What credit score do I need to buy a home?

Most conventional loans require 620 minimum. FHA accepts 580 for 3.5% down. The best rates require 740+. Improving your score 20-40 points before applying can save tens of thousands in interest.

How much money do I need to buy a house?

Budget for down payment (3-20%), closing costs (2-5% of loan), and 3-6 months reserves. On a $350,000 home with 5% down: roughly $17,500 down plus $8,000-15,000 closing costs plus $10,000+ reserves.

How long does it take to buy a house?

From starting your search to closing: 3-6 months is typical. Pre-approval takes 1-3 days. Once under contract, closing takes 30-45 days.

Mortgage Insurance Guide: PMI, MIP, and VA Funding Fee Explained

📅 May 6, 2026⏱ 11 min read✍️ MortgageCalPro Editorial Team🔄 Reviewed May 2026

Mortgage insurance is one of the most confusing and frustrating costs in homebuying — largely because there are actually several different types, they work differently, and they're often described by different names. This comprehensive guide covers every type of mortgage insurance you might encounter: private PMI, FHA MIP, USDA annual fees, and the VA funding fee. Understanding each helps you choose the right loan type and develop a strategy to minimize or eliminate these costs. Use our Mortgage Calculator to model any of these costs against your monthly payment.

Why Mortgage Insurance Exists

Mortgage insurance exists to manage lender risk on loans with smaller down payments. When you put less than 20% down, the lender faces more exposure — if you default and the home value has dropped, the foreclosure sale might not cover the full loan balance. Mortgage insurance compensates the lender for this additional risk. An important note: mortgage insurance protects the lender, not you. You pay the premiums, but the lender is the beneficiary.

Type 1: Private Mortgage Insurance (PMI) — Conventional Loans

PMI applies to conventional loans (not government-backed) when your down payment is less than 20% of the purchase price.

What PMI Costs

Credit Score	LTV 95% (5% down)	LTV 90% (10% down)	LTV 85% (15% down)
760+	0.46%/yr	0.31%/yr	0.19%/yr
720–759	0.64%/yr	0.44%/yr	0.27%/yr
680–719	0.90%/yr	0.62%/yr	0.38%/yr
640–679	1.29%/yr	0.90%/yr	0.55%/yr

Rates approximate. Your actual PMI rate is set by your PMI insurer based on your complete loan profile.

On a $320,000 loan at 0.85% PMI rate: annual PMI = $2,720, monthly = $227.

How to Remove PMI

Request cancellation: Once your loan balance reaches 80% of the original purchase price, you can request cancellation in writing. The lender must cancel within 30 days if you meet their conditions.
Automatic termination: Federally required once your balance is scheduled to reach 78% LTV.
Appreciate your way out: If your home's value has risen significantly, a new appraisal may show 20%+ equity, allowing early cancellation (lender may require 2+ years of payments first).
Make extra payments: Reach 80% LTV faster with extra principal payments — model with our Extra Payment Calculator.

For a complete deep-dive, read our full PMI guide.

Type 2: FHA Mortgage Insurance Premium (MIP)

FHA MIP is required on all FHA loans regardless of down payment size. It has two components:

Upfront MIP (UFMIP): 1.75% of the loan amount paid at closing (almost always financed into the loan)
Annual MIP: 0.55%–0.85% of the outstanding loan balance, paid monthly

FHA MIP Duration

Down Payment	MIP Duration
Less than 10%	Life of the loan (30 years) — never automatically removed
10% or more	11 years — then automatically canceled

This is the most important difference between FHA and conventional loans: FHA MIP with less than 10% down is permanent. On a $300,000 FHA loan at 0.85% MIP, you'd pay $2,550/year in MIP indefinitely — unless you refinance into a conventional loan. Once you have 20% equity, refinancing into conventional eliminates MIP entirely. See our FHA vs Conventional comparison.

Type 3: USDA Annual Guarantee Fee

USDA loans don't have PMI or MIP but do have:

Upfront guarantee fee: 1.0% of the loan amount at closing (can be financed)
Annual fee: 0.35% of the outstanding loan balance, paid monthly

The USDA annual fee (0.35%) is significantly lower than FHA MIP (0.55–0.85%) and provides the same purpose. On a $300,000 USDA loan: annual fee = $1,050, monthly = $87.50. For more detail, see our USDA Loan guide.

Type 4: VA Funding Fee

VA loans never have mortgage insurance — one of their biggest advantages. Instead, there's a one-time VA funding fee that sustains the loan program:

Down Payment	First Use	Subsequent Use
0–4.99%	2.15%	3.30%
5–9.99%	1.50%	1.50%
10%+	1.25%	1.25%

Exemption: Veterans with a service-connected disability rating pay no funding fee. Always check your exemption status. See our VA Loan guide for full details.

Comparison: All Types Side by Side

Type	Loan	Upfront Cost	Monthly Cost	Removable?
PMI	Conventional	None	0.5–1.5%/yr	Yes — at 80% LTV
MIP	FHA	1.75%	0.55–0.85%/yr	Only if 10%+ down (after 11 yrs) or refi to conventional
Annual Fee	USDA	1.0% guarantee fee	0.35%/yr	When loan paid off
Funding Fee	VA	1.25–3.30% (one-time)	None	N/A — already paid

Strategies to Minimize Mortgage Insurance Costs

Put 20% down on a conventional loan — eliminates PMI entirely from day one
Use an 80-10-10 piggyback loan — first mortgage at 80%, second at 10%, 10% down — no PMI on either
Use a VA loan if eligible — no monthly mortgage insurance ever; see our VA guide
Improve your credit before applying — higher credit score = lower PMI rate on conventional loans
Make extra payments to reach 80% LTV faster — use our Extra Payment Calculator
Refinance FHA to conventional — once you have 20% equity, refinancing eliminates MIP permanently

What is the difference between PMI and MIP?

PMI applies to conventional loans with less than 20% down and can be removed at 20% equity. MIP applies to FHA loans — 1.75% upfront plus an annual premium that lasts the life of the loan if you put less than 10% down. MIP is much harder to remove.

How much does PMI cost?

PMI typically costs 0.5–1.5% of the original loan amount annually, paid monthly. On a $320,000 loan, that's roughly $133–$400/month. Your exact rate depends on credit score, loan-to-value, and insurer.

How do I avoid mortgage insurance entirely?

Put 20% down on a conventional loan (no PMI). Use a VA loan if eligible (no MI ever). Use an 80-10-10 piggyback structure. Or accept PMI initially and make extra payments to reach 20% equity faster — model with our Extra Payment Calculator.