Buying
What is PMI and how do I avoid it?
PMI (private mortgage insurance) is a monthly fee charged when you put less than 20% down on a conventional loan. VA loans have no PMI. For conventional buyers, it can be avoided with a larger down payment or eliminated once equity reaches 20%.
PMI is a monthly insurance premium that protects the lender — not you — if you default on a conventional loan with less than 20% down. It adds cost to your payment without adding any value to you as the borrower.
How much does PMI cost?
PMI typically costs 0.5–1.5% of the original loan amount per year, billed monthly. On a $280,000 loan, that's $117–$350/month added to your payment. The rate depends on your credit score, loan-to-value ratio, and lender.
How to avoid PMI
- Put 20% or more down on a conventional loan — PMI isn't required at that threshold
- Use a VA loan: No PMI, ever — even with zero down. This is one of the most significant financial benefits of the VA loan program
- Piggyback loan (80/10/10): Take a first mortgage at 80%, a second loan at 10%, and put 10% down — though this strategy has trade-offs
- Lender-paid PMI: The lender covers PMI in exchange for a higher interest rate — can make sense if you plan to sell within a few years
How to remove PMI once you have it
- Request cancellation when your loan balance reaches 80% of the original value (Homeowners Protection Act right)
- Lenders must automatically cancel at 78% LTV based on original value
- Refinance when home appreciation has pushed your equity above 20% — get a new appraisal to support it
If you're eligible for a VA loan, the no-PMI benefit alone can save you hundreds of dollars per month. It's one of the most underappreciated parts of the program.
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