A VA loan is ideal for veterans or active-duty service members looking to buy a home; however, staying informed is important, especially regarding extra fees associated with the home-buying process.
Today, we’re here to answer the question, “Do VA loans have PMI?”
Lenders utilize private mortgage insurance (PMI) to protect themselves if borrowers default on their loans. But do you need it?
Let’s dive in.
Do VA Loans Have PMI?
No, VA loans don’t have PMI and instead have a one-time VA funding fee at closing, depending on your total cost.
Generally, if you can’t pay a 20% down payment on the cost of your new house after closing fees, then mortgage lenders require mortgage insurance as part of your monthly payments.
PMI protects the lender if a homeowner stops making payments on their loan. Unfortunately, 20% isn’t always feasible to bring to the table, so many homeowners are stuck with a monthly PMI payment.
In conventional loans, the PMI generally ends once the borrower has 20% equity in their home.
While there are benefits to the absence of a VA home loan PMI, you still must qualify for VA loan eligibility criteria.
The Benefit of Not Having a VA Home Loan PMI
Having no mortgage insurance significantly benefits veterans when buying a home, especially since it eliminates the monthly payments that PMI brings.
While PMI is helpful if you can’t afford a significant down payment, you end up paying higher monthly mortgage payments.
However, because there’s no VA home loan PMI, you’ll save thousands of dollars over the life of your loan by not requiring VA loan mortgage insurance.
What is the VA Funding Fee?
When veterans, service members, or survivors purchase a home with a VA-backed or VA-direct home loan, you’ll be required to pay a one-time funding fee based on the total value of your loan.
The VA funding fee helps lower the cost of your home since the VA home loan program doesn’t require monthly mortgage insurance or down payments. In 2023, there was a VA funding fee reduction.
VA Funding Fee vs. Mortgage Insurance
Since we’ve answered the question, “Do you pay PMI on a VA loan,” let’s look closer at the differences between the VA funding fee and mortgage insurance.
| VA Funding Fee | Mortgage Insurance |
| One-time payment | Monthly payments |
| Applies to VA loans | Applies to conventional loans |
| Required for all borrowers, with some exceptions | Required if the down payment is less than 20% |
| Supports the VA home loan program | Protects lender if the borrower defaults |
VA Home Loan PMI (FAQs) Frequently Asked Questions
Do VA loans require mortgage insurance?
No. One of the benefits of qualifying for a VA loan is you aren’t required to have mortgage insurance. While a one-time funding fee is required, you don’t have to worry about monthly payments.
Do I need PMI with a VA loan?
No, you don’t need PMI with a VA loan, which is one of the advantages of getting a loan through the VA. The top three benefits of a VA loan are:
- No PMI
- Low interest rates
- No down payment
What are the disadvantages of a VA loan?
While there are several advantages of a VA loan, disadvantages include:
- Stricter appraisal requirements
- Can’t purchase second homes or rental properties
- Less flexibility
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