Mortgage Insurance
If you’re looking at mortgages that don’t require a 20% down payment, you’ll usually need to pay mortgage insurance. It protects the lender and lowers their risk—but it also raises the overall cost of your loan.
The good news: a low down payment doesn’t lock you into just one type of mortgage. Here’s how mortgage insurance works across the main loan programs.
Conventional loans
These aren’t backed by a government agency (like FHA or VA). If you put down less than 20%, you’ll almost always pay private mortgage insurance (PMI). The cost depends on your down-payment size and credit score, and it’s typically paid monthly. Once you’ve paid the loan down to a certain percentage of the home’s value (usually 20% equity), you can request to cancel PMI—or it may drop automatically at 78%.
FHA loans
Federal Housing Administration loans also require mortgage insurance, called MIP. It’s not based on your credit score, but the monthly portion can be slightly higher if your down payment is under 5%. FHA loans charge two premiums:
An upfront premium paid at closing (you can often roll it into the loan balance).
A monthly premium added to your regular payment.
Rolling the upfront premium into the loan increases your overall balance and monthly costs.
VA loans
If you’re an eligible veteran, active-duty service member, or qualifying spouse, a VA loan is often the strongest option. These loans don’t require monthly mortgage insurance. Instead, most borrowers pay a one-time funding fee at closing. The fee amount depends on your service history, whether you’ve used the benefit before, and how much you put down. Many borrowers finance the fee into the loan.
Want to see which option fits your situation?
Reach out for a quick, no-obligation conversation. I can walk you through the numbers for conventional, FHA, and VA loans based on your down-payment amount, credit profile, and goals.
