You cannot avoid PMI if you put down less than 20 percent, but you have real alternatives to a traditional mortgage

Private mortgage insurance (PMI) is a fee lenders charge when you borrow more than 80 percent of a home's value. If you have no down payment, a standard loan will require PMI—there is no way around it on a conventional mortgage. But you do have other paths: VA loans, USDA loans, and state-specific first-time buyer programs that let you buy with zero down and no PMI at all.

The catch is that each path has strict requirements. VA loans are only for military members and veterans. USDA loans only work in rural areas and have income limits. State programs vary wildly by where you live. Understanding which one you actually may have access to for matters more than trying to dodge PMI on a loan you do not may have access to for in the first place.

Key Takeaways

  • VA loans and USDA loans both allow zero-down purchases with no PMI, but VA loans require military service and USDA loans require a rural property location and income under a set limit.
  • Conventional loans with less than 20 percent down always include PMI; there is no legitimate way to avoid it on that loan type.
  • State and local first-time buyer programs sometimes offer down payment help or PMI waivers, but availability and rules depend entirely on your state and income.
  • If you do not may have access to for VA, USDA, or a state program, your real choice is between paying PMI now or saving longer for a larger down payment.

VA loans: zero down, no PMI, if you have military service

A VA loan is backed by the Department of Veterans Affairs and requires no down payment and no PMI. You pay a one-time funding fee instead (usually 2.3 percent of the loan amount for first-time users), but that can be rolled into the loan itself. The interest rate is typically lower than a conventional loan, which often makes up for the funding fee.

You may have access to if you are a current active-duty service member, a veteran with an honorable discharge, a surviving spouse of a service member who died in service or from a service-connected disability, or a member of the National Guard or Reserves who meets specific service requirements. You will need a Certificate of may be able to access from the VA, which you can request online through VA.gov or through your lender.

VA loans have no income limits and no PMI, but they do have a funding fee that varies by service status and down payment size. The VA also limits how much a lender can charge you in closing costs. If you may have access to, this is the strongest path to buying with no money down.

USDA loans: zero down in rural areas, with income restrictions

A USDA loan is backed by the U.S. Department of Agriculture and allows zero-down purchases in rural areas with no PMI. Like VA loans, you pay a one-time may provide fee (usually 1 percent of the loan amount) that rolls into your loan balance. The interest rate is competitive with conventional loans.

The property must be in a USDA-designated rural area. You can check whether an address qualifies on the USDA Rural Development website by entering the zip code. Your household income must not exceed 115 percent of the area median income for your county (or 90 percent in some cases, depending on the program). A family of four in a rural county might have a limit of $90,000 to $110,000; limits vary by location and change yearly.

You do not need to be a first-time buyer, but you must occupy the home as your primary residence. If the property qualifies and your income is within the limit, USDA loans are a genuine zero-down, no-PMI option. The main barrier is the rural location requirement, which eliminates most urban and suburban areas.

State and local first-time buyer programs

Many states and cities run down payment assistance programs for first-time buyers. Some cover part or all of your down payment; others reduce or waive PMI. The programs, income limits, and property price caps vary dramatically by state. A program in one state might cover 5 percent down; another might cover 15 percent or offer a forgivable loan.

Start by searching "[your state] first-time homebuyer program" or contacting your state housing finance agency directly. Many states list programs on their housing authority website. Local nonprofits and community development organizations also run down payment assistance programs; you can find these through the National Council of State Housing Agencies or by calling your city or county housing office.

Some programs require you to take a homebuyer education course before you apply. Others have income limits, price caps on the home, or restrictions on which lenders you can use. A few offer grants (money you do not repay); others offer second mortgages or forgivable loans (you owe the money only if you sell or refinance within a set time). Read the fine print carefully, because the terms change the real cost of the loan.

Why PMI exists and what it actually costs

PMI protects the lender, not you. If you stop paying and the lender forecloses, PMI covers the difference between what they recover from selling the home and what you still owe. Because that risk is real when you put down less than 20 percent, lenders charge PMI to offset it.

On a conventional loan, PMI typically runs 0.5 to 1.5 percent of the loan amount per year, depending on your credit score, the size of your down payment, and the lender. On a $300,000 home with 3 percent down ($9,000), you might pay $150 to $450 per month in PMI. You can remove PMI once you reach 20 percent equity, but that takes years of payments and home appreciation.

This is why VA and USDA loans are valuable: they skip PMI entirely. The funding fee or may provide fee is a one-time cost, not an ongoing monthly charge. Over the life of a 30-year loan, that difference adds up to tens of thousands of dollars.

When a larger down payment makes more sense than PMI

If you do not may have access to for VA, USDA, or a state program, you have two real choices: buy now with PMI, or wait and save for a larger down payment. The math depends on your situation.

If you can save 20 percent down in one to two years, waiting often makes sense. You avoid PMI entirely and build equity faster from day one. If saving 20 percent would take five years or more, buying now with PMI and removing it later may be the better move—you build equity immediately, and you stop paying PMI once you hit 20 percent equity through a combination of payments and home appreciation.

Some buyers also use a strategy called "piggyback financing": they take out a first mortgage for 80 percent and a second mortgage (often called a home equity line of credit) for 10 to 15 percent, putting down 5 to 10 percent in cash. This avoids PMI but saddles you with two monthly payments and two sets of closing costs. It is worth exploring only if PMI would cost significantly more than the second mortgage.

How to move forward if you have no down payment

Start by determining which programs you actually may have access to for. If you have military service, contact a VA-approved lender and request your Certificate of may be able to access. If you live in a rural area, check the USDA Rural Development website to see if your property qualifies and calculate your income limit. If neither applies, search for state and local first-time buyer programs in your area.

Once you know which loans you can use, get preapproved by a lender who specializes in that loan type. A VA lender knows VA loans inside out; a USDA lender knows USDA loans. Preapproval tells you the maximum you can borrow and locks in an interest rate for a set period (usually 45 to 120 days). It also signals to sellers that you are a serious buyer.

If you do not may have access to for any of these programs, talk to a mortgage broker or lender about conventional loans with PMI. Understand the exact monthly cost, when you can remove it, and whether waiting to save more makes financial sense for your situation. Do not assume PMI is permanent—it is not—but do not ignore its cost either.

Frequently Asked Questions

Can I use a VA loan or USDA loan if I have bad credit?

Both programs have credit score requirements, but they are typically more flexible than conventional loans. VA loans usually require a score of 580 or higher; USDA loans often accept 580 to 640. If your score is lower, you may need to wait and rebuild credit before applying. Ask a lender what score they require, because it varies by lender.

What if my property is in a rural area but does not may have access to for USDA?

USDA has specific rural designations that change over time. A property that looks rural may not may have access to because it is too close to an urban center or falls outside the program's service area. Check the USDA Rural Development website with the exact address. If it does not may have access to, explore state programs or conventional loans with PMI.

Can I remove PMI early if my home value goes up?

Yes, but the process varies. You can request PMI removal once you reach 20 percent equity through a combination of payments and home appreciation. Some lenders allow you to remove it at that point; others require you to refinance. Ask your lender about their PMI removal policy before you sign the loan.

Do I have to be a first-time buyer to use a state down payment program?

Most state programs are limited to first-time buyers, but definitions vary. Some count you as a first-time buyer if you have not owned a home in the past three years. Others have no prior ownership requirement at all. Check your state's specific program rules.

What happens if I get a VA or USDA loan and then sell the home?

You can sell anytime. If you used a VA loan, your VA entitlement is restored once the loan is paid off, and you can use it again for another home. If you used a USDA loan, there are no restrictions on selling. The loan simply transfers to the new owner or is paid off from the sale proceeds.