VA Loans Never Require PMI, Even With Zero Down
VA home loan benefits
VA funding fee rules
Loan Estimate insurance lines
FHA mortgage insurance basics
VA loans do not charge PMI, even with zero down, which can lower your monthly payment compared with other low down options. Instead of monthly insurance, many buyers pay a one time VA funding fee, and eligible Disabled Veterans can pay zero. The result is more of your payment going toward principal and interest.
Why no PMI matters on a VA loan
- No monthly insurance line: A VA loan does not require private mortgage insurance at any down payment level, so you avoid a recurring monthly charge that many buyers pay for years.
- Lower payment at the same price: With no PMI, your monthly housing payment is usually lower than a comparable low down conventional loan where PMI applies.
- Faster equity progress: With less money going to insurance, more of each payment can go to principal and interest, which can build equity faster over time.
- Cleaner budget planning: Your monthly cost is easier to predict because you do not have a separate PMI line that can change with credit and down payment tiers.
The tradeoff is the VA funding fee
- One time program fee: Many VA borrowers pay a funding fee instead of monthly mortgage insurance, and the percentage depends on use history and down payment tier.
- Most finance it: The funding fee is commonly rolled into the loan balance to keep cash to close lower, which slightly increases payment and interest over time.
- Exemption can be huge: If you are exempt from the funding fee, often tied to disability compensation status, the VA loan can be close to truly insurance free.
- Separate from other costs: The funding fee is not the same as title, escrow, appraisal, or taxes and insurance, which still exist on any purchase.
VA vs FHA vs conventional, quick comparison
| Feature | VA loan | FHA loan | Conventional |
|---|---|---|---|
| Down payment | Often 0% | Typically 3.5% | Often 3% to 5% |
| Monthly insurance | None | Required | Often required until enough equity |
| Upfront program fee | Funding fee if not exempt | Upfront MIP plus monthly MIP | None |
- Big picture: The VA advantage is removing monthly mortgage insurance, which often lowers the payment more than people expect.
- What still matters: Rate, taxes, insurance, HOA, and funding fee status still decide the final payment, so compare full PITI, not just the note rate.
Hidden monthly savings for Military households
- More money stays in your payment: Without PMI, a larger share of your monthly housing budget goes to principal and interest instead of insurance.
- Better payment fit with allowances: Many Military families budget around their housing allowance, and removing PMI can make the payment fit without stretching the rest of the household budget.
- Refinance flexibility later: If rates drop, VA streamline refinance options can adjust the rate without needing to “cancel PMI” because it was never there.
- Watch the escrow line: Taxes and homeowners insurance can still rise, so keep reserves even when PMI is not part of the payment.
FAQs
Do VA loans ever require PMI?
No. VA loans do not charge private mortgage insurance, even with zero down. That is one reason the monthly payment can be lower than other low down loan types where mortgage insurance is required.
What replaces PMI on a VA loan?
Many borrowers pay a one time VA funding fee instead of monthly insurance. The funding fee can usually be financed into the loan. If you are exempt, often due to disability compensation status, you may pay zero.
Can I use seller credits to cover costs if there is no PMI?
Key Takeaways
- VA loans eliminate monthly PMI entirely, replacing it with a single upfront funding fee.
- Many borrowers can finance the funding fee, preserving cash and simplifying closing budgets.
- Disability, surviving spouse, and Purple Heart benefits may fully waive the funding fee.
- Zero-down options, capped closing costs, and no prepayment penalties enhance affordability.
- Assumability and streamlined refinancing can lower costs over a loan’s life.
- Extra principal payments and smart refinances help VA borrowers build equity faster.
More VA Closing Costs Resources
- VA Closing Costs Guide See typical VA fees, who pays them, and saving strategies.
- VA Funding Fee: Rates and Rules Rates by service category, first use vs. subsequent, exemptions explained.
- Finance the VA Funding Fee or Pay at Closing? Pros and cons of financing the fee versus paying cash upfront.
- VA Loan Closing Disclosure Explained Understand each line item, timing, and how to spot errors.
- VA Loan Fees: Current Costs Current lender fees, third-party charges, and common ranges to expect.
- VA Closing Day Checklist Step-by-step tasks to prepare documents, funds, insurance, and utilities.
- VA Closing Costs Timeline When estimates arrive, what's due when, and milestones from start.
- No-Closing-Cost VA Loans How lenders offset fees, rate tradeoffs, and when this option fits.
One of the cleanest VA loan advantages in 2026 is simple: there is no Private Mortgage Insurance, even with zero down. That matters because PMI and FHA mortgage insurance are monthly costs that hit your budget before you ever build equity. VA confirms that a VA backed purchase loan has no need for private mortgage insurance or FHA mortgage insurance premiums, which is why the monthly payment math often looks better than low down payment alternatives.
Do VA Loans Require PMI?
No. VA loans do not require PMI or any ongoing monthly mortgage insurance. Veterans United explains this in plain language and frames it as a major affordability edge because you avoid the monthly insurance line that comes with many other low down payment loans in its overview of the VA loan benefit of avoiding PMI.
- PMI is a lender protection premium on many conventional loans when you put down less than 20 percent, and it increases your required monthly payment.
- FHA uses mortgage insurance premiums instead of PMI, and that insurance can last a long time depending on your original loan to value.
- VA replaces monthly mortgage insurance with a program guaranty plus a one time funding fee in many cases, which changes cost timing.
Why No PMI Changes Your Monthly Payment and Buying Power
When you remove PMI from the payment stack, you free up monthly cash flow. That can help you qualify for more house because lenders look at your total monthly obligations when calculating debt to income. Military.com highlights the same core advantage in its Military.com summary of VA loans with low down payment and no PMI.
Monthly PMI Example on a $400,000 Conventional Loan
| PMI Scenario | Monthly PMI | Annual PMI | What It Does to Your Budget |
|---|---|---|---|
| Lower cost example | $150 | $1,800 | You still lose a meaningful monthly chunk that could fund reserves or principal reduction. |
| Mid range example | $250 | $3,000 | This level often changes approval ceilings for buyers who are close on DTI or residual cash flow. |
| Higher cost example | $350 | $4,200 | At this level, PMI can feel like a second car payment and it slows wealth building early on. |
PMI pricing varies by credit, down payment, and insurer, so treat these numbers as planning examples. The operational point is that VA removes that monthly insurance line entirely, which is why the advantage is easy to feel month one.
- Ask for a side by side quote that shows the full payment with insurance included, not just interest rate and principal and interest.
- Compare total monthly housing cost, including taxes and insurance, because PMI and FHA mortgage insurance can hide in the fine print.
- Use the PMI free gap as margin first, then decide whether you want to save it, invest it, or apply it to principal.
How Long Does Conventional PMI Last?
Conventional PMI is not always permanent. Many borrowers can request PMI removal when they reach the required loan to value threshold, and automatic termination can apply later if rules are met. The CFPB summarizes these consumer rights and timing triggers in its CFPB guide to when you can remove private mortgage insurance.
- PMI typically stays in place until your equity reaches a qualifying threshold and you meet lender and servicer conditions like payment history.
- Some early removal requests require an appraisal and proof the home value has not declined, which adds friction and cost to the process.
- Because PMI can end, the most accurate comparison is monthly savings plus expected PMI duration, not a full loan term projection.
How FHA Mortgage Insurance Differs From PMI
FHA does not use PMI. FHA uses mortgage insurance premiums that include an upfront premium and an annual premium paid monthly. For many borrowers with a high original loan to value, the annual FHA mortgage insurance can run for the full loan term. HUD documents annual mortgage insurance duration in its published guidance, including the duration table in HUD Mortgagee Letter 2023 05 showing annual MIP rates and duration.
FHA Mortgage Insurance Structure, High Level View
| Item | How It Is Charged | How Long It Can Last | Why It Matters |
|---|---|---|---|
| Upfront mortgage insurance premium | One time premium, often financed | Collected at closing, usually rolled into the balance | Increases the starting balance and slightly increases payment through amortization. |
| Annual mortgage insurance premium | Annual rate paid monthly | Often many years, and in some cases the full loan term | Adds a recurring monthly cost that reduces cash flow and slows early equity building. |
- If you are comparing VA to FHA, do not treat FHA insurance like a short term annoyance, because it can persist far longer than expected.
- Because FHA has both upfront and monthly insurance, the best comparison is the total payment and total cost over your expected holding period.
- Many buyers use FHA as a temporary bridge, but that strategy only works if credit and equity improvement are realistic and disciplined.
What You Pay Instead, The VA Funding Fee
Instead of monthly mortgage insurance, many VA borrowers pay a one time funding fee that helps keep the program running. VA also spells out the exemption rules and the ability to finance the funding fee into the loan in its VA funding fee and closing costs guidance including exemptions and refund rules. This is where the popular shortcut claim needs correction: exemption is not a simple disability percentage threshold. VA ties exemption to compensation status and specific categories, including receiving VA compensation for a service connected disability, or being eligible for compensation but receiving retirement or active duty pay instead.
VA Funding Fee Rate Snapshot for Purchase Loans
| Down Payment | First Use | After First Use | What Changes |
|---|---|---|---|
| Less than 5 percent | 2.15 percent | 3.30 percent | Higher fee tier, but still no monthly mortgage insurance. |
| 5 percent or more | 1.50 percent | 1.50 percent | Lower one time fee, but you trade cash liquidity for a smaller fee. |
| 10 percent or more | 1.25 percent | 1.25 percent | Lowest common tier for purchase, but only makes sense if the down payment does not strain reserves. |
- Financing the funding fee is common because it avoids a large cash hit at closing, but it increases the starting loan balance.
- If you qualify for an exemption, the VA loan becomes closer to truly insurance free compared with FHA and many conventional low down options.
- Even when you finance the fee, there is no monthly mortgage insurance premium line, which often improves payment affordability.
VA Vs FHA Vs Conventional Comparison
This comparison keeps the lanes clean. VA has no monthly mortgage insurance. FHA has mortgage insurance premiums. Conventional loans may require PMI until you meet removal conditions.
| Feature | VA Loan | FHA Loan | Conventional Loan |
|---|---|---|---|
| Down Payment Floor | Often zero down | Commonly 3.5 percent | Commonly 3 percent to 5 percent |
| Monthly Mortgage Insurance | None | Mortgage insurance premium paid monthly | PMI if below required equity threshold |
| Upfront Insurance Cost | Funding fee may apply, exemption possible | Upfront mortgage insurance premium applies in most cases | Typically none |
| How Insurance Ends | Not applicable | Duration depends on original loan to value and term | Can be removed when requirements are met |
How to Use the No PMI Advantage Without Wasting It
No PMI only helps if you keep control of your cash flow. The most common failure mode is treating the lower payment like permission to stretch on price, then getting squeezed by taxes, insurance, repairs, and escrow changes. The better play is to keep the payment conservative and direct the savings with intent.
- Build reserves first, because a strong reserve position keeps you off credit cards when the roof, HVAC, or escrow payment changes hit.
- Use the saved insurance line as a planned principal curtailment if you want faster equity, because consistency beats occasional large payments.
- If you are active duty Military, keep buffer for moves and PCS costs, because the budget shock rarely comes from the mortgage alone.
- Choose one target for the savings, reserves, principal, or retirement, and automate it so the advantage is real and repeatable.
- Recheck your escrow and insurance annually, because those increases can consume the no PMI advantage if you do not plan for them.
- If you are comparing lenders, compare total loan cost and monthly payment together, because rate, fees, and funding fee treatment all matter.
Common Myths About VA Loans and PMI
Most confusion is caused by mixing up PMI, FHA mortgage insurance, and the VA funding fee. Keep the buckets separate and the decision becomes clearer.
- No PMI does not mean no fees, because the VA funding fee can still apply unless you meet an exemption category.
- Funding fee exemption is not a simple disability percentage rule, it is based on VA compensation status and defined eligibility categories.
- Conventional PMI can end, so use realistic PMI duration when comparing, not a full loan term assumption.
The Bottom Line
VA loans eliminate PMI, which is one of the biggest monthly payment advantages available to Veterans and Military borrowers. Conventional PMI can often be removed later, but it raises the payment during the early years when budgets are usually tight. FHA mortgage insurance can last a long time and includes an upfront premium. The VA funding fee is the tradeoff, but it is one time, can often be financed, and can be waived for borrowers who meet VA’s exemption rules.
References Used
- VA Purchase Loan Page Explaining No PMI or MIP
- VA Funding Fee Guidance Including Exemptions and Financing Rules
- Veterans United Explanation of the VA Loan Benefit of Avoiding PMI
- Military.com Summary of VA Loans With No PMI
- CFPB Guidance on When PMI Can Be Removed
- HUD Mortgagee Letter 2023 05 With FHA Annual MIP Duration Table
Frequently Asked Questions
Do VA loans ever require PMI?
No. VA loans do not charge Private Mortgage Insurance. That is true whether you put zero down or make a down payment. You may still pay a one time VA funding fee unless you qualify for an exemption.
Is the VA funding fee the same thing as PMI?
No. PMI is a monthly premium on many conventional loans. The VA funding fee is typically a one time fee charged at closing that can often be financed. The cost timing and total impact are different.
How much does PMI usually cost?
PMI varies by credit score, down payment, and insurer pricing. Many borrowers experience PMI as a monthly cost in the hundreds on larger loan amounts. The right way to compare is to request a full payment quote with PMI included.
When can conventional PMI be removed?
Many borrowers can request PMI cancellation once they reach the required loan to value threshold and meet lender conditions like a good payment history. Automatic termination can apply later. Your servicer and loan documents define the exact steps.
Does FHA mortgage insurance last for the full loan term?
Often, yes, especially when the original loan to value is high. FHA also charges an upfront premium in many cases. The exact duration depends on your original down payment, your term, and FHA rules that apply to your case.
Can I roll the VA funding fee into my loan?
In many cases, yes. Financing the funding fee increases your starting loan balance and slightly increases the payment, but it avoids paying that fee in cash at closing. You still cannot finance most other closing costs on a purchase.
Who is exempt from the VA funding fee?
VA exemption is based on defined eligibility categories, commonly including borrowers receiving VA compensation for a service connected disability. Some borrowers who are eligible for compensation but receive other pay instead can also qualify. Confirm status before closing.
Does no PMI mean a VA loan is always cheaper?
Not always. Rate, lender fees, taxes, insurance, and funding fee treatment all matter. No PMI is a major advantage, but you still need a full payment comparison using the same assumptions across loan types.
Can a conventional loan with 20 percent down beat a VA loan?
Sometimes. With 20 percent down, conventional typically avoids PMI, so the comparison becomes interest rate, fees, and flexibility. VA can still win, but you should compare both offers using total monthly payment and expected time in the home.
What is the smartest way to use the no PMI savings?
Use it to increase your financial margin, not to stretch your purchase price. Build reserves first, then consider principal curtailments or long term investing. Keeping the payment conservative is what preserves the advantage through repairs and escrow changes.
