Can You Buy With Less Than 20% Down and Avoid Monthly PMI?
Yes. Depending on your qualifications and the loan program, you may be able to buy with less than 20% down without paying traditional monthly borrower-paid private mortgage insurance (PMI). The right choice depends on your credit profile, available cash, expected time in the home and the total cost of each option—not just the monthly payment.
On most conventional loans with less than 20% down, PMI protects the lender if the borrower defaults. It is different from homeowners insurance. Standard monthly PMI can also have an advantage: under applicable federal rules, many borrowers may request cancellation when the scheduled principal balance reaches 80% of the home’s original value, and automatic termination generally occurs at 78% if the loan is current. Loan terms and eligibility requirements apply.
1. Lender-Paid Mortgage Insurance
With lender-paid mortgage insurance, the lender pays the mortgage insurance premium and the borrower generally accepts a higher interest rate. This removes a separate monthly PMI charge, but it does not make the insurance free—the cost is built into the loan pricing.
This option may work well for some borrowers, especially when the payment comparison is favorable. Because the higher rate normally remains for the life of the loan unless you refinance or pay it off, it should be compared carefully with cancellable monthly PMI.
2. Single-Premium or Financed Mortgage Insurance
A single-premium option pays the mortgage insurance cost upfront at closing. In some cases, the premium may be financed into the loan rather than paid entirely in cash. This can eliminate a monthly PMI charge, but financing the premium increases the loan balance and interest paid over time.
3. Split-Premium Mortgage Insurance
Split-premium mortgage insurance combines a smaller upfront premium with a reduced monthly premium. It can be a middle ground for borrowers who want a lower monthly PMI cost without paying the entire premium at closing.
4. Piggyback or Combo Loans
A piggyback loan uses a first mortgage plus a second mortgage or home equity line of credit. Common structures include an 80-10-10 or 80-15-5. Keeping the first mortgage at 80% of the home’s value may eliminate PMI on that loan.
The second loan has its own payment, rate, fees and repayment terms. A home equity line may have a variable rate, so the total cost and possible future payment changes should be compared with a single mortgage that includes PMI. Piggyback financing can also be useful when the desired first-mortgage amount would otherwise exceed applicable loan limits.
5. VA Loans for Eligible Borrowers
VA-guaranteed home loans do not require monthly PMI. Many VA borrowers can also purchase with no down payment, although lender requirements may vary. A VA funding fee may apply and can depend on the loan type, down payment and prior use of the benefit; some eligible borrowers are exempt.
What About FHA and USDA Loans?
FHA and USDA loans can offer low- or no-down-payment paths, but they use government mortgage insurance or guarantee fees rather than conventional PMI. Those costs and cancellation rules are different, so these programs should not automatically be treated as “no mortgage insurance” options.
Which Option Is Best?
There is no single best strategy for every buyer. We can compare:
- Interest rate and annual percentage rate (APR)
- Monthly payment
- Cash needed at closing
- Upfront, monthly and long-term insurance costs
- Second-mortgage or HELOC terms
- How long you expect to keep the loan
A side-by-side loan comparison can show whether monthly PMI, lender-paid MI, a single or split premium, a combo loan or an eligible VA loan better supports your goals.
Loan programs, pricing and eligibility requirements can change. This information is educational and is not a commitment to lend, tax advice or financial advice.
