No PMI Mortgage Options – How to Avoid Private Mortgage Insurance

What Is PMI and Why Do Lenders Require It?

Private Mortgage Insurance (PMI) is a monthly cost added to your mortgage payment if you buy a home with less than a 20% down payment using most conventional loans. PMI exists to protect the lender — not you — in case you stop making payments and your home goes into foreclosure.

The cost of PMI can vary, but it typically ranges between 0.3% and 1.5% of your loan amount annually. On a $300,000 mortgage, that’s anywhere from $75 to $375 per month — money that doesn’t go toward paying down your loan.

While PMI helps lenders take on more borrowers with smaller down payments, it’s essentially a fee for not meeting the 20% equity mark up front. For many homebuyers, avoiding PMI can mean big monthly savings and thousands of dollars kept over the life of the loan.

Why Avoiding PMI Matters

Avoiding PMI can have both short-term and long-term financial benefits:

• Lower Monthly Payment – Even an extra $150 per month can make a big difference in your monthly budget.
• More Purchasing Power – Without PMI, you may qualify for a slightly higher loan amount while keeping your monthly payment the same.
• Better Long-Term Equity – Every dollar you save on PMI can be applied toward your principal or other investments.

With home prices rising across many U.S. markets, understanding no-PMI options is more important than ever for buyers looking to stretch their budgets without overextending financially.

How PMI Works on Conventional Loans

Conventional loans follow a simple rule: if you don’t put 20% down, you pay PMI. But there’s more nuance:

• PMI is removable – Once you reach 20% equity through payments or home appreciation, you can request PMI removal.
• It’s based on your risk profile – Higher credit scores mean lower PMI rates.
• PMI is not a tax deduction for most borrowers.

If you’re not prepared to make a full 20% down payment, you’re not automatically stuck paying PMI — you just need to know which loan programs or strategies can help you avoid it.

No PMI Mortgage Options

Here are the main ways to avoid PMI while still buying with less than 20% down.

1. VA Loans (For Eligible Veterans, Service Members, and Some Surviving Spouses)

Best For: Veterans, active-duty service members, National Guard and Reserve members, and some surviving spouses.

VA loans, backed by the U.S. Department of Veterans Affairs, are one of the most powerful no-PMI mortgage options available.

Key Benefits:

• No Down Payment Required – Finance up to 100% of your home’s value.
• No PMI — Ever – VA loans do not require monthly mortgage insurance.
• Competitive Interest Rates – Often lower than conventional rates.
• Flexible Credit Guidelines – Easier to qualify compared to conventional loans.

While VA loans don’t have PMI, they do require a VA Funding Fee in most cases, which can be rolled into the loan. This fee helps keep the program sustainable, but certain borrowers — such as those with a service-connected disability — may be exempt.

2. Piggyback Loans (80-10-10 Strategy)

Best For: Buyers with strong credit who can manage two loans at once.

A piggyback loan, also known as an 80-10-10, splits your financing into two parts:

• First Loan: Covers 80% of the home price (avoiding PMI).
• Second Loan: Covers 10% of the home price.
• Down Payment: You provide the remaining 10% in cash.

Because the first mortgage is at or below 80% loan-to-value (LTV), PMI isn’t required. The second loan is often a home equity line of credit (HELOC) or fixed-rate second mortgage.

Pros:

• Avoids PMI without needing a full 20% down payment.
• Can be a smart strategy if you plan to pay off the second loan quickly.

Cons:

• Two loan payments to manage.
• Second loan may have a higher interest rate.

3. Lender-Paid Mortgage Insurance (LPMI)

Best For: Borrowers who want a single, predictable monthly payment and plan to stay in their home long term.

With Lender-Paid Mortgage Insurance, the lender covers the PMI cost in exchange for a slightly higher interest rate. While you don’t pay PMI as a separate line item, it’s built into your rate — meaning you may pay more interest over the life of the loan.

Pros:

• No separate PMI payment.
• Lower monthly payment compared to borrower-paid PMI in the short term.

Cons:

• Higher interest rate for the life of the loan.
• Not removable like traditional PMI.

4. USDA Loans (For Eligible Rural and Suburban Buyers)

Best For: Buyers purchasing in USDA-eligible rural or suburban areas who meet income requirements.

USDA loans, backed by the U.S. Department of Agriculture, are another zero-down, no-PMI option. Instead of PMI, USDA loans have a guarantee fee — typically much lower than conventional PMI costs.

Key Benefits:

• No down payment.
• Competitive interest rates.
• Lower total mortgage insurance costs compared to FHA or conventional loans.

The main limitation is location — you must buy in a USDA-eligible area and meet income guidelines.

5. Special Lender Programs (Like CapCenter’s Zero Closing Costs)

Some lenders offer unique programs that allow borrowers to avoid PMI even with less than 20% down.

At CapCenter, we provide tailored mortgage solutions that can help you save in multiple ways:

• Zero Closing Costs – You don’t pay lender fees, appraisal fees, or other closing costs.
• No PMI Options Available – Through certain program structures, you may be able to avoid PMI entirely.
• Transparent Process – We walk you through all costs so you know exactly what you’re paying.

This combination of savings — both up front and over time — can make a significant difference in your total cost of homeownership.

Comparing No-PMI Mortgage Options

When deciding on a no-PMI mortgage strategy, consider:

1. Eligibility Requirements – VA and USDA loans have strict guidelines; conventional strategies may be more flexible.
2. Upfront vs. Long-Term Cost – LPMI may cost less monthly at first, but more over time.
3. Flexibility – Piggyback loans give you the option to pay off the second loan early and reduce your rate later.

Common Myths About No-PMI Mortgages

Myth #1: You must put 20% down to avoid PMI.
Reality: Several programs allow less than 20% down without PMI.

Myth #2: No-PMI loans always have higher interest rates.
Reality: Some do (like LPMI), but VA and USDA loans often have competitive or even lower rates.

Myth #3: PMI is permanent.
Reality: On conventional loans, PMI can be removed once you reach 20% equity.

How to Qualify for a No-PMI Mortgage

While every program has unique guidelines, here are general steps to improve your chances:

• Improve Your Credit Score – Higher credit means better rates and terms.
• Lower Your Debt-to-Income Ratio – Pay down debts to free up monthly income.
• Save for a Larger Down Payment – Even moving from 5% to 10% down can expand your options.
• Work with a Knowledgeable Lender – A lender who understands no-PMI programs can guide you to the best fit.

CapCenter’s Advantage

At CapCenter, we go beyond just finding you a mortgage — we help you strategically avoid unnecessary costs like PMI and closing fees.

With our Zero Closing Costs promise, you won’t pay for lender fees, appraisal fees, or other standard closing charges. That’s thousands of dollars in savings right from the start. Pair that with our ability to structure loans that eliminate PMI when possible, and you’re looking at a double layer of savings over the life of your loan.

Final Thoughts

Private Mortgage Insurance can be a costly addition to your monthly payment, but it’s not inevitable. Whether you qualify for a VA or USDA loan, consider a piggyback strategy, opt for LPMI, or work with a lender like CapCenter to structure a custom no-PMI solution, there are multiple paths to saving money.

By understanding your options and partnering with the right lender, you can move into your dream home without unnecessary monthly expenses — and keep more of your money working for you.