Lending
Mortgage Insurance, Loan by Loan
How PMI, FHA MIP, the VA funding fee and the USDA loan fees work, and when PMI can end.
Talk to Maggie directly: cell (916) 549-3131 (text or call) · maggie@loveyoursurroundings.coMaggie B. Hopkins, NMLS #349517 · Surroundings NMLS #2528307
What is mortgage insurance, and who does it protect?
Mortgage insurance protects the lender if a borrower stops paying. It does not protect you. The CFPB is clear on this on its PMI page (last reviewed August 28, 2023). You can still lose the home to foreclosure if you fall behind.
So why would you want it? It lets you buy with less than 20% down. For many buyers that means owning years sooner. The CFPB notes it can help you qualify, and it raises the cost of the loan. Each loan type handles it differently, which is what this page walks through.
How does PMI work on a conventional loan?
Private mortgage insurance (PMI) is the kind used on conventional loans. The CFPB says you may need it when your down payment is under 20%, or when you refinance with less than 20% equity. Private companies provide it, and your lender arranges it.
The CFPB's PMI page lists three ways to pay it:
- Monthly. The most common. It's added to your mortgage payment.
- Upfront. One payment at closing. You may not get a refund if you move or refinance.
- Both. An upfront payment plus a smaller monthly one.
The CFPB's page on mortgage insurance (last reviewed August 28, 2026) says PMI pricing depends on your down payment and credit score. Ask each lender to quote the PMI too, not only the rate.
When can you get rid of PMI?
A federal law, the Homeowners Protection Act, sets the rules for most loans. The CFPB's examination guide says it took effect July 29, 1999. The CFPB's page on removing PMI (last reviewed August 28, 2026) explains how it works for single-family homes you live in, closed on or after that date:
- You can ask at 80%. Once your balance reaches 80% of the home's original value, you can request cancellation in writing. Extra payments can get you there sooner. You need a good payment history and must be current. You must certify there are no other liens, such as a second mortgage. The servicer may ask you to show the value hasn't dropped, usually with an appraisal.
- It ends on its own at 78%. PMI should end automatically when your scheduled balance reaches 78% of the original value, if you're current.
- It ends at the midpoint. If neither has happened, PMI must end the month after the halfway point of your loan's schedule, such as year 15 of a 30-year loan, if you're current.
The CFPB notes that Fannie Mae and Freddie Mac rules can allow earlier cancellation, as long as they are no less favorable to you. Ask your servicer what its rules are, what it counts as the original value and what it needs from you.
How does FHA mortgage insurance work, and how long does it last?
Every FHA loan carries a mortgage insurance premium (MIP), paid to the FHA. The CFPB's mortgage insurance page (last reviewed August 28, 2026) explains there are two parts. An upfront premium is paid at closing or added to the loan. An annual premium is split into your monthly payment. The CFPB adds that the cost doesn't depend on your credit score.
How long the annual premium lasts depends on your starting loan-to-value. HUD's Mortgagee Letter 2023-05 (February 22, 2023) lays it out:
- 90% or less at the start (10% or more down): the annual premium lasts 11 years.
- More than 90% at the start: it lasts for the full mortgage term.
FHA MIP does not follow the PMI rules above. If you have an FHA loan with MIP for the full term, the usual way to remove it is to refinance into a different loan, such as conventional, once your equity and credit allow. Ask us to run that math. See our refinance page.
Does a VA loan have mortgage insurance?
No. The VA guarantee takes the place of mortgage insurance, so there is no monthly premium. The CFPB says so on its mortgage insurance page (last reviewed August 28, 2026). Instead, most borrowers pay a one-time VA funding fee.
VA.gov explains the fee on its funding fee page (last updated October 5, 2026). You can pay it at closing or finance it into the loan. The amount depends on the loan type, the loan amount, whether it's your first VA loan and, for some loans, your down payment.
Some borrowers don't pay it at all. VA.gov lists who is exempt, including those receiving VA disability compensation. Surviving spouses receiving Dependency and Indemnity Compensation are exempt too. So are active-duty service members who show proof of a Purple Heart by closing. More on our VA loan page.
What is the USDA guarantee fee?
USDA loans charge a guarantee fee instead of PMI. The CFPB's mortgage insurance page (last reviewed August 28, 2026) describes two parts. An upfront amount is paid at closing and can be rolled into the loan. A monthly amount is part of your payment. The CFPB says it is similar to FHA but typically cheaper.
USDA reviews its fees from year to year. Ask the lender for the current upfront and annual fee in writing, and how long the annual fee lasts on your loan.
How do you compare loans that handle mortgage insurance differently?
Compare the full monthly payment and the full cash to close, not only the rate. A loan with a lower rate can cost more each month once insurance is added. Look at how long the insurance lasts too. Ask these questions:
- What is the monthly mortgage insurance, and what is the upfront amount?
- When does it end, and what do I need to do to end it?
- What would a bigger down payment do to the insurance cost?
- Over the years I expect to keep this loan, which option costs less in total?
Our mortgage calculator lets you test payments. The Loan Estimate guide shows where mortgage insurance appears on the form.
How do you start comparing your mortgage insurance options?
Fill out the loan options form or call Maggie's cell at (916) 549-3131. Maggie will lay out conventional, FHA, VA or USDA options that fit you. Each one shows the insurance cost, how long it lasts and the total over the years you plan to stay.
Frequently Asked Questions
When does PMI go away?
Under the Homeowners Protection Act, as the CFPB explains, you can request cancellation at 80% of the original value. It ends automatically at 78% if you're current, and no later than the month after your loan's midpoint.
Can I remove FHA mortgage insurance?
It depends on your start. Per HUD Mortgagee Letter 2023-05, annual MIP lasts 11 years if your loan-to-value started at 90% or less, and the full term if it started above 90%. Refinancing into another loan is the usual way out sooner.
Do VA loans have PMI?
No. VA loans have no monthly mortgage insurance. Most borrowers pay a one-time funding fee instead, and VA.gov lists exemptions, including for Veterans receiving VA disability compensation.
Who does mortgage insurance protect?
The lender. The CFPB says PMI protects the lender, not you, if you stop making payments.
Is it worth waiting to buy until I have 20% down?
Not always. Mortgage insurance adds cost, and waiting has costs too, such as rent and home prices in the meantime. We can show you both paths in dollars.
Talk to Maggie directly: cell (916) 549-3131 (text or call) · maggie@loveyoursurroundings.coMaggie B. Hopkins, NMLS #349517 · Surroundings NMLS #2528307
Loans are arranged through Maggie B. Hopkins, NMLS #349517 · Surroundings NMLS #2528307. This is not a commitment to lend. All loans subject to credit approval and property qualification. Equal Housing Lender.
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