Educational content citing HUD 4000.1 and Fannie Mae Selling Guide. Rates, limits and program eligibility verified April 2026 and change frequently. Consult a licensed lender before applying.
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Conventional Case Study: $300,000 Home, 5% Down

Full line-item math. PMI cancellation timeline explicit. HomeReady 3% scenario as appendix.

Scenario Assumptions

Purchase price

$300,000

Down payment

5% / $15,000

FICO score

720

Interest rate

6.65% (conforming Apr 2026)

Loan term

30-year fixed

PMI rate

0.55% / yr (720 FICO, 95% LTV)

Property tax

1.1% / $275/mo

Home insurance

$1,400/yr / $117/mo

1. Closing Day Line-Item

Purchase price$300,000
Down payment (5%)($15,000)Your cash at closing
Loan amount$285,000$300,000 - $15,000
Upfront premiumNoneNo conventional equivalent to UFMIP
Closing costs (estimate)~$8,400Origination, title, escrow, prepaids
Total cash at closing~$23,400$15,000 down + $8,400 costs

With LTV over 90%, conventional seller concessions are capped at 3% of purchase price ($9,000). That is enough to cover the $8,400 in closing costs, reducing cash at closing to $15,000 in the best case. Compare to FHA where the concession cap is 6% regardless of down payment.

2. Monthly Payment Breakdown

Principal + Interest$1,831$285,000 @ 6.65% / 30yr
PMI (0.55% / 12)$131$285,000 x 0.0055 / 12 (month 1)
Property tax (1.1% / 12)$275$300,000 x 0.011 / 12
Home insurance$117$1,400 / 12
Total PITI$2,354Month 1

Monthly saving vs FHA 3.5% down: $98/month ($2,452 FHA vs $2,354 conventional). Over 10 years: $11,760. PMI also cancels in year 8.

3. PMI Cancellation Timeline

PMI cancels automatically when the loan balance reaches 78% of the original purchase price ($234,000 on a $300k home). With 3% annual appreciation and standard amortisation:

YearBalanceHome ValueLTVPMI Status
Year 1$281,800$309,00091%Paying PMI
Year 3$275,600$328,00084%Paying PMI
Year 5$268,900$347,80077%Can request removal at 80% LTV
Year 7$261,500$368,60071%PMI removed (requested ~yr 6.5)
Year 8$256,800$380,00068%PMI auto-cancels at 78% (yr 8)
Year 10$247,200$403,00061%PMI long gone

Requesting removal at 80% LTV (around year 6.5): total PMI paid = approximately $9,500 + $500 appraisal = $10,000. Waiting for auto-cancel at 78% (year 8): total PMI paid = approximately $12,052. Requesting early saves approximately $2,000.

4. 30-Year Total Cost of Ownership

Principal + Interest (30yr)$659,160$1,831 x 360
Total PMI (with 80% request)~$10,000~78 months of PMI + appraisal
Property taxes (2% annual increase)~$130,000Rough 30-year total
Home insurance (2% annual increase)~$54,000Rough 30-year total
Grand total paid over 30 years~$853,160For a $300,000 home

Conventional total ($853k) vs FHA total ($928k) = savings of $75,000 over 30 years for a borrower with 720 FICO choosing 5% conventional over 3.5% FHA. See the FHA case study for the full comparison.

5. Appendix: HomeReady 3% Down Scenario

For income-qualified borrowers at or below 80% AMI, HomeReady offers 3% down conventional with reduced PMI. Same $300k home:

Down payment$9,000 (3%)vs $10,500 FHA 3.5%
Loan amount$291,000vs $294,566 FHA (with UFMIP)
Rate~6.65%Same as standard conventional
Monthly P+I$1,870vs $1,920 FHA
Monthly PMI~$41HomeReady reduced rate ~0.17%
Monthly PITI~$2,303vs $2,452 FHA (saves $149/mo)
PMI cancels~Year 11vs never (FHA, without refi)
Income cap80% AMIe.g. $82,800 in Los Angeles

HomeReady beats FHA on every metric for income-qualified borrowers: lower monthly payment by $149, less total insurance, no upfront premium. The constraint is the 80% AMI income cap. See HomeReady income limits by metro.

6. FICO Sensitivity Table

FICORatePMI RateMonthly PITIvs FHA?
760+6.50%0.28%$2,314Conventional wins clearly
740-7596.55%0.32%$2,323Conventional wins clearly
720-7396.65%0.35%$2,354Conventional wins by $98/mo
700-7196.85%0.45%$2,386Conventional wins by $66/mo
680-6997.00%0.55%$2,419Conventional wins by $33/mo
660-6797.20%0.70%$2,477Very close; FHA may be better
640-6597.45%0.95%$2,548FHA wins for this FICO
620-6397.70%1.20%$2,620FHA wins decisively

FHA PITI baseline: $2,452/mo at 680 FICO (from FHA case study). PMI rates are MGIC estimates April 2026.

Frequently Asked Questions

How much cash do I need for 5% down on a $300k home?+
You need $15,000 for the down payment plus approximately $8,400 in closing costs, totalling $23,400. Seller concessions of up to 3% ($9,000) with LTV over 90% can cover closing costs, reducing your cash to $15,000 in the best case.
When does PMI drop on a $300k conventional loan?+
With 5% down and 3% annual appreciation, you can request PMI removal at 80% LTV around year 6.5 (with a $500 appraisal) or wait for automatic cancellation at 78% LTV around year 8. Requesting saves approximately $2,000 in PMI payments.
Can I get a conventional loan with 3% down?+
Yes, via HomeReady (Fannie Mae) or Home Possible (Freddie Mac) if your income is at or below 80% of Area Median Income. HomeReady requires 620 FICO; Home Possible requires 660. Both offer reduced PMI rates of approximately 0.17%, well below standard conventional or FHA MIP.
What rate can I expect with 720 FICO?+
At 720 FICO for a 30-year conventional in April 2026, expect approximately 6.65% as a starting point. Rates vary by lender, LTV, and lock period. Shopping 3-5 lenders typically yields a 0.25-0.5% rate improvement over accepting the first quote.
Is PMI tax-deductible?+
The PMI deduction for primary residences expired after the 2021 tax year and has not been renewed as of April 2026. Consult a tax professional for current guidance. Even without a deduction, conventional PMI is typically far less expensive than FHA MIP over the life of the loan for 680+ FICO borrowers.

Related Pages

FHA $300k Case StudyPMI Mechanics ExplainedHomeReady Income LimitsMIP vs PMI Comparison

Last verified April 2026. Rate based on Freddie Mac PMMS week of 10 April 2026. PMI rates per MGIC rate card April 2026.