How to Avoid PMI When Buying a House

Quick answer: The most direct way to avoid PMI is to put 20% down on a conventional loan. Other options include piggyback loans (80/10/10), VA loans (no PMI), USDA loans (guarantee fee instead of PMI), and lender-paid PMI (LPMI) in exchange for a higher interest rate.

PMI typically costs 0.5% to 1.5% of your loan amount per year. On a $300,000 loan, that is $1,500 to $4,500 annually — or $125 to $375 per month.

Put 20% Down

A 20% down payment is the standard way to skip PMI on a conventional loan. Lenders require PMI when you put less than 20% down because you have less equity to protect them if you default.

Dollar example on a $350,000 home:

Item	Amount
Home price	$350,000
20% down payment	$70,000
Loan amount	$280,000
PMI required?	No

Compare that to 10% down ($35,000) on the same $350,000 home:

• Loan: $315,000
• PMI at 0.8% annually: $2,520/year ($210/month)
• Over 5 years before reaching 80% LTV: roughly $12,600 in PMI

The tradeoff: you need $35,000 more cash at closing to avoid PMI with 20% down.

Use a Piggyback Loan

A piggyback loan — often called 80/10/10 — splits your financing into two loans plus a down payment:

• First mortgage: 80% of the purchase price
• Second mortgage (HELOC or fixed second): 10%
• Down payment: 10%

Example on a $350,000 home:

Component	Amount
First mortgage (80%)	$280,000
Second mortgage (10%)	$35,000
Down payment (10%)	$35,000
PMI required?	No (first loan is at 80% LTV)

Pros: Avoid PMI with only 10% down. Keep more cash for closing costs or reserves.

Cons: The second loan usually carries a higher rate — often 8% to 12% depending on credit. Two monthly payments instead of one. Second liens can complicate refinancing later.

Run the math: if PMI costs $210/month but your second loan payment is $280/month on $35,000, the piggyback may cost more than PMI.

Piggyback loans work best when the second mortgage rate stays below 9% and you plan to pay off the second loan within 5 to 10 years. Ask your lender for a side-by-side comparison before choosing this structure.

Choose a VA Loan

VA loans have no PMI — ever. Instead, most borrowers pay a VA funding fee at closing or finance it into the loan.

2025 VA funding fee rates (purchase loans):

Down payment	First-time use	Subsequent use
Less than 5%	2.15%	3.30%
5% to 9.99%	1.50%	1.50%
10% or more	1.25%	1.25%

Example: $300,000 loan, first-time use, 0% down → funding fee 2.15% = $6,450 (one-time, often financed).

Who qualifies: Active-duty service members, veterans with qualifying service, National Guard and Reserve members, and eligible surviving spouses.

Exempt from funding fee: Veterans with a service-connected disability rating, Purple Heart recipients, and certain surviving spouses.

See our full comparison in Do VA and USDA Loans Have PMI?.

Choose a USDA Loan

USDA guaranteed loans have no PMI. They use a guarantee fee instead:

• Upfront guarantee fee: 1% of the loan amount
• Annual guarantee fee: 0.35% of the unpaid balance (paid monthly)

Example on a $250,000 USDA loan:

Fee	Amount
Upfront (1%)	$2,500 (often financed)
Annual (0.35%)	$875/year ($73/month)

Who qualifies: Low-to-moderate income buyers purchasing in USDA-eligible rural and suburban areas. 0% down is allowed for eligible borrowers.

USDA monthly guarantee fees are often lower than conventional PMI. On the same $250,000 loan, PMI at 0.8% costs $167/month — more than double the USDA $73/month annual fee.

Consider Lender-Paid PMI (LPMI)

With LPMI, the lender pays your PMI premium in exchange for a higher interest rate — typically 0.25% to 0.75% above the standard rate.

Tradeoff example on a $300,000 loan:

Option	Rate	Monthly P&I	PMI/LPMI cost
Borrower-paid PMI	6.75%	$1,946	+ $180/month PMI
Lender-paid PMI	7.25%	$2,047	$0 separate PMI

LPMI adds about $101/month to principal and interest. Borrower-paid PMI adds $180/month. LPMI saves $79/month in this example — but you pay the higher rate until you refinance or sell.

When LPMI makes sense: You plan to sell or refinance within 5 to 7 years, or you want lower upfront monthly costs without 20% down.

How Much Down Payment Do You Need to Avoid PMI?

Answer: 20% on a conventional loan.

Down payment	PMI on $350,000 home (10% down loan)	Monthly PMI at 0.8%
10% ($35,000)	Required	$210/month
15% ($52,500)	Required	$157/month
20% ($70,000)	Not required	$0

PMI rates range from 0.5% to 1.5% of the loan amount annually, depending on credit score, down payment, and loan type. Higher credit scores get lower PMI rates.

If you cannot reach 20% down, compare piggyback loans, VA/USDA eligibility, and LPMI against standard PMI costs. See how to cancel PMI once you build equity. Read what is PMI in real estate for a full cost breakdown.

Frequently Asked Questions

How do I avoid PMI?

Put 20% down on a conventional loan, use a piggyback 80/10/10 structure, choose a VA or USDA loan, or select lender-paid PMI with a higher rate.

What is the minimum down payment to avoid PMI?

20% on a conventional loan. Government loans (VA, USDA) do not use PMI but have their own fees.

Can I avoid PMI with less than 20% down?

Yes — through piggyback loans, VA loans, USDA loans, or LPMI. Each option has different costs and eligibility rules.

What is a piggyback loan?

An 80/10/10 structure: 80% first mortgage, 10% second loan, 10% down. The first loan stays at 80% LTV, so PMI is not required.

Is lender-paid PMI worth it?

It can be if the rate increase costs less than monthly PMI over your expected time in the home. Compare total costs over 5 years before deciding.

Ready to compare mortgage options? Get a free quote through LendingTree to see rates with and without PMI.