A $400,000 home purchase can make the difference plain: a qualified VA borrower may finance the home with zero down and no monthly PMI, while a conventional buyer putting less than 20% down may carry a separate mortgage insurance charge. So, is PMI required on VA loans? No. VA-backed mortgages do not require private mortgage insurance, even when an eligible borrower finances 100% of the purchase price.
That does not mean a VA loan has no upfront cost or no qualification standards. Most borrowers who use their VA home loan benefit pay a one-time VA funding fee unless they qualify for an exemption. The smart comparison is not simply “no PMI versus PMI.” It is total cash needed, total payment, pricing, eligibility, and how long you expect to keep the home.
By Duane Buziak, NMLS #1110647
Table of Contents
- Why VA loans do not require PMI
- VA funding fee versus monthly mortgage insurance
- A worked VA loan payment example
- VA versus conventional and FHA financing
- When a VA loan may not be the best fit
- Eight common questions
Why is PMI required on VA loans? It isn’t.
Private mortgage insurance, commonly called PMI, is generally associated with conventional financing when a borrower puts down less than 20%. It helps protect the party funding the mortgage if the borrower defaults. VA-backed financing operates differently because the federal VA guaranty supports the program. That guaranty is why eligible borrowers can often buy with zero down without adding a monthly PMI charge.
For military families working around a PCS date, that structure can protect monthly cash flow. A buyer should still plan for homeowner’s insurance, property taxes, prepaid items, appraisal-related costs, and other closing expenses. Ask VA Loans Pro about no-out-of-pocket closing options rather than assuming every cost disappears.
The VA program also has occupancy requirements. It is designed for a primary residence, not a vacation home or a pure investment purchase. Your Certificate of Eligibility, service history, residual-income review, credit profile, and the property itself all remain part of the approval conversation.
The funding fee is not PMI
The VA funding fee is a one-time program charge, not monthly mortgage insurance. For a first-time VA purchase with zero down, the current standard funding fee is 2.15% of the base loan amount. A subsequent use with zero down is generally 3.3%. The percentage can change based on prior use, down payment, and transaction type.
Borrowers receiving VA disability compensation, and certain eligible surviving spouses, may be exempt from the funding fee. That exemption can materially change the numbers. Do not guess based on a disability rating alone – confirm your status before setting a purchase budget.
You can pay the funding fee in cash at closing or finance it into the loan balance when permitted. Financing it preserves cash, but it also means interest is paid on that fee over time. That is a trade-off worth seeing in dollars before you choose.
A worked VA payment example with real math
Assume an eligible first-time VA buyer purchases a home for $400,000 with zero down. The base loan is $400,000. At a 2.15% funding fee, the calculation is:
$400,000 × 0.0215 = $8,600 funding fee
If the borrower finances that fee, the starting loan amount becomes:
$400,000 + $8,600 = $408,600
Using an illustrative 30-year fixed rate of 6.25%, the principal-and-interest payment is approximately $2,515.34 per month. That figure excludes property taxes, homeowner’s insurance, any HOA dues, and any optional costs. Most importantly, it includes $0 monthly PMI.
If this borrower is exempt from the funding fee, the financed balance would remain $400,000. At the same illustrative 6.25% rate for 30 years, principal and interest would be approximately $2,462.87 per month. The exemption reduces the financed balance by $8,600 and cuts the illustrated payment by about $52.47 per month.
Rates, fees, and payments change with market conditions, credit, property type, loan structure, and lock timing. This example shows the math, not a rate quote.
VA loans compared with conventional and FHA
| Feature | VA Purchase Loan | Conventional Purchase Loan | FHA Purchase Loan |
|---|---|---|---|
| Minimum down payment | 0% for qualified eligible borrowers | Often 3% to 5%, depending on program and qualification | 3.5% for many qualified borrowers |
| Monthly mortgage insurance | No PMI | Usually required below 20% down | Annual mortgage insurance premium generally applies |
| Upfront program charge | VA funding fee, often financeable; exemptions may apply | No standard government funding fee | Upfront mortgage insurance premium generally applies |
| Interest-rate pricing | Often competitive; depends on borrower and market profile | Depends heavily on credit, down payment, and loan terms | Can be competitive, but mortgage insurance affects total cost |
| Primary residence requirement | Yes | Varies by program and occupancy type | Generally yes for standard owner-occupied financing |
The absence of PMI can be especially meaningful when you are preserving reserves for a move, repairs, or the normal surprises that come with a new duty station. It can also improve buying power because underwriting considers the full monthly housing payment, not just principal and interest.
Virginia buyers should also account for local price realities. Virginia REALTORS reported a statewide median sales price of $420,000 in 2024, a useful benchmark when estimating down payment and payment differences across loan types. In higher-cost Northern Virginia markets, a zero-down VA structure can preserve substantially more cash than a conventional purchase requiring even 5% down. In Richmond, the exact answer depends on the neighborhood, tax assessment, insurance quote, and contract terms – not a generic online calculator.
When a VA loan may not be the best fit
No PMI is a major advantage, but it is not an automatic instruction to use VA financing. A borrower making a large down payment may reduce the funding fee or eliminate it at 10% down, yet a strong conventional option could still deserve a side-by-side comparison. The right choice depends on pricing, projected time in the home, exemption status, seller concessions, credit profile, and whether the home meets VA property standards.
A condo, unique property condition, or tight closing deadline can introduce extra details. That is where a broker’s job matters. VA Loans Pro shops a network of more than 500 mortgage sources rather than defending one shelf of products. Our Dare to Compare approach puts the payment structure and cash-to-close math in front of you.
For a buyer who wants to protect credit before selecting a path, ask about a NoTouch Credit Pull pre-approval. It is designed to start the conversation without a hard inquiry, then build a clear plan around your eligibility, target payment, and timeline.
FAQ: PMI on VA loans
1. Do VA loans have PMI?
No. Eligible VA borrowers do not pay private mortgage insurance, including when financing 100% of a home’s purchase price.
2. What replaces PMI on a VA loan?
Most non-exempt borrowers pay a one-time VA funding fee. It is different from PMI and may be financed into the loan amount.
3. Can a VA funding fee be waived?
Yes. Borrowers receiving qualifying VA disability compensation and certain eligible surviving spouses may be exempt. Confirm eligibility before closing.
4. Is the VA funding fee paid every month?
No. It is an upfront charge. If financed, it becomes part of the loan balance and is repaid through the regular mortgage payment.
5. Can I buy a home with zero down and no PMI?
Yes, if you meet VA eligibility and underwriting requirements and the property qualifies. Zero down does not mean zero cash needed for every transaction.
6. Does a VA loan have a lower payment than conventional financing?
Often, but not always. Removing monthly PMI can lower the payment, while rate pricing, funding fee treatment, taxes, and insurance still affect the final total.
7. Do VA loans require perfect credit?
No. Credit standards vary by mortgage source and overall file strength. VA Loans Pro can review options for borrowers with scores as low as 500 FICO.
8. Can I use a VA loan more than once?
Yes. You may be able to restore or reuse entitlement, but the funding fee can differ for subsequent use and entitlement calculations should be reviewed first.
The move to make before writing an offer
Before you waive a financing contingency, compare an actual VA payment against a conventional and FHA payment using the same purchase price, expected closing date, and realistic insurance estimate. The winning option is the one that fits your service benefit, monthly budget, and move timeline – not the one with the loudest advertisement.
Legal disclaimer: This article is for general educational purposes only and is not a commitment to lend, a loan approval, legal advice, tax advice, or financial advice. Loan programs, rates, fees, eligibility requirements, funding-fee exemptions, and underwriting guidelines are subject to change and borrower qualification. Equal Housing Opportunity. Coast2Coast Mortgage, LLC NMLS #376205. Duane Buziak NMLS #1110647.
Duane Buziak | Mortgage Maestro | NMLS #1110647 | Coast2Coast Mortgage, LLC NMLS #376205 | Licensed in VA, FL, TN, GA & DC [Contact] | NoTouch Credit Pull available — no hard inquiry, no credit hit.