000 home in Monroe — roughly today's median — here's what PMI looks like at different down payment levels:

• 3% down ($6,900): loan of $223,100 → PMI of roughly $130–$185/month
• 5% down ($11,500): loan of $218,500 → PMI of roughly $91–$182/month
• 10% down ($23,000): loan of $207,000 → PMI of roughly $72–$144/month

That's $1,000 to $2,200 per year going out the door — money that doesn't reduce your balance or build equity.

PMI stays on your loan until you reach 80% loan-to-value (LTV) and request its removal in writing — or until you hit 78% LTV automatically, at which point federal law (the Homeowners Protection Act) requires your lender to cancel it without any action on your part. On a $230,000 purchase with 5% down, reaching that automatic cancellation point takes roughly 8 to 10 years with a standard 30-year amortization schedule.

That's a significant amount of money paid for something that protects only your lender.

PMI vs. FHA Mortgage Insurance — Know the Difference

A lot of buyers think FHA loans are a way to avoid PMI. They're not. FHA loans replace PMI with something called mortgage insurance premium (MIP), and in most cases, MIP is worse.

Here's the breakdown on a $230,000 home with 3.5% down (the FHA minimum):

• Upfront MIP: 1.75% of the loan amount = $3,884, added to your loan balance at closing
• Annual MIP: 0.55% of the loan per year = approximately $102/month
• Duration: If you put down less than 10%, MIP stays for the entire life of the loan— all 30 years — unless you refinance into a conventional loan

Over 30 years, that's roughly $36,720 in MIP payments, plus the $3,884 upfront. Total: over $40,000 in mortgage insurance on a $230,000 home.

Conventional PMI, by contrast, cancels once you build equity. FHA MIP, in most cases, does not.

This doesn't mean FHA is always the wrong choice. Buyers with credit scores in the mid-600s often still fare better with FHA because PMI rates for conventional loans spike steeply with lower credit scores. But it's a real comparison to make — not an assumption that FHA is automatically cheaper because the rate is lower.

5 Ways Monroe Buyers Avoid PMI

1. USDA Loan — $0 Down, No PMI, Rural Ouachita Parish

USDA loans are the most underutilized financing tool in the NELA market. If the home you're buying is in an eligible rural area, you get:

• $0 down payment
• No PMI (USDA uses a small guarantee fee instead, which is significantly lower)
• Competitive rates comparable to conventional financing

In the Monroe-West Monroe metro, several areas qualify: Sterlington, Swartz, and much of rural Ouachita Parish outside the Monroe city limits. If you're buying in those corridors — which are seeing strong activity right now from buyers priced out of in-town inventory — USDA is worth a serious look.

Income limits for 2026 are approximately $110,650 for a household of 1–4 people. Eligibility is address-specific, so verify before you assume.

We wrote a full guide here: USDA Loans in Monroe, Louisiana: Buy a Home in Sterlington or Swartz With $0 Down

2. VA Loan — $0 Down, No PMI, for Veterans

If you've served, VA loans are the best mortgage product in the market — period. No down payment, no PMI, competitive rates, and a $832,750 loan limit in Ouachita Parish for 2026.

Instead of PMI, VA charges a one-time funding fee (typically 1.25%–3.3% depending on your down payment and whether it's your first use), which can be financed into the loan. For many veterans, that's far less expensive than years of monthly PMI.

100% disabled veterans may also qualify for a full property tax exemption in Ouachita Parish, which adds another layer of monthly savings.

Full details here: VA Loans in Monroe, Louisiana: What Every Veteran Buyer Needs to Know

3. Delta 100 — 2% Rate, 100% Financing, No PMI (Northeast Louisiana Exclusive)

This one is specific to our market, and most buyers — even long-time locals — have never heard of it.

The Delta 100 program is a Louisiana Housing Corporation product available only in the Delta parishes of North Louisiana, including Ouachita Parish (outside Monroe city limits) and Richland Parish. It offers:

• 100% financing — zero down payment
• 2% fixed interest rate — dramatically below market
• No PMI — none at all
• Up to $242,000 in financing
• Up to 3% closing cost assistance
• No minimum credit score required

The income limit is 80% of area median income for the specific parish, so this program targets working families — not just the lowest-income buyers. It's not widely advertised, but it's real, and it's available to eligible buyers right now.

If you're considering a home in Sterlington, Swartz, West Monroe, or in Richland Parish near the Meta/Hyperion data center corridor, Delta 100 may be the most powerful financing tool available to you. A 2% rate on a $230,000 home saves you hundreds of dollars per month compared to today's market rates — before you even factor in the PMI savings.

We covered the full buyer program landscape here: First-Time Home Buyer Programs in Monroe, Louisiana

4. Conventional Loan With 20% Down

The cleanest way to avoid PMI is also the most obvious: put 20% down and PMI never enters the picture.

On a $230,000 Monroe home, that's $46,000 down. That's a real number for many buyers, but it's worth considering whether it actually makes sense to get there.

If you have $30,000 saved and are waiting to reach $46,000, you're paying rent the entire time — and in today's Monroe market, rents are rising as the Meta/Hyperion data center project drives up demand from relocating workers. The math of "wait until I have 20%" doesn't always favor the buyer who waits.

There's also a middle-ground strategy: put 10% down, accept PMI for a few years, build equity faster through a combination of payments and appreciation, and then request PMI removal. With Monroe values trending upward in the corridors surrounding the Meta project, appreciation may help you reach 80% LTV faster than the amortization schedule alone would suggest.

5. Piggyback Loan (80-10-10) or Lender-Paid PMI

For buyers who don't qualify for USDA, VA, or Delta 100 and can't quite reach 20% down, two more structures worth knowing about:

Piggyback loan (80-10-10): You take out a first mortgage for 80% of the purchase price, a second loan (often a home equity line of credit) for 10%, and put 10% down yourself. Because the first loan stays at exactly 80% LTV, there's no PMI. The tradeoff is that you're carrying two loan payments with two interest rates — you'll need to run the numbers against conventional PMI to see which is cheaper.

Lender-paid PMI (LPMI): Some lenders cover the PMI themselves in exchange for a slightly higher interest rate on your loan. The math works out favorably for buyers who don't plan to stay in the home long-term — because you avoid the monthly PMI hit but don't benefit from eventual PMI cancellation (the rate stays elevated for the life of the loan).

Talk to your lender about both options if you're in the 10%–19% down range.

If You Already Have PMI — Here's How to Remove It

If you're already in a home with PMI, you're not stuck with it forever. Here's your path out:

Option 1 — Request removal at 80% LTV. Under the Homeowners Protection Act, you can send your lender a written request to cancel PMI once your loan balance reaches 80% of the original purchase price. You'll need to be current on payments, have no subordinate liens, and may need to show that your home's value hasn't declined. The lender may require an appraisal.

Option 2 — Automatic cancellation at 78% LTV. Even if you don't request it, your servicer is legally required to cancel PMI automatically when your scheduled balance reaches 78% of the original value — as long as you're current on payments.

Option 3 — Get a new appraisal if values have risen. If your home has appreciated significantly — as many properties in the Sterlington, Swartz, and West Monroe corridors have over the past 24 months — a new appraisal ($300–$600) may document value gains that push your current LTV below 80%, qualifying you to request removal well ahead of schedule.

Option 4 — Refinance. If you've built meaningful equity and rates have moved in your favor, refinancing into a new conventional loan at 80% or lower LTV eliminates PMI and potentially lowers your rate. This requires closing costs, so run the numbers carefully.

Why This Matters Right Now in NELA

The Monroe market is absorbing a wave of buyers that didn't exist two years ago. Tech workers relocating to support the Meta/Hyperion data center project in Richland Parish are arriving with steady income, strong job security, and a genuine need to understand Louisiana's mortgage landscape quickly.

Many of these buyers are coming from markets where PMI is just an assumed cost of buying a home. In NELA, it doesn't have to be. Delta 100, USDA, and VA collectively cover a large percentage of eligible buyers in this market — and most of those buyers don't know these programs exist until an agent or lender tells them.

If you're new to the Monroe area and trying to figure out the smartest path to buying, the structure of your financing matters as much as the home you choose.

The Bottom Line

PMI is a real cost — $90 to $200 or more per month on a typical Monroe-area purchase. But in this market, it's also one of the most avoidable costs in your entire transaction, especially if you're buying in rural Ouachita Parish, Richland Parish, Sterlington, or Swartz.

If you're getting ready to buy and haven't yet looked at USDA, VA, or Delta 100, that conversation needs to happen before you commit to a loan structure. We work with buyers across the region every week who end up in a significantly better financial position once they understand what's available to them.

Ready to start? Reach out to our team and we'll connect you with the right lender for your situation — and make sure you're looking at every listing in your price range.

Contact Harrison Lilly Realty →