I have not heard of a time frame for PMI. Instead, my understanding has always been that lenders required it until you had a certain equity stake - 30% in my experience.

I would run away from a 'PMI for Life' scenario, and find another lender.

If this loan officer can't explain to you exactly why you would want to improve the LTV...she may be putting her interests ahead of yours.

PMI for the life of the loan could amount to a tremendous amount of money. Also, my suspicion is that you could get a better rate, if you put more down. All sorts of reasons to put more money down if you can.

I would take a look at another bank.

Except that if you are a high risk borrower, the lender can require PMI down to 50% LTV.

You have to contact the lender to request that they stop the PMI when the principle remaining on the mortgage drops below 80% of value. It may also require a reappraisal. I'm not sure.

If you start out at 3.5% down on a 30 year loan, it will take quite a while for the LTV to drop below 80%, since the early payments are almost all interest and the principle is reduced very slowly.

A >20% down, 15 year loan will be a much better deal if you can swing the down payment.

Correction: It looks like FHA is now collecting PMI for the life of the loan ---

FHA Mortgage Premium Changes for April 2013
http://www.fha.com/fha_article?id=414