PMI vs. MIP on Construction-to-Permanent Loans: What You’ll Pay and How to Reduce It

If you’re building a custom home, the last thing you want is a surprise bill you didn’t see coming. Mortgage insurance on construction-to-permanent (C2P) loans—PMI for conventional loans and MIP for FHA—can be one of those surprises. The good news: you can plan for it, estimate it, and, in many cases, shrink it. I’ve helped plenty of clients structure builds to minimize insurance costs without blowing up their cash flow or timeline. This guide lays out exactly what you’ll pay and how to reduce it—with real numbers, examples, and the “gotchas” that trip people up.

Quick primer: PMI vs. MIP when you’re building

• PMI (Private Mortgage Insurance) applies to conventional loans when your loan-to-value (LTV) exceeds 80%. It protects the lender, not you. It can be paid monthly, upfront, or built into the rate (lender-paid PMI).
• MIP (Mortgage Insurance Premium) is FHA’s version. It includes:
• Upfront MIP (UFMIP): typically 1.75% of the base loan amount (can be financed).
• Annual MIP: paid monthly. As of 2023’s reduction, most 30-year FHA loans land around 0.55% annually, depending on LTV and term.
• VA loans don’t have monthly mortgage insurance; they charge a one-time Funding Fee instead (which can be financed).
• USDA loans have a 1.0% upfront guarantee fee and a 0.35% annual fee, paid monthly—think of it as FHA-like.

Construction-to-permanent loans wrap your construction financing and your permanent mortgage into a single closing (single-close, one-time-close, or OTC), which is ultra convenient. The way PMI/MIP is collected and when it starts depends on the loan type and the lender’s program.

When mortgage insurance actually starts on C2P loans

Here’s how it usually plays out during the build and after conversion to permanent financing. Lenders do vary, so ask these questions explicitly.

Conventional single-close (C2P) with PMI

• During construction: You typically make Interest-only payments on the drawn balance. Many lenders don’t collect monthly PMI during construction. If PMI is required, it often begins at conversion when the home is complete and the loan modifies to its permanent amortizing form.
• At conversion: PMI kicks in if your LTV is above 80% based on the appraised “as-completed” value. Some lenders lock PMI terms at the single closing; others finalize at conversion depending on final LTV and credit overlays.
• Upfront PMI options: Some lenders require single-premium PMI upfront at the initial closing for a single-close structure. It can be financed.

FHA one-time-close (OTC) with MIP

• At closing: UFMIP (1.75%) is charged at the first closing and can be financed into the loan.
• Monthly MIP: Begins after closing and continues through construction. FHA treats the OTC loan as a fully closed mortgage from day one, so monthly MIP doesn’t wait for the conversion.
• Duration: If your original LTV is greater than 90%, monthly MIP lasts for the life of the loan. If 90% or less, MIP lasts 11 years.

VA and USDA one-time-close for comparison

• VA: No monthly mortgage insurance. You’ll pay the VA Funding Fee once (0–3.3% depending on first-time use and down payment; reduced for some veterans, waived for those with eligible disabilities). Interest-only payments on drawn funds are common during the build. No MIP/PMI.
• USDA: 1.0% upfront guarantee fee (can be financed) plus 0.35% annual fee paid monthly. The annual fee starts after closing and continues during construction.

What you’ll pay: realistic PMI/MIP cost ranges

Numbers make this clearer. Let’s look at common budgets and FICO scenarios.

Assumptions:

• Project budget (land + construction + soft costs): $600,000
• “As-completed” appraised value: $600,000
• Construction period: 10 months
• Permanent term: 30 years
• Property: owner-occupied single-family
• Rates and costs here are ballpark estimates. Lender overlays matter.

Conventional with PMI: monthly-paid options

For a 5% down conventional C2P (95% LTV), PMI pricing leans heavily on credit score and DTI. Typical annual PMI factors (as a share of loan amount) might range:

• 760+ FICO: roughly 0.30%–0.50%
• 720–759 FICO: roughly 0.40%–0.70%
• 680–719 FICO: roughly 0.70%–1.20%
• <680 FICO: could exceed 1.20%–1.80%

Example:

• Loan amount: $570,000 (5% down on $600,000)
• 740 FICO PMI estimate: 0.55% annually
• Annual PMI: $570,000 × 0.0055 = $3,135
• Monthly PMI: $261

If lender collects PMI only after conversion (and your construction timeline is 10 months), you’d avoid 10 months of PMI versus FHA, which collects during construction. Over a full year, you’re looking at ~$3,135 in PMI vs. $0 during the build phase in many programs. After conversion, the PMI continues until you hit 78% LTV by amortization or you request cancellation at 80% LTV per the Homeowners Protection Act (more on that later).

Conventional with single-premium PMI

Single-premium PMI can run roughly 1.25%–2.75% of the loan amount for 95% LTV depending on credit, property type, and lender. For the same $570,000 loan:

• Mid-range single premium at 1.85%: $10,545 (one-time)
• Some programs allow partial refunds if you refinance or reach cancellation thresholds early, some don’t. Read the certificate terms.

This can be financed into the loan on many single-close programs, which reduces monthly payment pressure but increases balance and interest cost over time.

Conventional lender-paid PMI (LPMI)

LPMI folds mortgage insurance into your interest rate. You’ll see a rate about 0.25%–0.625% higher than a comparable loan with borrower-paid PMI, depending on credit and LTV. Your monthly payment is higher, but you don’t have a separate PMI line. There’s no PMI to cancel because it’s in the rate; the only way to “remove” it is to refinance. Sometimes this is still cheaper over the first 5–7 years, especially when PMI prices are steep at lower credit scores.

FHA one-time-close with MIP

• UFMIP: 1.75% × $582,000 base? Wait—FHA calculates off base loan amount before UFMIP. Let’s assume 3.5% down:
• Base loan: $600,000 × 96.5% = $579,000
• UFMIP: $579,000 × 1.75% = $10,132.50 (financed or paid upfront)
• Total loan if financed: $589,132.50
• Annual MIP: For most 30-year FHA loans with >95% LTV, annual MIP is around 0.55%:
• $579,000 × 0.55% = $3,184.50 annually → $265 monthly
• Timing: Monthly MIP begins the month after closing and continues during the 10-month build.

Compared to conventional in our example, FHA’s monthly MIP might look similar at first glance. The major difference is:

• FHA collects monthly MIP during construction.
• FHA’s MIP typically lasts longer and may be for the life of the loan if your original LTV is above 90%.

USDA and VA for context

• USDA: On a $600,000 deal, USDA likely isn’t an option unless your location qualifies and the loan size is within USDA limits. If it were:
• Upfront fee: 1.0% × loan amount (financeable)
• Annual fee: 0.35% × loan amount
• VA: No monthly MIP/PMI. Funding Fee typically 2.15% for first-time use with 0% down (lower with a down payment or subsequent use adjustments). On $600,000:
• Funding Fee example: $12,900 (can be financed), and no monthly mortgage insurance. If you’re eligible, VA is often the cheapest monthly option on a single-close.

How PMI/MIP ties into your construction timeline

• Underwriting and closing: 30–60 days, sometimes longer if you’re finalizing plans, specs, and builder approvals.
• Construction: 8–14 months is typical for a custom home with a reputable GC. Owner-builder and ultra-custom homes can push longer.
• Draws: Usually 5–10 draw events, each requiring inspections to verify progress. You pay interest on drawn funds only during construction.
• Conversion/modification: When the home is complete and the final inspection or Certificate Of Occupancy is in, the lender modifies the loan to its permanent terms.

PMI/MIP overlays:

• Conventional: You may not see a PMI charge until the permanent phase. If the final appraisal comes in strong, you could even slip under 80% LTV at conversion and avoid PMI altogether.
• FHA: You pay MIP from the first month after closing, even during construction.
• USDA: Annual fee accrues during the build.
• VA: No monthly mortgage insurance—period.

One-time-close vs. two-time-close: where insurance costs differ

• One-time-close (OTC): One set of closing costs, and your rate and MI structure is set at the start. Predictable, less paperwork later. PMI may be priced upfront or begin at conversion. FHA MIP starts right away.
• Two-time-close: You do a construction loan first, then a separate permanent mortgage after the build. You’ll pay two sets of closing costs, but you get a fresh appraisal and can shop the best rate and PMI/MIP at that time. If values rise and your final LTV is under 80%, you can dodge PMI entirely on the permanent loan. This is one of the cleanest ways to eliminate monthly PMI without a bigger down payment, assuming the market cooperates.

I’ve seen buyers start as OTC but pivot to a two-time-close because they expected to finish at 92% LTV, then got a strong appraisal that brought them to 79%—no PMI. You’ll spend more on duplicate title, lender, and settlement fees, but when PMI would have cost $250–$350 per month for 5–7 years, it’s often a net win.

Common lender overlays you’ll run into

• Minimum down payment: Conventional C2P might be available at 5% down for a primary residence, but plenty of lenders want 10%–20% down for custom homes or owner-builder scenarios.
• Credit score floors: 680–700+ for conventional C2P is common. FHA OTC may allow 620 or even 600 with overlays.
• Self-build: Many lenders won’t offer C2P if you’re acting as the general contractor; those who do often require 20%–25% down and excellent reserves.
• Lot equity: If you own the lot, many lenders will credit the current appraised lot value (if owned 12+ months) or the original purchase price (owned <12 months) toward your down payment. This can help you avoid PMI or MIP tiers.

How to reduce PMI/MIP on a construction-to-permanent loan

Here’s the actionable list I give clients when we’re planning a build.

1) Use land equity to reduce LTV

• If you already own the lot, push your lender to use current appraised value (12+ months seasoning). On more than one build, I’ve seen land equity wipe out PMI at conversion because the “as-completed” value plus seasoned land value brought the LTV under 80%.
• If owned under 12 months, confirm whether the lender will use cost basis or a blended method. Some will treat significant improvements (e.g., well/septic, grading) as basis increases.

2) Design to a strong appraisal

• Appraisers rely on completed plans, specs, and comps. Upgrading kitchens and baths, efficient layouts, and square footage that aligns with the neighborhood can boost “as-completed” value.
• Avoid overbuilding for the area. If every comp is a 2,200–2,800 sq. ft. home and you push to 4,000 sq. ft. on a small lot, your price-per-foot may lag and hurt LTV.
• Provide your lender and appraiser a complete spec book: finishes, energy features, mechanical systems, and any green certifications. More detail often translates to a stronger valuation.

3) Shift from monthly PMI to single-premium or split-premium

• Single-premium PMI often reduces lifetime cost if you’ll keep the loan 5+ years, and it can lower your DTI compared to monthly PMI.
• Split-premium PMI: Pay a smaller upfront (e.g., 0.75%) and a reduced monthly. Good middle ground, especially if you want a lower payment but don’t want to sink 2% upfront.

Tip: Ask for a refundable vs. nonrefundable single-premium quote. If you think a refi is likely within 3 years, refundable can protect you from sunk cost.

4) Consider lender-paid PMI (LPMI) when rates align

• If LPMI boosts your rate by 0.375% but removes a $250 monthly PMI, it can be a net win depending on your horizons. Ask your lender for a side-by-side cost of MI over 5, 7, and 10 years. Calculate breakeven if you expect to refinance or sell.

5) Improve credit early—before the C2P lock

• PMI is highly sensitive to FICO. Jumping from 719 to 740 can save 0.10%–0.30% on PMI factor. On a $600,000 build, that’s $50–$140 per month on PMI alone.
• Fast wins: pay revolving balances down below 10% utilization, correct any derogatory errors, and avoid opening new accounts during underwriting and construction. Let tradelines age.

6) Time your appraisal and conversion

• Two-time-close strategy: If local comps are rising and inventory is tight, a second closing post-build can boost value and eliminate PMI.
• Single-close: If your lender prices PMI at conversion, ask them to recalculate PMI if the final value lands better than the initial estimate.

7) Use a piggyback second to avoid PMI

• Not all lenders allow piggybacks on single-close C2P. Many don’t. However, on a two-time-close, you could do an 80-10-10 at the permanent phase: 80% first mortgage, 10% second mortgage, 10% down. This dodges PMI entirely.
• Compare the cost: seconds often carry higher rates and shorter terms. If the second is interest-only for 10 years, watch the payment shock when it amortizes or when the balloon is due.

8) If eligible, price out VA generously

• VA’s lack of monthly MI often means a lower payment every month despite the Funding Fee. On a $600,000 build, you’ll likely save $250–$400 per month compared to conventional with PMI or FHA with MIP.
• If you have a disability rating that waives the Funding Fee, VA is almost unbeatable for payment.

9) Shorten the term (for FHA MIP)

• FHA MIP factors are lower on 15-year loans than 30-year loans. If your budget can handle a 15- or 20-year term, your annual MIP drops, sometimes significantly. This also accelerates equity buildup and can make a refinance to conventional easier down the road.

10) Recast after completion

• If you plan to sell your current home after the new build is finished, ask your lender if they allow a principal curtailment or recast. A big chunk of principal after conversion might drop you under 80% LTV and allow PMI cancellation or at least reduce your MIP exposure if you soon refinance out of FHA.

11) Builder credits and lender incentives

• Some lenders will contribute to single-premium PMI as part of a builder affinity program. I’ve negotiated builder credits to cover half of a single-premium PMI, reducing monthly payment and long-term cost. It never hurts to ask.

What lenders don’t always tell you

• FHA MIP during construction: You’ll pay monthly MIP from the month after closing even though you’re not living there yet. Budget for those payments on top of interest-only during the build or confirm if the lender escrows them during construction and what that does to your cash to close.
• PMI cancellation isn’t based on current value unless you request it. Automatic PMI cancelation is at 78% of original value by amortization. You can request cancellation at 80% based on original value or, with many lenders, based on current value with a new appraisal after a seasoning period (usually 2 years; some allow earlier if substantial improvements raise value).
• Single-premium PMI refund policies vary. Some are nonrefundable. If you’re planning to refinance soon (e.g., because of a rate drop, bonus, or home sale), a nonrefundable premium may be a poor fit.
• Owner-builder loans are treated as higher risk. Expect stricter down payment requirements and fewer MI structures. If you can, use a licensed GC the lender approves.

Real-world scenarios with numbers

Scenario 1: Conventional C2P, 5% down, 10-month build

• Budget: $600,000
• Down payment: $30,000
• Loan: $570,000 interest-only during construction
• FICO: 742
• PMI factor at conversion: 0.55% annually
• Monthly PMI after conversion: ~$261
• Construction phase PMI: Not collected (program dependent)
• Strategy: Because values were rising in the neighborhood, borrower chose a two-time-close. When the home wrapped, new appraisal hit $650,000. With $570,000 loan, LTV = 87.7%. Still above 80%. They brought $50,000 from the sale of their old home to reduce the new loan to $520,000. Now LTV = 80% exactly—no PMI. The extra second closing cost them ~$5,200 but saved ~$261/month and ~$6,000–$10,000 in PMI they would have paid before reaching 80% via amortization.

Scenario 2: FHA OTC, 3.5% down, 9-month build

• Budget: $500,000
• Down payment: $17,500
• Base loan: $482,500
• UFMIP: $8,443.75 (financed, new total ~$490,944)
• Annual MIP: 0.55% of base ($482,500 × 0.0055 = $2,653.75) → $221/month
• MIP timing: Begins immediately after closing
• Strategy: Borrower planned to refinance to conventional at 12 months when credit score improved from 670 to 720 and new neighborhood comps stabilized. They accepted MIP during construction because FHA terms rescued the deal when conventional overlays would have required 10% down. Twelve months later, they refinanced to conventional at 85% LTV with a 0.48% PMI factor: $170/month. They expect to request PMI cancellation at 80% in year 5 due to amortization and appreciation.

Scenario 3: VA OTC, 0% down, 11-month build

• Budget: $700,000
• Down payment: $0
• Funding Fee: First-time use 2.15% → $15,050 (financed)
• No monthly MI
• Monthly payment saved vs. comparable conventional at 95% LTV with 740 FICO and 0.50% PMI factor: roughly $300–$400/month less
• Strategy: Borrower had the option of conventional with 5% down but kept cash liquid for contingencies. VA was the clear monthly winner and removed MI risk.

Estimating your PMI or MIP before you start

I walk clients through a simple worksheet:

1) Nail down your budget

• Include land, hard costs, soft costs (permits, architect, engineering), contingency (10%), and lender fees. Soft costs and contingency are often forgotten.

2) Estimate “as-completed” value

• Have your builder or lender connect you with a local appraiser who can give a sanity check. You want your “as-completed” value and your project budget to be in the same ballpark. Big gaps may affect MI eligibility or required cash.

3) Choose the loan type

• Conventional: 5% down may be allowed with solid credit and builder. Expect PMI at >80% LTV.
• FHA: 3.5% down is common. MIP starts after closing, lasts 11 years or life of loan depending on LTV.
• VA: Consider if eligible. No monthly MI.
• USDA: Rural areas only and income/loan limits apply, but cheap monthly fee.

4) Plug in MI assumptions

• Conventional PMI:
• FICO ≥760: start with 0.35%–0.50% annually
• FICO 720–759: 0.45%–0.80%
• FICO 680–719: 0.80%–1.20%
• FHA MIP:
• UFMIP 1.75% upfront (financeable)
• Annual around 0.55% for most 30-year high-LTV loans
• VA/USDA per above

5) Decide how to pay PMI (if conventional)

• Monthly, single-premium, split-premium, or lender-paid. Price all four if your lender offers them. The cheapest option over 7 years might not be the cheapest over 3.

6) Model appreciation and cancellation

• If you’re in a rising market, monthly PMI might be short-lived. If you’re in a flat market, single-premium could still win if you’ll keep the loan.

7) Confirm timing

• Ask the lender:
• For conventional: “Do you charge monthly PMI during construction, or only after conversion?”
• For FHA/USDA: “Do you collect monthly MIP/annual fee during construction, and can any of it be escrowed?”

Cash-to-close and monthly cash flow: don’t miss these line items

• Upfront MIP or PMI premium: FHA UFMIP, or single-premium PMI if chosen.
• Builder’s risk and course-of-construction insurance: Often required. Budget a few thousand dollars depending on value and state.
• Interest reserve vs. out-of-pocket: Some programs allow building an interest reserve into the loan. If not, plan to pay interest monthly during the build on drawn amounts.
• Inspection and draw fees: $100–$300 per inspection is typical, with 5–10 draws over the project.
• Contingency: If your builder hasn’t included a contingency, set aside 10%. Weather delays and supply chain hiccups happen.
• Permits and impact fees: These can be significant in growth areas; I’ve seen $15,000–$40,000 swings that blow up early budgets.
• MIP/PMI during construction: FHA/USDA collect; conventional may not.

PMI cancellation and MIP duration: the fine print that saves money

Conventional PMI cancellation rules (HPA)

• Automatic cancellation: Once your loan reaches 78% of the original value by amortization, the lender must cancel PMI automatically.
• Borrower-initiated cancellation: You can request PMI removal at 80% LTV based on the original value by schedule. Many lenders also allow an appraisal-based request using current value after a certain seasoning period (commonly 2 years). Some allow earlier if you’ve made substantial improvements (a custom home qualifies—ask for their improvements policy).
• Clean payment history: You need a good pay history and no subordinate liens.

Tip: Set calendar reminders right after closing with the amortization schedule. Too many homeowners keep paying PMI months longer than needed.

FHA MIP duration

• Original LTV >90%: MIP is for the life of the loan.
• Original LTV ≤90%: MIP lasts 11 years.
• To remove MIP, you must refinance into a conventional loan that meets PMI cancellation thresholds. Plan for this if your initial down payment is small but your income and credit will improve.

USDA annual fee

• Continues for the life of the loan. As with FHA, you’d refinance to conventional to eliminate it, once you meet LTV and credit standards.

The builder and appraisal side: how they influence MI

• Reputable, approved builder: Lenders price risk into MI overlays. A recognized builder with a clean track record can unlock lower down payment options and smooth underwriting. I’ve seen owner-builder deals require an extra 5–10% down compared to GC-led builds.
• Detailed budget and timeline: Clear draw schedule and contingencies reduce perceived risk. Cleaner files get better exceptions.
• Specs that appraise: Stone countertops alone won’t swing the value. Balanced investments—kitchen/baths, good mechanicals, energy efficiency, curb appeal—play better with appraisers than niche, high-cost finishes.
• Don’t inflate allowances: Appraisers use your contract price and specs along with comps to value “as-completed.” Inflated allowances that don’t reflect market reality can backfire if the appraisal doesn’t support the budget.

Frequently asked “what ifs”

• What if the final appraisal comes in low?
• You may need to bring cash to maintain your LTV target, take a higher LTV and pay PMI or higher MIP factors, or adjust the scope. On OTC loans, this can be tough midstream. Contingency planning matters.

• Can I lock my rate and PMI terms upfront?
• Many OTC programs lock the rate and MI structure at the initial closing, then modify the note at completion. Lock fees and long-term lock costs can apply. Some lenders float PMI until conversion based on final LTV—ask.

• Can I roll PMI or MIP into the loan?
• FHA UFMIP can be financed. Single-premium PMI can often be financed on OTC loans. Lender-paid PMI is “rolled in” via rate instead of balance.

• Do I need PMI on a second home or investment property?
• Second-home C2P may be eligible with at least 10% down (lender overlays vary), and PMI might be available. Investment property C2P is much tougher; expect larger down payments and fewer MI options.

Step-by-step game plan to keep insurance costs low

1) Pre-qual with at least two lenders that offer C2P and two-time-close options.

• Ask them to price conventional (with all four PMI options), FHA, VA/USDA if applicable.

2) Assemble your build package for accurate pricing:

• Plans, specs, builder resume and cost breakdown, lot documentation, and timeline.

3) Run three paths on paper:

• Path A: Conventional OTC with monthly PMI.
• Path B: Conventional OTC with single-premium or LPMI.
• Path C: Two-time-close construction only, then permanent with a fresh appraisal.

4) Stress-test the appraisal by ±5–10%:

• See how PMI changes, whether you drop below 80% LTV, and your cash-to-close implications.

5) Fix credit and liquidity now:

• Pay cards down, pause new credit, and build reserves that satisfy the lender and cover contingencies without raiding retirement or emergency funds.

6) Choose builder and specs with appraisal in mind:

• Get feedback from your lender’s appraisal panel if possible. Local data beats guesswork.

7) Decide on PMI/MIP structure with a time horizon:

• If likely to refi in 18–30 months, monthly PMI or refundable single-premium can beat LPMI.
• If you’ll keep the loan 7+ years, single-premium or LPMI often win.

8) Lock or float strategically:

• If your lender prices MI at conversion, a rising value trend is your friend. If not, choose the MI structure that gives you certainty.

9) Track LTV and set reminders:

• For conventional, set a reminder the month you expect to hit 80% LTV. For FHA/USDA, set refinance checkpoints at 12, 24, and 36 months to evaluate escaping MIP/annual fee.

Common mistakes I see (and how to avoid them)

• Assuming PMI or MIP doesn’t apply during construction
• For FHA and USDA, it does. For conventional, ask directly—some lenders do collect during construction.

• Choosing nonrefundable single-premium PMI and refinancing a year later
• You just sunk thousands. If refinance is likely, either choose monthly PMI, LPMI, or a refundable premium.

• Overbuilding for the neighborhood
• Your “as-completed” value won’t support your budget, and you wind up stuck paying PMI longer or writing a check at conversion.

• Forgetting about duration rules
• FHA MIP can last for the life of the loan. Don’t assume it will drop off.

• Ignoring piggyback options on two-time-close
• An 80-10-10 stack can beat PMI in the right rate environment, especially if you’re bonus-comped and can crush the second mortgage quickly.

• Not negotiating builder or lender credits
• Credits can cover some or all of a single-premium PMI, saving hundreds per month.

• Missing the chance to use land equity
• If you’ve owned your lot more than 12 months, push to use current appraised value, not just your purchase price.

What this looks like on a monthly budget

Let’s take a $600,000 build with 5% down and two borrower profiles:

• Borrower A (conventional, 740 FICO, monthly PMI after conversion only)
• Interest-only during construction: if the average draw through the build is $300,000 and the interest rate is 7.50%, monthly interest is roughly $1,875 on average (it will rise as draws increase).
• Post-conversion principal/interest at 7.25% on $570,000: ~$3,876/month
• PMI: ~$261/month (until canceled)
• Taxes/insurance: location-dependent—estimate $700–$1,200/month

• Borrower B (FHA OTC, 3.5% down, MIP during construction)
• MIP during construction: ~$220/month
• Interest-only rules vary; some FHA OTC structures fully amortize from day one. If amortizing from day one at 7.00% on $589,132 (with UFMIP financed), P&I is ~$3,919/month plus MIP. Confirm structure with lender.

The takeaway: FHA’s MIP tends to raise your monthly during construction, while conventional often spares you monthly PMI until conversion. If your cash flow is tight during the build, that difference matters.

Negotiation checklist to bring to your lender

• Will PMI be collected during construction on your conventional C2P? If yes, how is it calculated on the drawn balance vs. committed?
• Do you allow single-premium PMI to be financed? Is it refundable?
• Can you provide side-by-side quotes for:
• Monthly PMI
• Single-premium PMI
• Split-premium PMI
• Lender-paid PMI (with the exact rate bump)
• For FHA OTC, will MIP accrue and be paid monthly during construction, or do you escrow it up front?
• If my “as-completed” value comes in higher at conversion, will you recalc PMI or is it locked from the initial closing?
• Do you allow recast after conversion if I make a large principal payment?
• What seasoning do you require to use current appraised value of land vs. purchase price?
• Are there pricing breaks at different LTV thresholds (95% vs. 90%) that would justify a slightly larger down payment?

Final thoughts and practical strategy

You don’t need to guess at PMI or MIP costs on a Construction-to-permanent Loan. Build a side-by-side comparison and make your choice based on your time horizon, cash flow during construction, and how likely you are to refinance.

If I were advising a client starting now:

• If eligible for VA, lead with VA OTC and compare only to conventional with LPMI or single-premium; VA usually wins on payment.
• If strong credit and 10% down is feasible, conventional C2P with monthly PMI that begins at conversion is often the sweet spot—especially if you can request cancellation within 24–36 months using a new appraisal.
• If your credit or down payment pushes you to FHA, use it as a stepping-stone. Budget for MIP during construction, and set a refinance target the day you lock. Improve credit and plan to refinance to conventional when you hit ~80–85% LTV.

The key is to decide on purpose. Choose a mortgage insurance structure that fits your budget through the build and gives you a clear path to reduce or eliminate it when the house is done. That way, the only surprise you get is how good the place looks when you finally move in.