VA loans do not require PMI, even with zero down payment

No. Private mortgage insurance (PMI) is not required on VA loans, regardless of how much money you put down. This is one of the core benefits of the VA loan program. A conventional loan with less than 20 percent down requires PMI to protect the lender if you stop paying. VA loans do not carry this requirement because the Department of Veterans Affairs guarantees a portion of the loan to the lender, removing their need for that insurance.

You can borrow the full purchase price of a home — or even slightly more for closing costs — without PMI appearing anywhere on your loan documents or monthly payment. This applies whether you put down zero dollars, 5 percent, or 15 percent.

Key Takeaways

  • VA loans never require PMI because the VA's may provide replaces the lender's need for that insurance.
  • You can put zero money down on a VA loan and still avoid PMI, unlike conventional loans.
  • Your monthly payment includes only principal, interest, property taxes, homeowners insurance, and possibly a VA funding fee — not PMI.
  • The VA funding fee is a one-time cost, not monthly insurance, and can be rolled into your loan amount.
  • Some VA borrowers with disabilities may be exempt from the VA funding fee entirely.

How the VA may provide replaces PMI

When you take out a conventional loan with less than 20 percent down, the lender requires you to buy PMI. That insurance protects the lender's money if you default. The VA loan works differently: instead of requiring you to buy insurance, the VA itself guarantees to reimburse the lender for a portion of any loss. This may provide is called the VA entitlement.

Because the lender already has the VA's promise to cover part of the risk, they do not need PMI. The may provide is backed by the federal government, which makes it as solid as insurance from the lender's perspective — and more valuable, because it covers a larger portion of the loan than PMI typically would.

What you do pay: the VA funding fee

VA loans do not have PMI, but they do have a VA funding fee. This is a one-time charge, not a monthly payment. The funding fee goes to the VA to help fund the loan program itself and ranges from 1.4 percent to 3.6 percent of the loan amount, depending on your down payment and whether this is your first VA loan use.

You can pay the funding fee upfront in cash at closing, or you can roll it into your loan amount and pay it over time as part of your monthly mortgage payment. Most borrowers roll it in because it spreads the cost across 15, 20, or 30 years rather than requiring a lump sum at closing.

Some VA borrowers are exempt from the funding fee entirely. If you receive disability compensation from the VA, or if you are a surviving spouse of a service member who died in service or from a service-connected disability, you do not owe the funding fee.

What your monthly payment actually includes

Your VA loan payment covers principal and interest on the amount you borrowed. It also includes property taxes and homeowners insurance, which the lender collects and holds in an escrow account. If you are in a flood zone, flood insurance premiums go into that escrow too.

If you rolled the VA funding fee into your loan, that amount is simply part of your principal — it does not appear as a separate line item. You will never see a line for PMI because it does not exist on VA loans.

The only other cost that might appear is a mortgage insurance premium if you are borrowing more than the VA's limit in your county. This is rare and applies only to loans that exceed the VA's maximum may provide amount, which varies by location and is typically quite high.

VA loans versus conventional loans with low down payments

A conventional loan with 5 percent down requires PMI. On a $300,000 home, that PMI might cost $150 to $200 per month — roughly $1,800 to $2,400 per year. You pay it until you reach 20 percent equity or until you refinance into a conventional loan without PMI.

A VA loan for the same $300,000 home with zero down has no PMI at all. The VA funding fee might be around $8,400 (2.8 percent), which you can roll into the loan. Spread over 30 years, that adds roughly $28 to your monthly payment. Over the life of the loan, you save thousands compared to PMI on a conventional loan.

This is why VA loans are often the better choice for military-connected borrowers, even when you have savings available for a down payment. The math usually favors putting that money toward closing costs or keeping it in reserve instead.

When you might see mortgage insurance on a VA loan

In rare cases, a VA loan can carry mortgage insurance. This happens when you borrow more than the VA's maximum may provide amount in your county. The VA does not may provide the entire loan — it guarantees a portion (currently up to $647,200 in most areas, though this changes annually). If your loan exceeds that amount, the lender may require mortgage insurance on the amount above the may provide.

This situation is uncommon because most borrowers do not exceed the VA's may provide limit. If you are buying an expensive home in a high-cost area, ask your lender whether your loan will exceed the may provide and whether mortgage insurance would be required.

Frequently Asked Questions

Can I avoid the VA funding fee?

You are exempt from the VA funding fee if you receive VA disability compensation or if you are a surviving spouse of a service member who died in service or from a service-connected disability. Otherwise, the funding fee applies to all VA loans. You can roll it into your loan amount to avoid paying it upfront.

Does PMI ever appear on a VA loan if I put down less than 20 percent?

No. PMI is never required on a VA loan, regardless of your down payment. The VA may provide eliminates the need for it. The only insurance-like cost is the one-time VA funding fee, which is not PMI.

What if I refinance my VA loan later?

If you refinance into another VA loan, you may owe a new VA funding fee on the refinanced amount, though some refinances (called VA streamline refinances) have reduced or waived fees. If you refinance into a conventional loan, you would then be subject to PMI rules for conventional loans.

Is the VA funding fee the same as PMI?

No. PMI is monthly insurance that protects the lender if you default. The VA funding fee is a one-time charge that funds the VA loan program. The funding fee is typically much cheaper over the life of the loan than PMI would be on a conventional loan.

Will my lender try to add PMI to my VA loan?

A reputable lender will not. PMI is not allowed on VA loans by federal law. If a lender mentions PMI for your VA loan, that is a sign to shop for a different lender who understands VA loan rules.