A buyer met in Billings believed that if they did not make a 20% down payment, they would not be able to secure a loan. This thought stemmed from a misunderstanding about PMI.

Recent market data shows that the average home value in Billings is $398,212, which is a 1.9% increase from the previous year. This figure is based on data collected by Zillow as of April 30, 2026, while other sources indicate that the median price was around $395,000 as of January.

PMI is not a condition for loan denial; rather, it is an insurance premium attached to conventional loans with a down payment of less than 20%. Once equity exceeds 20%, a request for cancellation can be made, and if it surpasses 22%, the lender is required to cancel it automatically. Once this was clarified, the buyer confirmed that they could proceed with a down payment as low as 10%.

Comparing this situation to FHA loans highlights the differences more clearly. The mortgage insurance premium (MIP) for FHA loans remains in place for the entire loan term if the down payment is less than 10%, whereas PMI for conventional loans can be eliminated as equity builds. For buyers with a credit score above 680, conventional loans are often more advantageous in the long run.

Some areas on the outskirts of Yellowstone County still qualify for USDA loans. According to rd.usda.gov, many census tracts near Billings are still included in eligible areas, so buyers considering properties outside the city should also explore the no down payment USDA option.

Breaking it down by credit score ranges, PMI rates are relatively high for those in the 620 range, while they drop significantly once the score exceeds 700. The buyer had a credit score of 690 and considered the option of managing their score for a few more months to exceed 700 before getting another quote. However, it was also noted that market conditions could change during that time, so waiting indefinitely is not necessarily the best approach.

Scenarios based on down payment sizes were also discussed. If proceeding with a 10% down payment, PMI will apply, but the initial cash burden is reduced. Conversely, preparing more than 20% allows starting without PMI, but it reduces available cash. Determining which option is more favorable depends on available cash and other spending plans. For properties in USDA-eligible areas like the outskirts of Yellowstone County, this calculation may change, so it's essential to first verify the exact address of the property of interest.

Families moving from other states to Montana may overlook that property tax and insurance structures can differ from their previous residence. For families considering school districts, it's advisable to refer to GreatSchools ratings, but boundaries change frequently, so checking the assigned school directly is recommended. For those newly immigrating from Korea and preparing for settlement, keeping FHA options open while building credit history can also be a strategy.

It was also emphasized that PMI rates vary not only based on credit scores but also on down payment percentages. There is a difference in PMI rates between preparing a 5% down payment and a 15% down payment, even with the same credit score, so simulating how monthly payments change as the down payment increases can be practically helpful. Many families moving to Montana have seen instances where they underestimated winter heating costs and insurance based on their previous residence, only to adjust after receiving actual quotes.

PMI should not be viewed as an obstacle to eliminate but rather as a tool that can be utilized when initial funds are limited, as confirmed in this consultation. By obtaining quotes from multiple lenders before making an offer, it can also be observed that PMI rates can vary slightly even under the same conditions. This article does not constitute investment or legal advice, and it is recommended to consult with lenders and professionals before finalizing any contracts.