You cannot avoid private mortgage insurance with zero down payment
Private mortgage insurance (PMI) is required by lenders when you put down less than 20 percent of the home's purchase price. If you have no down payment, PMI is not optional—it is a condition of the loan. No legitimate lender will write a mortgage with zero down and no PMI.
What you can do instead is explore loan programs designed specifically for zero-down buyers, some of which do not require PMI at all. These programs exist, they work differently than conventional mortgages, and they have real trade-offs. Understanding which ones exist and what they actually cost is more useful than trying to dodge PMI, which you cannot.
Key Takeaways
- PMI is mandatory on any conventional loan with less than 20 percent down, and lenders will not waive it.
- Federal Housing Administration (FHA) loans require an upfront mortgage insurance premium and an annual premium, but they allow 3.5 percent down instead of zero.
- VA loans (for may be able to access military members) and USDA loans (for rural properties) allow zero down with no PMI, but have specific may be able to access requirements and property restrictions.
- Seller concessions, gift funds, and down payment information programs can help you reach 5 to 10 percent down, which lowers but does not eliminate PMI costs.
- PMI costs roughly 0.5 to 1.5 percent of the loan amount per year, depending on your credit score and down payment size.
Why PMI exists and what it actually costs
PMI protects the lender, not you. When you borrow more than 80 percent of a home's value, the lender takes on extra risk if you default and the home sells for less than you owe. PMI covers that gap. You pay the premium, but the insurance company and lender are the beneficiaries.
On a $300,000 home with zero down, a conventional loan would cost roughly $150 to $375 per month in PMI alone, depending on your credit score and the lender's requirements. That is on top of your mortgage payment, property taxes, insurance, and homeowners association fees if applicable. PMI stays on your loan until you reach 20 percent equity through a combination of payments and home appreciation, which typically takes 5 to 10 years.
The cost is real and it adds up. But it is also the price of borrowing without a down payment on a conventional loan. The alternative is not to avoid PMI—it is to use a different type of loan that does not require it.
VA loans: zero down, no PMI, if you are may be able to access
If you are a current or former member of the U.S. military, a VA loan allows you to buy a home with zero down payment and no PMI. The Department of Veterans Affairs guarantees a portion of the loan to the lender, which removes the lender's need for insurance.
You will need a Certificate of may be able to access from the VA, which you can request online through VA.gov or through your lender. The process takes a few days to a few weeks. You must also meet the lender's credit and income requirements, which vary by lender but are often less strict than conventional loans.
VA loans do charge a one-time funding fee, typically 1.4 to 3.6 percent of the loan amount depending on your military branch, duty status, and whether you have used a VA loan before. This fee is usually rolled into the loan, so you do not pay it upfront. For a $300,000 home, that is roughly $4,200 to $10,800 added to your loan balance. It is not PMI, but it is a real cost that affects your total borrowing.
USDA loans: zero down for rural and suburban properties
USDA loans are backed by the U.S. Department of Agriculture and allow zero down payment with no PMI on properties in may be able to access rural and suburban areas. The USDA defines may be able to access areas by census tract, and many suburban communities may have access to even if they do not feel rural.
You can check whether a specific address is may be able to access on the USDA's website using their property may be able to access tool. Income limits explore—you must earn no more than 115 percent of the area median income for your county, though some areas allow up to 150 percent. A USDA loan officer or mortgage lender can confirm your income may be able to access quickly.
USDA loans charge a may provide fee (similar to a VA funding fee) of roughly 2 percent of the loan amount, plus an annual fee of about 0.35 percent of the remaining loan balance. For a $300,000 loan, that is $6,000 upfront and roughly $100 per year initially. Like VA funding fees, the may provide fee is usually rolled into the loan. USDA loans also require a property appraisal and a review of your debt-to-income ratio, which is stricter than some conventional lenders allow.
FHA loans: 3.5 percent down with mortgage insurance
FHA loans allow you to put down as little as 3.5 percent, which is much lower than the 20 percent needed to avoid PMI on a conventional loan. However, FHA loans do require mortgage insurance—it is called a mortgage insurance premium (MIP) rather than PMI, but it serves the same purpose and costs roughly the same.
FHA loans charge an upfront mortgage insurance premium of 1.75 percent of the loan amount, paid at closing or rolled into the loan. They also charge an annual premium of 0.55 to 0.80 percent of the loan balance, depending on the loan amount and your down payment size. On a $300,000 home with 3.5 percent down, the upfront cost is roughly $5,250, and the annual cost is roughly $1,650 to $2,400 per year.
The advantage of FHA is that you do not need to be military or live in a rural area. The disadvantage is that you still pay insurance, and you pay it for the life of the loan—FHA mortgage insurance does not drop off at 20 percent equity the way conventional PMI does. You can refinance to a conventional loan later to remove it, but that requires a new process, appraisal, and closing costs.
Down payment information and gift funds
If you can reach 5 to 10 percent down through a combination of your own savings, gift funds from family, or a down payment information program, you can reduce PMI costs significantly. PMI on a 10 percent down payment is roughly half the cost of PMI on zero down.
Down payment information programs exist at the state and local level, and they vary widely. Some are grants (you do not repay them), some are forgivable loans (you repay them only if you sell within a certain period), and some are second mortgages (you repay them like a loan). Your mortgage lender or a local housing counselor can tell you what programs exist in your area. The Department of Housing and Urban Development (HUD) maintains a list of HUD-approved housing counselors who can point you toward local programs for free.
Gift funds from family members are allowed on most loans, but the lender will require a signed gift letter stating that the money does not need to be repaid. The gift must come from a relative or someone with a family relationship to you—lenders do not allow gifts from friends or employers.
Comparing your actual options
| Loan Type | Minimum Down | PMI or Insurance | Upfront Cost | Annual Cost | Who Can Use It |
|---|---|---|---|---|---|
| Conventional | 20% (or 5-10% with PMI) | PMI if under 20% down | $0 | 0.5–1.5% of loan/year | Anyone with credit and income |
| VA | 0% | No PMI | 1.4–3.6% funding fee | $0 | Military members and veterans |
| USDA | 0% | No PMI | 2% may provide fee | 0.35% of balance/year | Rural/suburban properties, income limits |
| FHA | 3.5% | Mortgage insurance (MIP) | 1.75% upfront | 0.55–0.80% of balance/year | Anyone with credit and income |
What happens after you buy
If you use a VA or USDA loan, you are done—there is no PMI or annual insurance to remove later. If you use an FHA loan, you can refinance to a conventional loan once you have built equity and your credit has improved, which removes the mortgage insurance. Refinancing costs roughly 2 to 5 percent of the loan amount in closing costs, so it makes sense only if you plan to stay in the home long enough to recoup those costs through lower insurance payments.
If you use a conventional loan with PMI, you can request that PMI be removed once you reach 20 percent equity through a combination of payments and home appreciation. Some lenders will remove it automatically at 22 percent equity. You can also refinance to remove it, but again, refinancing costs money and makes sense only if the savings justify the expense.
Frequently Asked Questions
Can I get a conventional loan with zero down and no PMI?
No. PMI is required on any conventional loan with less than 20 percent down. No lender will waive this requirement. Your options are to reach 20 percent down, use a loan program that does not require PMI (VA, USDA), or accept PMI as part of the cost of borrowing.
What is the difference between PMI and mortgage insurance on an FHA loan?
PMI is used on conventional loans and drops off at 20 percent equity. FHA mortgage insurance (MIP) is used on FHA loans and stays for the life of the loan unless you refinance. Both protect the lender and cost you money, but the terms are different.
If I get a gift from family for a down payment, do I have to repay it?
No, but the lender requires a signed gift letter stating that the money is a gift and does not need to be repaid. The lender will ask to see the gift funds in your bank account before closing to verify they are real. The gift must come from a relative—lenders do not allow gifts from friends or employers.
Can I remove PMI early if I pay extra toward my mortgage?
Yes, if your extra payments help you reach 20 percent equity faster. Once you reach 20 percent equity, you can request PMI removal. Some lenders will remove it automatically at 22 percent equity. Check your loan documents or ask your lender about their specific policy.
Is a VA or USDA loan better than an FHA loan if I am may be able to access?
If you are may be able to access for VA or USDA, those are usually better because they have no PMI or mortgage insurance. VA and USDA do charge upfront fees, but those are typically lower than the combined cost of FHA insurance over several years. Compare the total costs with your lender before deciding.