A VA loan doesn't require private mortgage insurance, so eligible veterans and service members can buy a home with no down payment and no monthly mortgage-insurance charge. Below, you'll find what replaces PMI on a VA loan, who owes the one-time funding fee and who doesn't, and what that missing monthly charge is worth to your budget.
Here's the short version, and it's the whole reason this benefit matters: a VA loan doesn't come with private mortgage insurance. None. If you qualify, you can buy a home with no down payment and still skip the monthly mortgage-insurance charge that most low-down-payment borrowers pay.
That's unusual. On a conventional loan, lenders generally require PMI when you put down less than 20%. PMI doesn't protect you. It protects the lender if the loan goes bad. It shows up as a line on your monthly payment, right next to principal, interest, taxes, and homeowners insurance. For a lot of buyers, it's the difference between a payment that's comfortable and one that's a stretch.
A VA loan removes that line. The way I'd put it: you get the low-down-payment access without the monthly insurance cost that usually rides along with it.
Why can the program do that? Because the VA guarantees a portion of the loan to the lender. That guaranty does the job mortgage insurance normally does, giving the lender a backstop if the borrower defaults. The VA guarantees up to a quarter of the loan, so a lender like AmeriSave can offer the loan without asking you to buy a separate insurance policy on top.
So when people ask whether VA loans require PMI, the answer is no, and it isn't a loophole or a temporary promotion. It's how the program is built. The benefit isn't a lower rate you have to chase or a discount that expires. It's a structural feature: the monthly mortgage-insurance line that a comparable conventional or FHA borrower carries simply isn't there. The rest of these points cover the one part that trips people up, which is the trade-off, and how to think about what the no-PMI benefit is actually worth once you're looking at a real payment.
A VA loan isn't free of cost. It just moves the cost. Instead of a monthly insurance premium, most VA borrowers pay a one-time charge called the VA funding fee. It's paid once, at closing, and then you're done. There's no recurring monthly version of it.
The fee is a set percentage of the loan amount, and the percentage depends on two things: whether this is your first time using a VA loan, and how much you put down. For a purchase, first-time users pay 2.15% with less than 5% down, 1.5% with 5% or more down, and 1.25% with 10% or more down. If you've used a VA loan before, the no-money-down rate is 3.3%, while 5% down brings it to 1.5% and 10% down brings it to 1.25%. A streamline refinance runs 0.5%, and a loan assumption runs 0.5%.
Put real numbers on it. Say you're a first-time VA borrower buying a $300,000 home with nothing down. Your funding fee is 2.15% of $300,000, which is $6,450. That's a one-time charge, not $6,450 a year, and not a monthly add-on. Compare that to the VA's own example: a $200,000 home with $10,000 down (5%) makes the loan $190,000, and the 1.5% fee comes to $2,850.
You don't have to bring that money to the table in cash. You can pay the funding fee at closing, or you can roll it into the loan and pay it off over time. On a purchase loan, the funding fee is actually the one cost you're allowed to finance into the loan amount. The other closing costs you pay at closing. When you get your Loan Estimate from AmeriSave, you'll see the funding fee broken out, so you can decide which way you'd rather handle it.
The point to hold onto: the funding fee is the trade for the no-PMI benefit, and for a first-time home buyer it's usually a low single-digit percentage paid once. Whether that's a good trade depends on your situation, which is exactly what the next few points get into.
Here's the part a lot of people miss. The funding fee has exemptions, and they're broad enough that a large share of borrowers never pay it.
In recent years, more than half of the veterans who took out a VA-guaranteed home loan owed no funding fee. Read that again. That's more than half of all VA borrowers, not a small carve-out.
You're exempt from the funding fee if any of these describe you. You're receiving VA compensation for a service-connected disability. You're eligible for that compensation but receive retirement or active-duty pay instead. You're a surviving spouse receiving Dependency and Indemnity Compensation. You're a service member with a proposed or memorandum rating before your closing date based on a pre-discharge claim. Or you're an active-duty service member who provides evidence of a Purple Heart on or before closing.
If you're a veteran with a service-connected disability rating, this is worth your attention, because it means the no-PMI benefit comes with no insurance-style cost at all. No monthly mortgage insurance, and no funding fee either. On that $300,000 example, an exempt borrower's funding fee isn't reduced. It's zero.
There's also a timing piece worth knowing. If your disability rating comes through after you close, but the effective date is retroactive to before your closing date, you may be owed a refund of the funding fee you paid. That's real money, and it isn't always handed back automatically. If you think it applies to you, it's worth raising with your lender and the VA rather than waiting for someone to notice. A VA-experienced loan officer can look at your Certificate of Eligibility, which is where your exemption status shows up, and tell you whether the fee applies to you before you ever get to closing.
Mortgage insurance isn't unique to VA loans. It shows up on most low-down-payment loans. What's different is the form it takes and how long you're stuck with it. Three loan types, three different stories.
On a conventional loan, you'll usually pay PMI if your down payment is under 20%. The good news is that PMI is temporary. You can ask your servicer to cancel it once your loan balance drops to 80% of the home's original value, and as long as you're current on payments, it terminates automatically at 78%. If neither of those has happened, it comes off at the midpoint of the loan's schedule. So conventional PMI is a real monthly cost, but it has an exit. On a 30-year loan, paying it down to that 78% mark on schedule can take years.
On an FHA loan, the math is less forgiving. FHA charges an upfront mortgage insurance premium of 1.75% of the loan amount, plus an annual premium you pay monthly. The catch is duration: if you put down less than 10%, that annual premium lasts the life of the loan. It doesn't fall off when you hit 20% equity the way conventional PMI does. To get rid of it, most FHA borrowers end up refinancing into a different loan once they have enough equity. Only borrowers who put down 10% or more get to drop the annual premium after 11 years.
On a VA loan, there's no monthly mortgage insurance to cancel, terminate, or refinance away, because there was never any to begin with. You pay the one-time funding fee, and that's the end of the insurance-style cost. There's no clock to watch and no equity threshold to chase.
Here's the comparison that actually matters. Don't just look at the rate on the three offers. Look at what's in the monthly payment and how long it stays there. A conventional borrower carries PMI until they grind down to 78%. An FHA borrower with a small down payment often carries the premium for the life of the loan. A VA borrower carries neither. When you line the three up that way, the no-PMI benefit stops looking like a minor perk and starts looking like one of the real reasons the VA loan exists. If you're weighing a VA loan against another option, an AmeriSave loan officer can run the payment on each so you're comparing the whole monthly number, not just the headline rate.
A benefit you can't feel in your monthly payment is easy to wave off. So let's make the no-PMI benefit concrete.
Mortgage insurance on a low-down-payment loan generally runs a few tenths of a percent to over one percent of the loan amount per year, depending on your credit and how little you put down. The exact number varies, so take this as an illustration rather than a quote. Suppose mortgage insurance on a $300,000 loan ran 0.5% a year. That's $1,500 a year, or about $125 a month. A VA borrower with the same loan doesn't pay that $125. It's not reduced. It's simply not on the bill.
Now stretch that out. On a conventional loan, that $125 a month doesn't disappear the day you close. It rides along until you reach the cancellation point, which on a 30-year schedule with a small down payment can take the better part of a decade. Even at a modest $125 a month for, say, eight years, that's around $12,000 the VA borrower keeps. At a higher insurance rate, it's more.
There are two ways to spend that advantage, and both are worth understanding. The first is a lower monthly payment for the same house, which gives you more comfort and more margin if something in life shifts. The second is more house for the same monthly payment, because the money that would have gone to mortgage insurance can go toward principal and interest instead. Neither is automatically right. It depends on what you're trying to do.
One honest caveat, so the picture is complete: skipping mortgage insurance doesn't make a VA loan payment-free or even necessarily the cheapest in every scenario. You still pay principal, interest, property taxes, and homeowners insurance, and your interest rate still matters. The no-PMI benefit removes one specific line from the payment. It happens to be a line that quietly costs other borrowers thousands of dollars before it ever goes away. If you want to see the real number for your situation, an AmeriSave loan officer can show you the payment with and without that line, side by side, so the benefit stops being abstract.
A benefit is easier to use well when you know its edges. The no-PMI benefit is real, but it sits inside a program with rules, and a few of them surprise borrowers at the worst possible moment, which is at the closing table. Here's what to know going in.
The funding fee can grow your loan balance if you finance it. Rolling a $6,450 fee into the loan instead of paying it at closing is convenient, but you then pay interest on that $6,450 for as long as you hold the loan. It's still usually a reasonable trade for skipping monthly insurance. It's just not free money, and it's worth doing the math both ways.
VA loans are for primary homes and eligible borrowers. This benefit is tied to your service and is meant for a home you'll live in, not a rental or an investment property you'll never occupy. If you're shopping for an investment property, the no-PMI benefit isn't the tool for that job.
Repeat users pay more unless they're exempt or put money down. The funding fee on a first VA purchase with nothing down is 2.15%. Use the benefit again with nothing down and it's 3.3%. That gap is real, so if you've used a VA loan before, a down payment of 5% or 10%, which drops the fee to 1.5% or 1.25%, deserves a closer look than it might for a first-time buyer.
The funding fee is separate from your closing costs. It's paid to the VA, not to your lender, and it sits on its own line, on top of the usual costs like title, appraisal, and recording fees. Seeing it as a separate item helps you read your numbers correctly.
None of this cancels out the benefit. The point is the opposite. When you understand the funding fee, the occupancy rule, and the repeat-use math upfront, nothing on the closing disclosure catches you off guard. An AmeriSave loan officer can walk through these specifics with you early, while you still have time to plan around them.
Most of what determines whether you use this benefit well is in your control. A few moves, and they're all things you can handle before you ever sign.
Confirm your eligibility and exemption status first. Your Certificate of Eligibility is what tells the lender you qualify, and it's also where any funding-fee exemption shows up. Pulling it early matters for two reasons. It keeps your timeline clean, and it makes sure you don't pay a fee you didn't owe. If a disability rating is in progress, raise it before closing so you can seek a refund if the effective date turns out to be retroactive.
Decide how you'll handle the fee. If you have the cash and want the smallest loan balance, pay the funding fee at closing. If you'd rather keep cash on hand, roll it into the loan and accept a slightly higher balance. There's no single right answer. It's a cash-versus-balance choice that depends on what else you need your money for.
Consider a down payment even though you don't need one. This one surprises people. You can put zero down on a VA loan, but putting 5% or 10% down lowers your funding fee, shrinks your loan balance, and lowers your monthly payment. If you've got the funds and you're a repeat user staring at that 3.3% fee, a down payment can be the better play.
Shop the lender, not just the rate. When you're comparing offers, get comfortable with three things: the person you're working with, the loan they're putting in front of you, and the reputation of the company behind it. If any of those three doesn't sit right, that's your signal to keep looking. A good loan officer will ask about your situation before pitching you a product, and will give you more than one way to structure the loan. AmeriSave's VA loan team can pull your Certificate of Eligibility, confirm whether the funding fee applies to you, and show you the payment with a down payment and without, so you can pick the path you're most comfortable with.
The no-PMI benefit is one of the clearest advantages the VA loan offers, and it's easy to undervalue because you notice it by what isn't there. There's no monthly mortgage-insurance line on the payment. That's it, and that's a lot.
The trade is a one-time funding fee, which many veterans don't pay at all and which a down payment can shrink for everyone else. So when you compare a VA loan to a conventional or FHA option, don't stop at the interest rate. Add up the whole monthly payment, look at how long any mortgage insurance would stick around, and factor in whether you're exempt from the fee.
Two decisions are yours to make well: whether to put money down, and how to handle the funding fee. Get those right, talk to a VA-experienced loan officer who'll walk your numbers with you, and the benefit does exactly what it's supposed to do.
Carl leads sales operations at AmeriSave, where he has served since August 2015. He holds a BBA in Business Administration & Management from the University of Kentucky and previously served as Director of Sales at Discover Financial Services. Based in Louisville, KY with his family, Carl brings a practical, solution-focused approach to mortgage sales that emphasizes transparency and reducing buyer anxiety.
No. A VA loan never carries private mortgage insurance, even with no down payment. PMI is something conventional lenders require when you put down less than 20%, and it adds a monthly charge that protects the lender. A VA loan skips it entirely.
The reason is the VA guaranty. The VA guarantees up to a quarter of the loan to the lender, which does the same job PMI does on a conventional loan, so no separate insurance is needed. In place of monthly insurance, most VA purchase borrowers pay a one-time funding fee, which runs from 1.25% to 3.3% of the loan amount depending on your down payment and whether you've used the benefit before. Many borrowers pay no fee at all because of a disability exemption. The result is a low-down-payment loan with no recurring mortgage-insurance cost, which is one of the biggest reasons eligible buyers choose a VA loan over other options.
For a purchase, the VA funding fee ranges from 1.25% to 3.3% of the loan amount. First-time users with nothing down pay 2.15%, and repeat users with nothing down pay 3.3%.
A down payment lowers it for everyone. Put down 5% or more and the fee drops to 1.5%. Put down 10% or more and it drops to 1.25%, whether it's your first VA loan or not.
On a $300,000 first-time purchase with no down payment, the fee is 2.15% of $300,000, or $6,450, paid once. Put 10% down and the same purchase's fee falls to 1.25%, which is about $3,375 on the $270,000 financed. You can pay either amount at closing or roll it into the loan and finance it over time.
Several groups owe no funding fee. The main ones are veterans receiving VA compensation for a service-connected disability, those eligible for that compensation who receive retirement or active-duty pay instead, surviving spouses receiving Dependency and Indemnity Compensation, service members with a pre-discharge memorandum rating before closing, and active-duty members who show evidence of a Purple Heart on or before closing.
Exemptions aren't a fringe case. In recent years, more than half of the people who took out a VA-guaranteed home loan owed no funding fee at all. Your exemption status appears on your Certificate of Eligibility, which the lender pulls directly from the VA. One timing point matters: if a service-connected disability rating is granted after you close but is effective retroactively to before your closing date, you may be owed a refund of the fee you paid. That refund isn't always issued automatically, so it's worth following up with your lender and the VA if your rating changes.
Often, yes, mainly because of how long the insurance lasts. An FHA loan charges an upfront mortgage insurance premium of 1.75% of the loan amount plus a monthly premium, and with less than 10% down that monthly premium lasts the life of the loan. A VA loan has no monthly mortgage insurance at all.
The duration is the real difference. On an FHA loan with a small down payment, the only way to drop the monthly premium is usually to refinance into a different loan once you have enough equity. A VA borrower never has that monthly cost and pays only the one-time funding fee, which many are exempt from. That said, cheaper depends on the full picture, including your interest rate, your credit, and the funding fee tier you fall into. The cleanest way to compare is to look at the total monthly payment on each option, and how many years any mortgage insurance would stay on it, rather than comparing the rate alone.
Sometimes. The funding fee isn't cancelable the way conventional PMI is, because it's a one-time charge rather than a monthly one. But you can be refunded the fee you paid in specific situations.
The most common one is a service-connected disability rating that's granted after closing but is effective retroactively to a date before you closed. In that case you were technically exempt at closing, so the fee can be returned.
Say you paid a 2.15% fee on a $300,000 loan, which is $6,450, then a disability rating came through six months later with an effective date before your closing. You'd generally be eligible to recover that $6,450. The refund isn't automatic, though. You'd need to contact your lender or the VA with the documentation to start the process, so it pays to follow up rather than wait.
Suppose you're not eligible for a VA loan, but you want to avoid the monthly mortgage-insurance charge that comes with a low down payment.
You have a few paths. The most direct is to put 20% or more down on a conventional loan, which means no PMI from the start. If you can't reach 20%, a conventional loan still beats an FHA loan on insurance duration in most cases, because conventional PMI comes off: you can request cancellation at 80% of the home's original value, and it terminates automatically at 78% as long as you're current. An FHA loan with less than 10% down keeps its monthly premium for the life of the loan, so you'd typically refinance to shed it. So if the no-PMI structure of a VA loan is what appeals to you and you can't use one, a 20%-down conventional loan is the closest equivalent, and a conventional loan with PMI you can cancel is the next best thing.
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