Cash to close is the total amount you need to bring to closing day —…
Why Paying PMI Can Actually Make a Lot of Sense — The Number Will Surprise You
PMI. Private Mortgage Insurance. For most buyers, those three letters land like a punch to the stomach. They have been told — by parents, by friends, by the internet — that PMI is something to be avoided at all costs. That putting less than 20% down is financially irresponsible. That PMI is expensive, wasteful, and a sign you are not ready to buy.
Almost none of that is true in 2026. And the buyers who understand why are getting into homes — and keeping their cash — while the ones waiting to save 20% keep watching prices climb.
The Biggest Misconception in Mortgage Lending Today
When Ken Turkington has the PMI conversation with buyers, he hears the same thing over and over: they think PMI costs four to five times more than it actually does. They are operating on information that is a decade or two out of date — back when PMI was genuinely expensive and genuinely painful.
PMI pricing has changed dramatically. For a buyer with a 760 credit score today — which is a strong but attainable score — here is what PMI actually costs on a $350,000 home purchase:
3% down
$87
per month PMI on $350K
Keep $59,500
5% down
$53
per month PMI on $350K
Keep $52,500
10% down
$39
per month PMI on $350K
Keep $35,000
15% down
$22
per month PMI on $350K
Keep $17,500
Read those numbers again. A buyer putting 5% down on a $350,000 home is paying $53 per month for PMI — and keeping $52,500 in their pocket instead of putting it into the walls of their house. At 10% down the PMI cost drops to $39 per month while the buyer retains $35,000 in liquid capital.
$53 a month. Less than most people spend on a streaming subscription and a gym membership combined. Less than a tank of gas in some markets. That is the real cost of PMI for a buyer with good credit at 5% down in 2026. The reputation PMI carries does not match the reality of what PMI actually costs today.
The 20% Down Myth — Why It Does Not Always Make Sense
The 20% down rule comes from a different era of mortgage lending — when PMI was expensive, when home prices were lower, and when the opportunity cost of tying up capital in a down payment was less significant. That era is over.
Here is the question nobody asks loudly enough: what does that 20% down payment actually cost you? Not in monthly payment terms — but in terms of what you give up by locking that money into the house instead of keeping it liquid.
✓ 5% Down — Keep $52,500
Down payment$17,500
PMI per month$53
Cash retained$52,500
Emergency fund✓ Fully funded
Home repair buffer✓ Available
Investment potential✓ Preserved
Monthly PMI cost$53/mo
✕ 20% Down — Lock Up $70,000
Down payment$70,000
PMI per month$0
Cash retained$0
Emergency fund✗ Depleted
Home repair buffer✗ Gone
Investment potential✗ In the walls
Monthly PMI cost$0/mo
The Rainy Day Fund Argument — Why Liquidity Matters More Than You Think
Here is the conversation Ken and Kirk have with buyers who are dead set on putting 20% down: what happens on month three when the furnace goes out?
New homeowners almost always underestimate the cash requirements of homeownership. The furnace. The roof. The water heater. The appliance that decides to die the week after closing. These are not hypotheticals — they are certainties spread across time. The only question is when.
The Real Cost of Having No Liquidity
A buyer who puts every available dollar into a 20% down payment and then needs a $6,000 furnace replacement six months after closing has two options: put it on a credit card at 20%+ interest, or take out a personal loan at similar rates. Either way, they are paying far more than the $53/month PMI would have cost — and they are doing it from a position of financial stress rather than financial strength.
The buyer who kept $52,500 in liquid reserves writes a check for the furnace and moves on. No credit card. No personal loan. No financial stress. The PMI they paid for those six months — $318 total — looks like the best money they ever spent.
This is not a hypothetical scenario. It is one of the most common situations Ken and Kirk see with first-time buyers who stretched to put 20% down and then discovered that homeownership has a way of presenting unexpected bills at the most inconvenient moments.
The Real Math — PMI vs. Depleted Reserves
PMI cost at 5% down (760 score, $350K home)$53/month
PMI cost over 12 months$636/year
Cash kept liquid vs. 20% down$52,500
Average cost of unexpected home repair (Year 1)$3,000-$8,000
Interest cost if put on credit card at 20%$600-$1,600/year
Years of PMI to equal one emergency on credit card1-3 years
VerdictKeep the cash
The Credit Score Factor — Why 760 Is the Magic Number
PMI pricing is not flat. It is tiered based on your credit score — and the difference between a 700 score and a 760 score is meaningful. For buyers who can get their score to 760 or above, PMI rates drop to their most favorable levels.
This is one of the reasons we have detailed conversations about credit with every buyer before they apply. A buyer who can move their score from 720 to 760 before closing is not just getting a better mortgage rate — they are also getting dramatically cheaper PMI if they choose to put less than 20% down. Those two factors together can change the monthly payment calculation significantly.
760 is the threshold. At 760 or above, PMI rates drop to their best available tier. A buyer at 5% down with a 760 score is paying .19% annually — which works out to $53/month on a $350,000 loan. That same buyer at a lower credit score tier would pay meaningfully more. Getting to 760 before you buy is worth the effort — not just for the rate, but for the PMI cost as well.
PMI Is Not Forever — Here Is How It Goes Away
This is the other thing most buyers do not fully understand about PMI: it is temporary. It is not a permanent feature of the loan. There are two clear paths to PMI cancellation:
1
Pay the Loan Down to 78%
Once your loan balance reaches 78% of the original purchase price — meaning you have built 22% equity through your regular payments — the lender is required by law to automatically cancel your PMI. No request needed. No appraisal required. It happens automatically under the Homeowners Protection Act.
2
Request Cancellation After 2 Years
After two years of ownership, you can request that your lender order an updated appraisal. If your home has appreciated and your loan balance is now below 80% of the current appraised value — not the original purchase price — you can request PMI cancellation. In markets that are appreciating at 3-5% per year, this can happen faster than most buyers expect.
The Appreciation Accelerator
In a market appreciating at 3-5% per year, a buyer who puts 5% down on a $350,000 home is building equity from two directions simultaneously — their regular principal payments AND the appreciation of the property. A home purchased at $350,000 that appreciates at 4% annually is worth approximately $378,000 after two years. Combined with the principal paid down over those two years, many buyers find themselves at or near 20% equity well ahead of the schedule they originally expected.
After two years, they can request an updated appraisal, demonstrate the 80% LTV threshold, and have PMI removed. The total PMI paid over those two years on a 5% down purchase? Approximately $1,272. The equity gained through appreciation alone? Potentially $28,000 or more. The math is not close.
When 20% Down DOES Make Sense
We are not saying nobody should ever put 20% down. There are situations where it makes clear sense:
- Move-up buyers who are rolling significant equity from a home sale and the 20% comes naturally without depleting reserves
- Buyers with substantial liquid assets who will still have a robust emergency fund after the down payment
- Buyers in highly competitive markets where a larger down payment strengthens the offer in a bidding war situation
- Buyers who are extremely debt-averse and the psychological value of no PMI outweighs the financial math
The point is not that 20% down is always wrong. The point is that it is not always right — and the assumption that it is the only responsible choice is costing first-time buyers and entry-level buyers real money and real opportunity.
— Ken Turkington & Kirk Chivas, Co-Founders, First Commerce Financial | Combined 60+ years in mortgage lending
We have this conversation constantly. A buyer comes in convinced they need to wait until they have 20% saved. We show them the actual PMI number — $53 a month — and watch their face change. They thought it was going to be $300 or $400 a month. The reputation PMI carries is 15 years out of date.
The buyers who are waiting to save 20% on a $350,000 home need $70,000 in the bank before they can buy. In a market where prices are appreciating, the home they could have bought with 5% down two years ago now costs more — which means the 20% target keeps moving. Meanwhile the buyer who got in at 5% down is sitting on equity they built while the other buyer was still saving.
We are not telling everyone to put 3% down. We are saying: run the real math. Look at the actual PMI number. Think about what you are giving up by locking every available dollar into the down payment. The conversation is almost always more nuanced than "20% down is right and everything else is wrong."
Run the Real Numbers — Free, No Obligation
Tell Kirk or Ken your situation — your savings, your credit score, your target price range. We will show you exactly what PMI costs at different down payment levels, what you keep in your pocket, and what the full monthly payment looks like across every scenario. No pressure. Just the real math.
Start the Conversation — It's FreeFirst Commerce Financial | Licensed Independent Mortgage Broker | NMLS #137512 | AZ MB #1001354 | Licensed in Michigan, Florida, Arizona, and Texas | Ken Turkington NMLS #137873 | Kirk Chivas NMLS #160828 | PMI rates shown are estimates for illustrative purposes based on current market conditions for borrowers with 760+ credit scores. Actual rates vary by lender and individual borrower profile.
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