Mortgages Without PMI: Are They Actually Worth It?

You got your Loan Estimate back, saw a line for private mortgage insurance (PMI), and did a small double take. Regardless of how much was on the line item, it feels like a tax on not having 20% saved, and it seems strange that something called "insurance" protects your lender, not you.

That reaction is fair. PMI does protect the lender if you stop making payments on your mortgage loan, and it can feel as though you get nothing tangible for it. But eliminating it isn't always the win it looks like. The loans marketed as "no PMI" rarely erase the cost; they move what you'd pay on PMI into a higher rate, an extra fee, or a second loan, and sometimes you carry that cost for the full 30 years instead of the few years PMI usually lasts.

So the real question isn't just how to avoid PMI, it's what makes the most sense for you based on your finances and how long you plan to stay in the home. This covers both pathways people refer to when they say "avoid PMI": skipping it up front, and getting rid of it later once you already have it. Most first-time buyers land in PMI territory: the median first-time-buyer down payment was 10% in 2025, the highest since 1989.[1]

What is PMI, and how much does it cost?

Private mortgage insurance, or PMI, protects your lender if you stop making payments on your mortgage. On a conventional loan, you'll typically pay it when you put down less than 20%. That's the whole reason it exists: a smaller down payment means more risk for the lender, and PMI covers that risk until your equity in the home grows.

PMI is a conventional-loan product only. FHA, VA, and USDA loans don't charge PMI. They charge their own fees, which work differently, and mixing them up is where a lot of confusion starts.

How PMI is priced

Your PMI rate isn't a flat number. It's risk-based pricing, which means the insurer looks at how likely you are to stop making payments on the loan and prices the PMI accordingly. The biggest levers are your credit score and your loan-to-value ratio (how much you're borrowing against the home's value). Your debt-to-income ratio, whether the home is your primary residence, the property type, and even the number of borrowers on the loan can move it, too. That's why two people buying the same house at the same price can get very different PMI quotes on credit score alone.

Chloe Shubin, VP of Operations and Strategy at Griffin Funding, points out a nuance: you can't shop the PMI rate directly because your lender picks the mortgage insurer, not you. What you can move is the rate you're charged by improving your credit before you lock and by putting down a little more to reach a lower loan-to-value tier. Comparing whole loan packages across lenders still matters, since different lenders come back with different quotes, but "shop the PMI rate" as a standalone move doesn't really exist.

Here's the formula so you can run your own number:

Annual PMI rate × loan amount ÷ 12 = your monthly PMI.

If you're quoted a 0.75% rate on a $400,000 loan, that's $400,000 × 0.0075 ÷ 12, or $250 a month.

What PMI costs

As of its most recent published guidance, Fannie Mae puts the typical range at 0.58% to 1.86% of the loan amount per year (2022 figures), driven mostly by credit score and down payment amount.[2]

The average tends to sit well below the top of that range. The private mortgage insurance industry's average in-force premium worked out to about 0.39% of the loan (39.4 basis points) in 2024, down from 52.5 basis points in 2017.[3]

So strong-credit borrowers often pay less than people expect, while lower scores push you toward the high end.

The part most people can't do in their head is turning a percentage into a dollar figure. Here's the bridge, per $100,000 you borrow:

The 0.39% row reflects the industry average in-force premium; the higher rows reflect Fannie Mae's published range.

Now run it on a real purchase. Take a $500,000 home with 10% down, which leaves a $450,000 loan. At a low rate of 0.46%, PMI runs about $172 a month. At a mid-range 0.75%, it's $281. At the high end of 1.5%, it's $562. Same house, same price, same loan, and a spread of roughly $390 a month based on just the credit profile. That's the answer to why your quote and your coworker's quote look nothing alike.

We'll carry that $500,000 scenario through the rest of the article so you can track the cost as it changes. At a 30-year fixed rate of 6.66% (Aug. 2026), principal and interest on the $450,000 loan comes to about $2,901 a month.[4] Add mid-range PMI at 0.75% and you're at roughly $3,182 a month.

How you pay for PMI

Most people pay PMI as a monthly premium bundled into the mortgage payment, and that's a default worth planning around. But a few other structures exist, and lenders use different names for them:

• Borrower-paid monthly: the standard. It's added to your payment and drops off once you hit the equity thresholds below.
• Single-premium ("single pay" or "buy it out"): you pay the whole premium upfront at closing, or finance it into the loan, instead of monthly.
• Split-premium: a smaller upfront payment plus a reduced monthly premium.
• Lender-paid (LPMI, or "baked into the rate"): the lender pays the premium and charges you a higher interest rate for the life of the loan.
• Seller-paid: rare, and usually negotiated as part of a broader deal.

In recent years, single-premium and lender-paid structures have mostly stopped penciling out against standard monthly PMI for the average borrower, largely because monthly PMI automatically cancels when you reach 22% equity, and those don't.

Should you even try to avoid PMI?

Avoiding PMI feels like an obvious win. A lot of the time it isn't, and this is the part lender marketing tends to skip.

A "no-PMI" loan doesn't delete the cost. It relocates it, usually into a higher rate or a fee you may carry for three decades. Conventional PMI, by contrast, is temporary: it comes off once you build about 20% equity (the exact triggers are below). So paying PMI for a few years can easily cost less than paying a higher rate forever.

Nick Nastos, a real estate broker and owner of Chicago's Property Shop, explains it the way he does for clients: PMI at $120 a month for five years is $7,200, while a no-PMI loan that raises your payment $30 a month sounds cheaper until you realize you're paying that $30 for decades. His advice is to ignore the marketing, do the math, and think hard about how long you'll really be in the home.

Three variables decide this, and almost everything else is noise: how long you'll stay in the home, your credit tier, and how fast you'll reach 80% loan-to-value. Get those three untangled and the answer usually reveals itself.

Lower rate with PMI vs. higher rate with no PMI

Let's take the $500,000 scenario and compare a conventional loan with PMI against a lender-paid option that trades PMI for a rate bump of 0.375%:

Assumptions: $500,000 purchase price, 10% down, $450,000 loan, 30-year fixed, PMI at 0.75% annually running through month 96, principal and interest only (no taxes, insurance, or HOA). Break-even is the month cumulative payments on the LPMI loan first exceed the conventional loan.

Read the pattern, not just the first row. The LPMI loan is about $170 cheaper every month for the first eight years. Then PMI cancels on the conventional loan, its payment drops, and the LPMI loan is more expensive for the next 22 years. Over the full term it costs about $13,000 more. It only wins if you sell or refinance before roughly year 20.

Kristina Allan, a Realtor and licensed appraiser and founder of KALLANLVRE, walks clients through the same cliff at a smaller loan size. On a $360,000 loan, Lender A quotes 6.5% with $140 PMI, for about $2,415 a month, while Lender B offers a no-PMI loan at 6.875%, or about $2,365 a month. The no-PMI loan looks about $50 cheaper, until Lender A's PMI cancels and that payment drops near $2,275, while Lender B stays put unless the borrower refinances. (Those rates are illustrative, not today's quotes.)

Ethan Bowling, a CFP, ChFC, and CIMA at Alinity Wealth Management, runs the break-even the way a financial planner would, on a $600,000 loan: about $3,864 a month at 6.3% with $150 PMI, versus $3,792 at 6.5% with no PMI, a gap of roughly $71 a month. His conclusion is that the decision comes down to your holding period. (Rates illustrative as of mid-2026.)

Put Allan and Bowling together and you get the whole picture: She describes the moment PMI falls off and the payments diverge, and he supplies the rule that ties it up. So here's the decision rule: If you expect to stay in the home past your PMI cancellation date, take the loan with PMI and plan to cancel it. If you're confident you'll move or refinance within a few years, the higher-rate, no-PMI option can come out ahead. Everything hinges on the timeline.

How to get a mortgage with no PMI

True no-PMI mortgages exist, but they run through specific programs and strategies, each with its own real cost. Here's the rundown, with what each one really charges instead of PMI.

Verify current terms before you rely on any of these details, since program minutiae can change without notice.

VA loans

If you're eligible, a VA loan is usually the strongest no-PMI option out there: 0% down and no monthly mortgage insurance at all. The cost is a one-time funding fee.

Here are the full purchase tiers for first-time use as of 2026:

• 2.15% with less than 5% down
• 1.50% at 5% to 9.99% down
• 1.25% at 10% or more down.

Subsequent use jumps to 3.30% with less than 5% down, though it drops back to 1.50% or 1.25% at the higher down-payment tiers. A streamline refinance (IRRRL) is 0.50%.[5] 

The funding fee is fully waived for veterans receiving VA disability compensation, qualifying surviving spouses, and Purple Heart recipients on active duty. If that's you, a VA loan can be close to zero cost to enter.

USDA loans

USDA loans offer 0% down for eligible rural and some suburban properties, for buyers within county income limits and generally a 620 minimum credit score. Instead of PMI, they charge a 1% upfront guarantee fee plus a 0.35% annual fee.[6]

That 0.35% annual fee runs for the life of the loan. It does not drop off at 80% loan-to-value the way conventional PMI does. The only way out is to refinance into a conventional loan later. So "USDA has no PMI" is both technically true and practically misleading: the fee is smaller than typical PMI, but you'll pay it for the lifetime of the loan.

Portfolio and credit-union programs

Some banks and credit unions offer no-PMI mortgages that aren't VA or USDA, and the reason they can is worth understanding because it turns a list of brand names into a strategy you can use.

Most lenders sell your loan to Fannie Mae or Freddie Mac, and those buyers require mortgage insurance on anything above 80% loan-to-value. A lender that keeps the loan in-house, called a portfolio loan, isn't bound by that rule. So it can skip PMI.

But it isn't doing you a favor for free: it typically prices that risk into a slightly higher rate or a separate fee. The cost is still there; it's just not called PMI directly.

That's exactly what you find when you read the fine print on these programs:

• Navy Federal Homebuyers Choice: 100% financing and no PMI, open to members (membership isn't limited to military). The catch is a 1.75% funding fee, waivable only by accepting a 0.375% higher rate or putting 3% down, plus a 1% origination fee.[7] That funding fee is the "no-PMI just relocates the cost" idea living inside a single product.
• Citi HomeRun: 3% down and no PMI, available in Citibank branch markets, with income and property restrictions and loan limits up to the conforming maximum (higher in some high-cost areas).[8]
• NASA Federal Credit Union: $0 down and no PMI for primary-residence purchases in a set list of eligible states, with membership and credit requirements (100% financing generally needs a 720 score).[9]
• NACA: no down payment, no closing costs, no PMI, and below-market rates through a Bank of America partnership. In exchange you complete required workshops and counseling, and the process runs longer than a standard loan.[10]

The strategy is real, and actual buyers use it. Just read each program's cost line, not its headline.

Piggyback loans (80/10/10)

A piggyback loan is a way to reach the 20%-down finish line without having 20% in hand. You put 10% down, take a first mortgage for 80% of the price, and cover the last 10% with a second loan. Because your first mortgage lands right at 80% loan-to-value, no PMI is required on it.

Run it on the $500,000 scenario. Your first mortgage of $400,000 at 6.69% is about $2,578 a month. Add a $50,000 second loan at, say, 8.5% over 20 years, and that's another $434. Together, about $3,012 a month, versus roughly $3,182 for the PMI path. That's about $170 a month less, or a little over $10,000 saved across five years.

The trade-off is that you're managing two payments, and the second lien usually carries a higher (often variable) rate, and it doesn't cancel the way PMI does. Qualifying takes strong credit and steady income. And second-lien pricing swings a lot by lender, so treat that 8.5% as an assumption to shop, not a quote. When the numbers work, piggybacks often win on monthly cash flow; just go in clear-eyed about the second loan.

Physician and professional loans

If you're a physician, dentist, veterinarian, or in some cases an attorney, specialty programs may offer low or zero down, no PMI, and underwriting that treats student-loan debt favorably. The trade-off is usually a higher rate and a narrow eligibility window. If you qualify, they're worth a look alongside conventional financing.

Jumbo loans

Buyers are often surprised that the biggest loans skip mortgage insurance entirely. The reason is the same portfolio logic from above: jumbo loans exceed conforming limits, so they aren't sold to Fannie Mae or Freddie Mac and aren't bound by the mortgage-insurance requirement. Lenders manage that risk their own way instead, usually with larger down payments, higher credit minimums, and cash reserves often equal to six to 12 months of payments.

Lender-paid mortgage insurance (LPMI)

LPMI is really just PMI baked into your rate. The insurance still exists; your lender pays it and charges you a permanently higher interest rate to cover it. There's no separate PMI line on your statement, which is why it gets marketed as "no PMI."

The whole story lives in that break-even table above: cheaper monthly at first, more expensive over the long haul, with the crossover around year 20 on the $500,000 scenario. LPMI pays off only if you sell or refinance before then, and refinancing assumes rates fall, which is never guaranteed. If you're confident about a short stay, it can work. If you might settle in, it usually doesn't.

How to get rid of PMI once you have it

If you already have PMI, the good news is that on a conventional loan, it doesn't last forever. Most people assume it just vanishes the moment they hit 20% equity. That's close to true, but knowing the details can save you both time and a few thousand dollars.

The 80%/78%/midpoint rules

Federal law, specifically the Homeowners Protection Act of 1998, gives you three separate ways to shed PMI, and most borrowers only know about one:[11]

• Request cancellation at 80% loan-to-value of the home's original value. You have to ask in writing, be current on payments, and have a good payment history.
• Automatic termination at 78% loan-to-value of the original value, based on your original payment schedule, as long as you're current. You don't have to do anything.
• Midpoint termination at the halfway point of your loan's term (year 15 on a 30-year loan) if you're still current, even if you haven't reached 78% yet.

A couple of useful footnotes: Fannie Mae and Freddie Mac can add their own cancellation rules, but those can't be less favorable to you than the federal ones. The Homeowners Protection Act also doesn't apply to FHA or VA loans, and different rules apply when the lender pays the insurance.

Shubin notes that the 80%-request-versus-78%-automatic gap trips up most borrowers: at the 80% request, the lender can require a new appraisal, while automatic cancellation at 78% off the original schedule requires no action at all. People who assume it cancels automatically at 80% might end up waiting far longer than they need to.

Here's what that might look like with the $500,000 scenario. Your balance reaches 80% of the original value (that's $400,000) at month 97, about 8.1 years in, so you can request cancellation then. But automatic termination at 78% ($390,000) doesn't arrive until month 111, about 9.2 years. That's 14 months and roughly $3,938 in PMI premiums for the price of not requesting cancellation at 80%.

Allan makes the same point in plain dollars. On a $400,000 home bought with 10% down and a $360,000 loan, you can request removal once the balance hits $320,000 (80% of the original value), while automatic termination lands at $312,000 (78%). Watch your balance, and send the written request the month you cross 80%.

Removing PMI faster after your home appreciates

There's a second path many people miss: If your home has increased in value, you may reach the equity threshold years before your regular payments would get you there. Fannie Mae and Freddie Mac servicing guidelines commonly allow early removal based on current value, often around 75% loan-to-value after two years of ownership, or 80% after five.[2]

There's a costly mistake to avoid, and this is where Allan's appraiser expertise comes in handy. She's seen buyers order an appraisal on their own only to learn the servicer won't accept it. Her guidance: contact your servicer first and ask what kind of valuation it requires, because an independently ordered appraisal or an online estimate often won't count. Expect a minimum ownership period and a clean payment history to be part of the deal, too. An appraisal you pay for and can't use is a waste of a few hundred dollars.

So the practical sequence is short: call your servicer, ask what valuation type and seasoning period they require, confirm that your payment history qualifies, then order exactly the appraisal that they specified.

FHA is different, and it isn't PMI

FHA loans don't charge PMI. They charge MIP, a mortgage insurance premium, and it behaves differently in a way that can cost you for the life of the loan.

Current FHA MIP is 0.55% a year on most 30-year loans with less than 5% down, or 0.50% with 5% or more down, plus a one-time upfront premium of 1.75% of the loan amount.[12] Those annual rates apply to loans at or below the $726,200 base limit; above it, annual MIP runs 0.70% to 0.75%. HUD's 2023 reduction of 30 basis points remains in effect for loans originated in 2026.

On a $450,000 loan, the annual MIP alone runs about $206 a month.

The duration is the trap. If you put down less than 10% on an FHA loan, MIP lasts the entire life of the loan. Put down 10% or more and it drops off after 11 years. Unlike conventional PMI, it does not cancel when you hit 20% equity. The only exits are refinancing into a conventional loan or selling the home.

Shubin puts a lender's weight behind the warning: a buyer who goes with an FHA loan with 3.5% down expecting the premium to eventually cancel is permanently adding a cost that a conventional loan with PMI would have dropped. Her framing is that pricing the full cost across the years you expect to own, rather than reading the monthly payment at closing, separates a good decision from a hopeful guess.

Bowling, coming at it as a planner rather than a lender, lands in the same place: if you have the equity and credit to choose, conventional usually wins on structure, because PMI is droppable later and you keep your rate. With FHA under 10% down, the MIP is a life-of-loan cost you can only escape by refinancing out or selling.

PMI vs. MIP vs. USDA and VA fees, compared

Four loan types, four different names for "the cost of a low down payment," and they don't work the same. Here's the whole field in one table:

The takeaway is the whole reason to think twice before chasing "no PMI." Conventional PMI is the only one of the four that goes away on its own. FHA MIP, the USDA fee, and the VA funding fee are either permanent or paid up front. So the cost people work hardest to avoid is often the most flexible one they'll find.

Bottom line: should you get a mortgage without PMI?

True no-PMI mortgages exist, but they're narrower than the marketing suggests: VA and USDA for those who qualify, portfolio and credit-union programs for some borrowers, and piggyback and LPMI as structural workarounds with real trade-offs. None of them is free; they just move the cost somewhere less obvious.

So here's the decision rule. If you qualify for a VA loan, take it. If you expect to stay in the home past your PMI cancellation date, take the conventional loan with PMI and plan to cancel it once you hit 80%. If you're confident you'll move or refinance within a few years, a higher-rate, no-PMI option can pencil out. And if none of that fits cleanly, conventional PMI is the most flexible cost of the four, because it's the only one that ends on its own.

One concrete step you can take today: get written Loan Estimates from two or three lenders using the identical price, down payment, and loan type, then compare the total monthly payment, rate, APR, closing costs, and expected PMI duration. Not just the interest rate. That side-by-side is where the real answer for your numbers shows up.

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