According to Duane Buziak, private mortgage insurance (PMI) is one of the most negotiable-feeling and least-understood costs in a home purchase. PMI is the monthly premium a conventional lender requires when your loan-to-value ratio (LTV) is above 80%, meaning you borrowed more than 80% of the home’s value. Under the Fannie Mae Selling Guide, that is the line where mortgage insurance or an acceptable substitute becomes required on most conventional loans.
Skipping PMI is a trade, not a freebie. You usually pay for it somewhere else: more cash upfront, a higher rate, a second loan, or a funding fee. The seven strategies below show where the cost moves, so you can compare the total over the years you will actually hold the loan. At Mortgage Rate Hawk, the approach is simple: we don’t just look, we hunt. Watch. Compare. Save.
1. Put 20% down and keep your reserves intact
At 80% LTV or lower, conventional PMI is not required. The mechanism is simple: the lender’s risk drops, so the insurance that protects it from default is no longer needed. The catch is that 20% is a large number, and every dollar you move into the down payment is a dollar that is no longer a cushion.
Suppose, as an illustration, you are buying a $400,000 home in Virginia. Twenty percent down is $80,000. Ten percent down is $40,000 plus a PMI premium added to every monthly payment. The worked example later in this article puts real figures on that gap.
- Price the home and multiply by 0.80 to find your maximum loan at 80% LTV.
- Subtract that loan from the price to get the down payment target.
- Divide the target by what you can save monthly to build a timeline.
- Ask for quotes at 20% down and at 10% down, then compare the monthly payments and the cash left over.
The most common mistake is draining savings to reach 20% and closing with no emergency fund and no buffer for closing costs. A buyer who is short on cash after closing is exposed to the first roof repair or job gap. Duane Buziak teaches clients to treat reserves as part of the price of the house.
What to measure: the monthly payment difference between the two down payment levels, and the months of reserves remaining after closing. If 20% down leaves you with less than a few months of expenses, the PMI may be the cheaper risk.
2. Piggyback (80-10-10) loan: split the financing
A piggyback loan uses a first mortgage at 80% LTV, a second lien for 10%, and a 10% down payment. Because the first loan sits at 80%, it needs no PMI. You are swapping an insurance premium for interest on a second loan, so the question is which costs less.
Imagine a $450,000 purchase in Georgia: a $360,000 first mortgage, a $45,000 second, and $45,000 down. You would compare that blended payment with a single $405,000 loan at 90% LTV plus PMI.
The pitfall is the second lien itself. Second mortgages often carry higher rates than first mortgages, and some are variable-rate or carry a balloon payment. A rate that adjusts upward can erase the PMI savings, and a balloon can force a refinance at a moment you did not choose.
- Ask for quotes on both structures at the same price and down payment.
- Confirm the second lien’s rate type, term, and any balloon or draw period.
- Compare total monthly cost and total interest over the years you expect to keep the loans.
What to measure: the blended monthly payment and the cumulative cost at 5 years and at 10 years, against the PMI loan. Note that the second lien’s interest is not a PMI-style cost that disappears on its own; you will need to pay it off or refinance it. Check your options early, because second-lien availability and pricing shift with the market.
3. VA loan: Duane Buziak’s route for no monthly mortgage insurance
Eligible veterans and service members can buy with no down payment and no monthly mortgage insurance. In place of PMI, the VA charges a one-time funding fee, which can usually be financed into the loan. The fee is waived for borrowers who receive VA disability compensation and certain others, so it is worth confirming your status rather than assuming. The current fee table is on VA.gov.
Start with your Certificate of Eligibility. Your loan officer can pull it electronically using your Social Security number and date of birth, so you do not have to wait on paperwork. Then check your entitlement. If you have used part of it before, bonus (second-tier) entitlement may apply:
- Take the county loan limit and multiply it by 25% to get the maximum guarantee.
- Subtract the entitlement you have already used.
- Multiply the remaining entitlement by 4 to see your zero-down purchase limit.
As a labelled illustration, a $500,000 county limit gives a $125,000 maximum guarantee. With $40,000 already used, $85,000 remains, and 4 times that is $340,000 you can buy with zero down.
Consider an eligible Florida buyer purchasing at $380,000. The comparison is the financed funding fee against PMI on a conventional loan with a small down payment. The mistake to avoid is treating VA as cost-free or missing a disability-based exemption that would remove the fee entirely.
What to measure: the total monthly payment including the financed fee versus the conventional payment with PMI, plus the cash you need at closing in each case.
4. Lender-paid mortgage insurance (LPMI)
With LPMI, the lender buys the mortgage insurance and recovers the cost through a higher interest rate. You see no separate PMI line on your payment. The trade is that the higher rate is baked into the loan, so unlike borrower-paid PMI it does not fall away when your balance reaches 80% of the original value.
That permanence is why the break-even matters more than the monthly savings. As a labelled illustration, take a $360,000 loan at 6.50% with PMI of $180 a month, which is $2,455 in total. An LPMI version at 6.875% costs about $2,365, saving roughly $90 a month. Now assume the borrower-paid PMI would have been cancelled at month 84. After that, the LPMI loan costs about $90 more each month than the PMI loan. Setting the early savings against the later extra cost puts the break-even near month 169, about 14 years. This is simplified and ignores small principal differences.
The common mistake is picking LPMI because the payment looks lower today without asking how long you will keep the loan. If you plan to move or refinance within a handful of years, LPMI can win. If you will hold for decades, the permanent rate usually costs more.
- Get both quotes at the same loan amount, lock period, and credit profile.
- Calculate the monthly difference.
- Estimate when PMI would realistically cancel and find the break-even.
- Note that only a refinance removes the higher rate.
What to measure: the break-even month and the total cost across your realistic time in the home.
5. Raise your credit score before you lock
PMI is priced in tiers that depend heavily on your credit score and LTV, and your rate moves with your score too. A jump into a higher tier can lower the premium on every payment for as long as the insurance is in place. Credit is the one lever that helps almost every strategy on this list.
Suppose a borrower is carrying card balances near their limits. They pay the cards down to cut utilization, wait for the new balances to report, and move up a score tier. In this illustration, a PMI quote that was $215 a month comes back at $165 on the same loan. The figures are hypothetical, but the direction is what you are hunting for.
- Pull your free reports at CFPB.gov-recommended sources and dispute errors.
- Pay down revolving balances, starting with the highest utilization.
- Avoid new credit applications while you shop.
- Run a free no-touch credit check with Mortgage Rate Hawk by Duane Buziak, which does not ding your score.
- Re-quote after the new balances report.
The classic mistake is opening a new account for furniture or closing an old card to tidy up. Both can lower the score at the worst time. Keep accounts open and steady until closing.
What to measure: your score and the quoted PMI premium or rate before and after the changes. If a few months of cleanup saves more than the cost of waiting, you have your answer.
6. Low-down-payment conventional and assistance programs
Some conventional programs, including Fannie Mae’s HomeReady and Freddie Mac’s Home Possible, allow as little as 3% down and carry reduced mortgage insurance coverage requirements. Less required coverage can mean a smaller premium than a standard low-down conventional loan. Both have income limits and eligibility rules that change, so check the current terms at FannieMae.com and FreddieMac.com for 2026.
State housing finance agencies add another layer. Imagine a first-time buyer in North Carolina who pairs a 3% conventional loan with eligible down payment assistance, cutting the cash needed to close. The next step is comparing that against an FHA loan. FHA does not use PMI; it charges mortgage insurance premiums (MIP) that, per HUD, can last the life of the loan when you put down less than 10%. That duration difference can swing the long-term cost.
The mistake is treating assistance as free money. Some programs are forgivable over time, some are repayable on sale or refinance, and some carry resale restrictions. Read the terms before you rely on them.
- Check income and eligibility limits for each program.
- Read repayment, forgiveness, and resale terms for any assistance.
- Get conventional and FHA quotes side by side.
What to measure: cash to close and the full monthly payment, mortgage insurance included, across each program, plus how long the insurance stays on the loan.
7. Plan to cancel or refinance out of PMI
Borrower-paid PMI on a conventional loan is not permanent, which is the most overlooked fact in this whole topic. Under the Homeowners Protection Act (HPA), explained by the CFPB, you can request cancellation when your balance reaches 80% of the home’s original value, provided your payment history is good. Termination happens automatically at 78% on the original schedule. Asking at 80% rather than waiting can save months of premiums.
Imagine a borrower with a $360,000 loan on a $400,000 purchase. Their 80% target is a $320,000 balance. By adding modest extra principal each month, they reach that mark sooner, then send a written cancellation request with their payment history.
- Ask your servicer for its exact cancellation requirements.
- Track your balance against 80% of original value.
- Decide whether extra principal makes sense for your budget.
- Consider a refinance only if the savings clearly exceed the closing costs.
Two mistakes cost people money here: waiting passively for the 78% automatic drop-off, and refinancing without a break-even calculation. As a labelled example, $6,000 in refinance costs against $180 in monthly savings takes about 33 months to recover.
What to measure: your current LTV, the months remaining to 80%, and the monthly savings compared with the refinance costs.
Duane Buziak’s side-by-side comparison of the five main PMI-avoidance structures
| Option | Typical down payment | How mortgage insurance is handled | Main trade-off | Can the cost be removed later? |
|---|---|---|---|---|
| 20% down conventional | 20% of price | No PMI required at 80% LTV or lower | Most cash upfront, thinner reserves | Nothing to remove |
| Piggyback (80-10-10) | 10% | First loan at 80% LTV avoids PMI; second lien carries interest | Second-lien rate may be higher, variable, or balloon | Pay off or refinance the second lien |
| VA loan | 0% for eligible borrowers | No monthly mortgage insurance; one-time funding fee unless exempt | Funding fee, usually financed | Fee is one-time, no monthly premium to cancel |
| Lender-paid MI (LPMI) | Often 5% to 10% | No separate premium; cost sits in a higher rate | Higher rate for the life of the loan | Only by refinancing |
| Low-down conventional (HomeReady, Home Possible) | As little as 3% | PMI applies, with reduced coverage requirements | Income limits and program rules | Yes, via HPA request at 80% or automatic termination |
Rates, fees, and program terms move, so treat the table as a framework and confirm current figures with a live quote.
A worked example across Virginia, Georgia, and Florida
These figures use one illustrative 30-year fixed rate of 6.50% for principal and interest, with PMI amounts assumed for the example only. They are not quotes. Actual rates, APR, and PMI premiums depend on your credit, loan size, and market conditions on the day you lock. Taxes and homeowners insurance are excluded.
- Virginia, $400,000 home: At 20% down ($80,000), the $320,000 loan has a principal and interest payment of about $2,023. At 10% down ($40,000), the $360,000 loan is about $2,275, plus an assumed PMI of 0.60% a year ($180 a month), for about $2,455. Putting the extra $40,000 down saves roughly $433 a month.
- Georgia, $450,000 home: A single $405,000 loan at 90% LTV is about $2,560 plus assumed PMI of $203, or about $2,762. The piggyback uses a $360,000 first at 6.50% (about $2,275) and a $45,000 second at an assumed 8.50% over 20 years (about $391), for a blended $2,666. That is roughly $96 a month lower, but only while the second lien stays at the assumed rate.
- Florida, $380,000 home: An eligible VA buyer with no down payment and a 2.15% funding fee (the as-of-2026 first-use rate listed on VA.gov, so confirm the table) finances $388,170, for about $2,454 a month with no monthly mortgage insurance. A conventional loan with 5% down, a $361,000 loan, and assumed PMI of 0.90% a year comes to about $2,553. The VA path is about $99 a month lower and needs about $19,000 less cash upfront.
For reference, FHFA sets the conforming loan limits that determine which loans these structures apply to.
Ten PMI questions Duane Buziak hears most
How can I avoid paying PMI with less than 20% down?
You can avoid PMI with less than 20% down by using a VA loan, a piggyback loan, or lender-paid mortgage insurance. Each moves the cost into a funding fee, a second lien, or a higher rate, so compare the total cost.
Is 20% down the only way to avoid PMI?
No, 20% down is only the most direct way. VA loans, piggyback structures, and LPMI all avoid a separate monthly PMI premium at lower down payments.
Is lender-paid mortgage insurance really free?
No, LPMI is paid through a higher interest rate. That rate usually stays for the life of the loan unless you refinance.
Do VA and FHA loans have PMI?
Neither uses PMI. VA charges a one-time funding fee instead of monthly insurance, and FHA charges mortgage insurance premiums that, per HUD, may last the life of the loan when you put down less than 10%.
Is PMI permanent?
No, borrower-paid PMI on a conventional loan can be removed. You can request cancellation at 80% of the original value, and it ends automatically at 78% on the original schedule under the CFPB-explained Homeowners Protection Act.
What is a piggyback loan?
A piggyback loan is a second mortgage used alongside a first mortgage at 80% LTV so the first loan needs no PMI. A common version is 80-10-10: an 80% first, a 10% second, and 10% down.
Does my credit score affect PMI?
Yes, your credit score affects PMI pricing because premiums are set in tiers. Moving up a tier before you lock can lower the monthly premium.
What is the VA funding fee?
The VA funding fee is a one-time charge on VA loans that can usually be financed. Borrowers receiving VA disability compensation and certain others are exempt, so confirm your status on VA.gov.
How do I get my VA Certificate of Eligibility?
Your loan officer can usually pull your Certificate of Eligibility electronically using your Social Security number and date of birth. You can also request it through VA.gov.
Should I refinance just to remove PMI?
Only if the monthly savings pay back the closing costs within a period you will actually stay in the home. Calculate the break-even first, and check whether a cancellation request would remove PMI for free.
Start with your own numbers
PMI avoidance comes down to arithmetic on your price, your credit, and your timeline. Begin with the two tests that move the most money: tune up your credit score before you lock, then run the LPMI and piggyback break-even comparisons against a standard PMI loan. If you may be eligible for a VA loan, add that to the same comparison. Those three checks will show you quickly whether a lower down payment is costing you or saving you.
Call Duane Buziak at Mortgage Rate Hawk by Duane Buziak on 804-212-8663 for a same-day side-by-side based on your actual numbers.
Your dream home is waiting, don’t let the mortgage process hold you back. Get your free rate comparison and personalized loan match today, with same-day expert guidance to help you find the right path forward, whether you’re a first-time buyer or ready to refinance.
