Who this is for
- Buyers putting less than 20% down who want to compare PMI vs FHA MIP costs
- Homeowners paying PMI who may have the equity to remove it
- VA-eligible borrowers weighing the funding fee against no monthly MI
- Rural and suburban buyers comparing USDA’s fee structure to FHA and conventional
- Anyone deciding between a larger down payment and keeping cash in reserve
Typical Mortgage Insurance Guide: PMI, MIP, VA & USDA Fees requirements
| Conventional PMI (private mortgage insurance) | Required above 80% LTV. Typical annual cost roughly 0.3%–1.5% of the loan amount, in tiers by credit score and LTV. Cancellable. |
|---|---|
| PMI cost by credit band (typical) | Excellent credit (760+) at 95% LTV prices near the low end of the range; scores in the 620s–680s at high LTVs price near the top. Each 20-point band and each 5% LTV tier moves the rate. |
| FHA MIP, upfront | A one-time upfront premium, typically 1.75% of the loan amount, usually financed into the loan rather than paid in cash. |
| FHA MIP, annual | A monthly-billed annual premium that has recently run around 0.55% for most 30-year loans; it generally lasts the life of the loan when the down payment is under 10%. |
| FHA MIP exit | With 10%+ down, annual MIP typically drops after 11 years; otherwise it stays for the loan term, refinancing into conventional is the common exit. |
| VA funding fee | A one-time fee, typically around 2.15% of the loan on first use and higher on subsequent use, financeable into the loan. No monthly mortgage insurance ever. Exempt for veterans with service-connected disability compensation. |
| USDA guarantee fee, upfront | Typically 1% of the loan amount, financed into the loan. |
| USDA guarantee fee, annual | Typically 0.35% annually, billed monthly, for the life of the loan while it remains a USDA loan. |
| PMI auto-termination | By federal law, PMI must automatically terminate when the loan amortizes to 78% of the original value on schedule. |
| PMI borrower-requested cancellation | You can generally request cancellation at 80% of original value with a good payment history; the servicer will verify value. |
| PMI removal via appreciation | If the home’s value rose, a new appraisal showing 75–80% LTV (thresholds vary by seasoning and investor) can support early removal. |
Figures are typical market ranges as of October 2026. Actual terms depend on the lender, your credit, the property and the program, and are confirmed on your Loan Estimate or term sheet.
How it works
- At application, compare the all-in monthly payment, including each program’s MI structure, not just the interest rate.
- If you are choosing conventional with PMI, ask for the MI quote at your exact score and LTV; small score improvements before application can move you into a cheaper MI tier.
- After closing, track your loan balance against your home’s value; set a calendar reminder to check PMI removal eligibility around each year mark.
- To request PMI removal: confirm you meet the 80% threshold on original value (or the appreciation-based threshold), have a clean recent payment history, and order the valuation the servicer requires, often a broker price opinion or full appraisal at your cost.
- If you carry FHA MIP for the life of the loan, model the refinance into conventional once your equity and credit support 80% LTV, the monthly savings are often substantial.
- VA borrowers: remember the funding fee can be financed, and disability-compensation recipients are typically exempt, confirm exemption status before closing so it is not charged.
Try the Mortgage Payment Calculator
Pros and cons
Advantages
- PMI lets buyers purchase years sooner with 3–5% down instead of waiting to save 20%
- Conventional PMI is cancellable, it is temporary by design
- The VA funding fee buys a lifetime of no monthly mortgage insurance
- FHA and USDA MI structures open homeownership to lower-score and zero-down borrowers
Trade-offs
- FHA annual MIP typically lasts the life of the loan, the only exit is refinancing or paying off
- USDA’s annual fee also runs for the loan’s life while it remains a USDA loan
- PMI removal is not automatic at 80%, you must request it (78% auto-termination is the backstop)
- Appreciation-based PMI removal costs you an appraisal and must meet investor seasoning rules
Documents you’ll need
- PMI disclosure forms signed at closing (your servicer’s cancellation rules live here)
- Recent mortgage statement showing current balance
- Evidence of value for removal requests: appraisal or broker price opinion as the servicer requires
- VA Certificate of Eligibility and disability-compensation documentation for funding-fee exemption
Mortgage Insurance Guide: PMI, MIP, VA & USDA Fees FAQ
What is the difference between PMI and MIP?
PMI (private mortgage insurance) applies to conventional loans above 80% loan-to-value and is cancellable as you build equity. MIP (mortgage insurance premium) is FHA’s version: an upfront premium plus a monthly-billed annual premium that, for most borrowers, lasts the life of the loan. PMI is temporary by design; MIP is usually permanent until you refinance out of the FHA loan.
How much does PMI cost?
It is priced in tiers by credit score and loan-to-value. As a typical range, annual PMI runs roughly 0.3% to 1.5% of the loan amount, so on a $400,000 loan, roughly $100 to $500 per month, with the best pricing going to high scores at lower LTVs and the highest pricing to lower scores at 95%+ LTV. Your lender’s MI quote at application is the real number; these are planning ranges.
When does PMI automatically drop off?
Under the federal Homeowners Protection Act, PMI must automatically terminate when your loan balance amortizes down to 78% of the original property value on the original schedule, provided you are current on payments. You do not have to wait for that date: you can generally request cancellation at 80% of original value with a good payment history.
Can I remove PMI because my home went up in value?
Often yes. If appreciation (or improvements) pushed your loan-to-value to roughly 75–80%, many servicers allow early PMI removal based on a new valuation, usually a broker price opinion or full appraisal that you pay for. Exact thresholds and seasoning requirements (how long you have owned the home) vary by investor, so ask your servicer for its written rules before ordering anything.
How does the VA funding fee compare to monthly MI?
The VA funding fee is a one-time charge, typically around 2.15% of the loan amount on first use, higher on subsequent use, that can be financed into the loan, and then there is never any monthly mortgage insurance. For a borrower who will hold the loan for years, that structure usually beats paying monthly MI indefinitely. Veterans receiving service-connected disability compensation are typically exempt from the fee entirely.
Is FHA MIP or conventional PMI cheaper for me?
It depends on your score and down payment. FHA’s annual MIP is roughly flat regardless of credit score, so lower-score borrowers often pay less monthly with FHA; higher-score borrowers with 5%+ down frequently pay less with conventional PMI, and conventional PMI can be cancelled while FHA MIP usually cannot. The honest answer requires quoting both at your exact profile, which is exactly what we do.
What is lender-paid mortgage insurance (LPMI)?
Instead of monthly PMI, the lender charges a slightly higher interest rate and pays the MI premium itself. It lowers your monthly payment but the higher rate lasts the life of the loan. It can make sense if you will sell or refinance within a few years; for long holds, borrower-paid MI you can cancel usually wins.
Can I avoid mortgage insurance with a piggyback loan?
Yes, an 80-10-10 structure (80% first mortgage, 10% second, 10% down) avoids PMI entirely. You trade MI for a second mortgage payment, usually at a higher rate. Compare the total monthly cost of both structures at your exact profile.
Does mortgage insurance protect me if I default?
No, it protects the lender, not you. That is the most misunderstood part: you pay the premium, but the coverage pays the lender’s loss if you default and the foreclosure sale does not cover the balance. Your protection comes from equity and reserves, not from MI.
How Mortgage Insurance Guide: PMI, MIP, VA & USDA Fees compare
| Mortgage Insurance Guide: PMI, MIP, VA & USDA Fees | Conventional Loans | FHA Loans | VA Loans | |
|---|---|---|---|---|
| Best for | Buyers putting less than 20% down who want to compare PMI vs FHA MIP costs | Buyers with good credit and steady income | First-time buyers | Veterans and active-duty service members |
| Down payment | , | 3% (eligible first-time buyers), 5%+ otherwise; 15–25% on investment property | , | $0 with full entitlement |
| Credit | Excellent credit (760+) at 95% LTV prices near the low end of the range; scores in the 620s–680s at high LTVs price near the top. Each 20-point band and each 5% LTV tier moves the rate. | 620 | 580 for 3.5% down; 500–579 with 10% down | VA sets no minimum; lenders commonly look for 580–620 |
| Income docs | , | , | , | , |
Typical ranges, your Loan Estimate or term sheet confirms actual terms.
Coming soon: a 2-minute walkthrough from our loan team.
Related programs
Conventional Loans
A conventional loan is a mortgage not insured by the government that follows Fannie Mae or Freddie Mac guidelines.
FHA Loans
An FHA loan is a government-insured mortgage that allows 3.5% down with a credit score of 580 or higher, or 10% down with a score from 500 to 579.
VA Loans
A VA loan is a mortgage guaranteed by the Department of Veterans Affairs that lets eligible veterans, active-duty service members and certain surviving spouses buy with no down payment and no monthly mortgage insurance.
USDA Loans
A USDA loan is a mortgage guaranteed by the U.S.
First-Time Homebuyer Loans
First-time homebuyer loans are mortgage options with low down payments, typically 3% conventional, 3.5% FHA or $0 VA, often paired with state or local down payment assistance.