Mortgage insurance rules vary sharply by loan program.
Conventional loans often use private mortgage insurance, or PMI, when the borrower has less than 20% equity. FHA loans use mortgage insurance premiums, or MIP.
VA loans don't require monthly mortgage insurance, but most borrowers pay a one-time funding fee. USDA loans do not use traditional PMI either, but they do use upfront and annual guarantee fees.
Here’s an overview of PMI requirements based on loan program.
PMI Requirements By Loan Type
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Loan Type
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Monthly Mortgage Insurance Or Equivalent
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Upfront Cost
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Can It Be Removed?
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Conventional
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PMI often applies when equity is below 20%
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Usually none as a separate upfront PMI charge, though structure varies
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Often yes. Once you reach 80% LTV, you can usually request cancellation, and it falls off automatically at 78%.
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FHA
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Annual MIP usually applies
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Upfront MIP usually applies
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Sometimes, but often much harder than conventional
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VA
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No monthly mortgage insurance
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One-time funding fee usually applies
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Not applicable because there is no monthly PMI
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USDA
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Annual fee applies
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Upfront guarantee fee applies
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Generally remains while the loan is outstanding
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What PMI Is And What It Is Not
Private mortgage insurance, or PMI, is insurance on certain conventional loans that protects the lender, not the borrower. It’s usually required if your down payment is less than 20% of the purchase price, or when refinance equity is below 20%.
PMI is not the same thing as FHA mortgage insurance premium, the VA funding fee, or USDA guarantee fees. Those are separate costs under separate loan programs, with their own rules and timelines.
PMI Rules For Conventional Loans
Conventional PMI is what most borrowers mean when they talk about mortgage insurance. On many conventional loans, PMI applies when the borrower starts with less than 20% equity.
You generally have the right to ask your servicer to cancel PMI on the date the principal balance is scheduled to reach 80% of the home’s original value, and your servicer generally has to terminate PMI automatically when the balance is scheduled to reach 78% of the original value.
That makes conventional PMI more flexible than FHA mortgage insurance in many cases.
What “Original Value” Means
For conventional PMI rules, original value generally refers to the lesser of the home’s sales price or appraised value at the time the loan was made. The Consumer Financial Protection Bureau (CFPB) cancellation guidance is based on that original value standard, not the home’s current market value.
FHA Mortgage Insurance Premiums
FHA loans not use PMI. They use mortgage insurance premiums, or MIP.
FHA borrowers generally pay both an upfront premium and an annual premium that is collected monthly. For many newer FHA loans, annual MIP usually lasts 11 years if the starting LTV is 90% or less, and often lasts for the life of the loan if the starting LTV is above 90%. That generally means that, if your down payment is less than 10%, you’ll pay MIP throughout the life of the loan.
That structure is why many FHA borrowers later compare refinancing into a conventional loan once they have enough equity and a stronger credit profile.
VA Funding Fee
VA loans do not require monthly mortgage insurance. Instead, a one-time VA funding fee is usually required.
That funding fee is a one-time payment that helps lower the cost of the program for taxpayers because the VA home loan program doesn’t require down payments or monthly mortgage insurance. Some eligible borrowers, including veterans with service-related disabilities, may be exempt from the funding fee.
The funding fee can usually be rolled into your loan.
USDA Guarantee Fee
USDA loans also do not use traditional PMI.
Instead, USDA guaranteed loans use an upfront guarantee fee and an annual fee. USDA’s current guaranteed-loan program materials show an upfront guarantee fee of 1.00% and an annual fee of 0.35% of the unpaid principal balance.
That means USDA financing can still carry an ongoing insurance-like cost, even though it is not called PMI, but it decreases over time based on your principal.
Why The Differences Matter
The biggest practical difference is removability.
Conventional PMI is often removable under CFPB cancellation and termination rules. FHA MIP is usually harder to remove and may require refinancing into a different loan type. VA avoids monthly mortgage insurance entirely, while USDA generally keeps its annual fee in place while the guaranteed loan remains outstanding.
That means the lowest note rate does not always produce the lowest all-in housing cost. Buyers need to compare the full payment, not just the base interest rate.
The Bottom Line
PMI requirements depend entirely on loan type.
Conventional loans often use PMI when the borrower starts below 20% equity, and that PMI is often removable. FHA uses MIP, which can last for the life of the loan. VA avoids monthly mortgage insurance but usually charges a one-time funding fee, although certain eligible borrowers can be exempt. USDA avoids traditional PMI too, but still uses upfront and annual guarantee fees.
Frequently Asked Questions
Is PMI The Same As FHA MIP?
No. PMI is conventional mortgage insurance. FHA uses its own mortgage insurance premium system.
When Can Conventional PMI Be Removed?
The CFPB says borrowers generally can request cancellation when the balance is scheduled to reach 80% of the home’s original value, and servicers generally must terminate PMI automatically at 78% if the loan is current.
Do VA Loans Have Monthly Mortgage Insurance?
No. VA says the program does not require monthly mortgage insurance, though many borrowers pay a one-time funding fee.
Do USDA Loans Have PMI?
Not traditional PMI. USDA guaranteed loans use an upfront guarantee fee and an annual fee instead.
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