How to Avoid PMI on a Mortgage

Buying a home with less than a 20% down payment often means dealing with private mortgage insurance (PMI). This extra monthly fee is added to your mortgage payment and is attached to nearly half of all mortgages. You can get a mortgage without PMI, but only through specific loan programs or strategies.

The cost of PMI depends on your credit score and finances. It can be 0.1–5% of the loan amount, potentially adding $10–500 or more to your monthly payments. 

Thankfully, you can reduce or bypass PMI altogether, even without making a big down payment.

What is PMI, and how much does it cost?

Private mortgage insurance (PMI) protects lenders, not borrowers, if you default on your mortgage. It’s usually required when you put down less than 20% on a conventional loan.

• Cost: 0.1%–2% of the loan amount annually (sometimes up to 5% in high-risk cases)
• Example: On a $450,000 mortgage at 6%, PMI at 1% adds about $375/month

Most borrowers pay PMI monthly, but some lenders may allow a one-time premium at closing.

PMI example: $450,000 mortgage 

PMI protects the lender (not you) if you stop making payments on the mortgage.

The most common way to pay PMI is through a monthly premium added to your mortgage payment, although sometimes lenders may charge a one-time premium at closing.

The cost of PMI varies based on factors like your credit score, down-payment size, loan amount, and the type of mortgage. A lower debt-to-income ratio and higher credit score will help reduce the amount of PMI you pay, according to David Naimey, a loan officer at Society Mortgage.  

PMI can make a mortgage unaffordable for some borrowers. For example, on a $500,000 home with a 10% down payment, PMI could add $375 monthly if the rate is 1%.

Can I get rid of PMI?

Yes, but it takes time. You can eliminate PMI on a mortgage after you close on a home purchase, but you would have to take the following actions: 

• Pay down your mortgage to achieve 20% equity, then request PMI removal (which may require an appraisal to confirm your home's value)
• Reach 22% equity through mortgage paydown, at which point lenders must cancel PMI per the federal Homeowners Protection Act

Unfortunately, starting with 10% equity and reaching 20–22% can take 5–10 years with standard payments and no significant property value change.

How to get a no-PMI mortgage

1. Research lenders with no- or low-PMI loans

Several loan programs and financial institutions offer mortgages without PMI, and some lenders help their clients navigate the complexities of PMI before securing a loan. 

For example, Society Mortgage allows borrowers to pay a portion of the PMI upfront and then finance the rest into the borrower's monthly payment. 

"This will reduce the monthly PMI if they get a conventional loan," says Jeremy Szozda, a loan officer at Society Mortgage. 

Here's a rundown of some no- or low-PMI options.

No PMI mortgage loans

Here's a quick look at the main ways to get a mortgage with no PMI.

VA loans: No-PMI mortgage loans are available only for veterans, active military members, and spouses. VA loans also don't require a down payment, reducing out-of-pocket home-buying costs. Instead, most borrowers pay a one-time VA funding fee (1.25%–2.15%), though it’s waived for disabled veterans.[1]

USDA loans: These are ideal for home buyers in rural areas. USDA loans often waive PMI. However, they require a guarantee fee that is essentially the same as mortgage insurance.[2] USDA loans require the property to be located in an eligible location and might also require at least a “fair” credit rating (minimum FICO score of 620) and income.

Special bank and credit union programs: Some lenders offer mortgages without PMI for qualifying buyers.

• Citi HomeRun Mortgage: 3% down, no PMI, available for purchases/refinances on single-family homes, condos, co-ops, and two-unit properties.[3]
• Navy Federal Credit Union Homebuyer Choice: 100% financing, no PMI, for first-time buyers (membership not limited to military).[4]
• NASA Federal Credit Union: $0 down, no PMI; open to anyone via National Space Society membership.[5]
• NACA program: No down payment, no PMI, and no closing costs — but requires membership, workshops, and financial counseling.[6]

Low PMI mortgage loans

FHA loans: PMI is required on all FHA loans. However, in early 2023, the Biden administration announced the reduction of annual mortgage insurance premiums from 0.85% to 0.55% on FHA loans, estimated to save borrowers an average of $800 annually.[7] 

"If you put 5% down [on FHA loans], this fee reduces to 0.5%, and with 10% down it will automatically get removed in 11 years," says Naimey. 

2. Get a piggyback mortgage on a conventional loan

How a piggyback mortgage works

A piggyback loan, often referred to as an 80/10/10 loan or combination loan, is a savvy strategy for home buyers looking to avoid PMI without putting 20% down. 

You start by making a 10% down payment. Then, instead of covering the remaining 90% with a single mortgage, you split it further: You take a second mortgage for another 10% and a primary mortgage for the remaining 80%.

This strategy allows you to bypass PMI because you effectively meet the 20% threshold. However, you'll have to manage and make monthly payments on two separate loans, which may work best if you have strong credit and a stable income.

Piggyback loan: $500,000 house example

Here's an example: You buy a house for $500,000. You make a down payment of $50,000 (10%), secure a second mortgage for an additional $50,000 (10%), and then cover the remaining $400,000 (80%) with your primary mortgage.

3. Consider a lender-paid mortgage insurance (LPMI) loan

An LPMI loan presents an alternative route for home buyers looking to avoid PMI. There's no PMI, but you'll pay a higher interest rate on the mortgage.

While this arrangement frees you from making separate PMI payments, it could lead to higher total costs over the lifespan of your loan, particularly if you don't plan to refinance your mortgage or sell soon. 

Consider the long-term financial implications of an LPMI loan before proceeding. Weigh the immediate benefit of avoiding PMI against the potential for increased costs over time due to the higher interest rate. This calculation often depends on how long you intend to stay in the home.

LPMI loans may work best for:

• Short-term homeowners. If you intend to live in your home for only a few years, the higher interest rate may have less impact over a shorter period.
• Refinancers. If you plan on refinancing your mortgage shortly after purchasing the home, you'll likely pay the higher interest rate for a short time before refinancing, so an LPMI loan could be a cost-effective strategy. But this option is also risky because it relies on the assumption that mortgage rates will fall in the future, which isn't guaranteed. Contact a mortgage lender for more specific advice.

Bottom line: Should you get a mortgage without PMI?

Mortgages without PMI exist, but they’re limited to certain government programs, bank products, or loan strategies. VA and USDA loans are the most common true no-PMI mortgages. Bank and credit union programs can help some borrowers, while piggyback and LPMI loans are alternatives with tradeoffs.

If you don’t qualify, you can still minimize costs with FHA or by paying down your mortgage until PMI falls off. A knowledgeable lender can walk you through the best no-PMI options for your situation.

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