What is typically required to avoid mortgage insurance on conventional loans?

To avoid mortgage insurance on conventional loans, a borrower is typically required to make a down payment of at least 20%. When a borrower puts down 20% or more, the lender considers the loan to be less risky, as the borrower's equity in the property is substantial. This reduced risk often leads lenders to waive the requirement for private mortgage insurance (PMI), which is an additional cost that protects the lender in the event of default by the borrower.

When a borrower puts down less than 20%, lenders generally require PMI to mitigate the financial risk. While having a larger down payment not only helps to avoid mortgage insurance but can also lead to better loan terms or rates, the threshold of 20% is the standard benchmark used in the industry to eliminate the need for this insurance.

Other options, such as a co-signer or a minimum credit score, may influence loan approval or interest rates but do not directly affect the requirement for mortgage insurance in the context of down payments. These elements are important in the overall loan process, but it is specifically the size of the down payment that determines whether or not mortgage insurance is required on conventional loans.