How to Avoid PMI: 7 Legitimate Options

Updated upon publication of this page.

PMI is not a legal requirement. It is a lender requirement that applies only to conventional loans with less than 20 percent down. There are at least seven legitimate ways to avoid paying it, each with different trade-offs.

7 legitimate options Cost-benefit per path Myths debunked

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Option 1: Put 20 percent down

The simplest path. If your down payment is 20 percent or more of the purchase price, lenders do not require PMI on a standard conventional loan.

When it works: You have the savings or plan to accumulate them before buying. On a $400,000 home, you need $80,000.

Trade-off: Saving an extra 10 to 15 percent down payment can take several years, during which you miss any appreciation and continue paying rent. In fast-rising markets, the extra down payment may cost more than the PMI you avoided.

Best for: Buyers who already have the cash, or who are in slow or declining markets where waiting is not costly.

Option 2: Piggyback loan (80-10-10)

Take out a second mortgage simultaneously to cover part of what would otherwise require PMI. The classic structure is 80-10-10: 80% first mortgage, 10% second mortgage, 10% cash down.

When it works: You can qualify for both mortgages, your credit is 680+, and the combined cost of the second mortgage interest is less than what you would pay in PMI. See our piggyback calculator for the math.

Trade-off: Second mortgages carry higher interest rates (often 2-4% above first-mortgage rates), two sets of closing costs, more complex underwriting, and the second mortgage must still be paid off eventually. HELOC-based piggybacks also expose you to variable rate risk.

Best for: Mid-range credit scores (680-720) in high-PMI tiers where the PMI savings exceed the second-mortgage interest premium.

Option 3: Lender-Paid PMI (LPMI)

Your lender pays the PMI premium up front in exchange for charging you a slightly higher interest rate for the life of the loan (typically 0.25% to 0.75% higher). No monthly PMI line item.

When it works: You plan to refinance or sell within 5-7 years, before the higher rate accumulates to exceed what BPMI would have cost. Or your credit is low enough that LPMI's rate penalty is less than BPMI's monthly premium.

Trade-off: Not cancellable. The higher rate applies forever, even after you pass 20% equity. If you stay in the loan long term, you pay more than you would have with regular PMI. Our LPMI vs BPMI guide has detailed break-even math.

Best for: Borrowers planning a shorter stay (under 7 years), or those with lower credit who face high BPMI rates.

Option 4: VA loan (eligible veterans)

VA loans do not require PMI. Instead, they charge a one-time funding fee of 1.25% to 3.30% of the loan amount, which can be rolled into the loan.

When it works: You are an active-duty service member, veteran, Reservist, National Guard member, or qualifying surviving spouse. Our VA funding fee calculator shows your exact fee.

Trade-off: You still pay the funding fee (unless you qualify for an exemption through disability compensation, Purple Heart on active duty, or certain surviving-spouse status). VA loans have slightly stricter property condition requirements than conventional loans.

Best for: Eligible veterans and service members. Almost always the cheapest option when available.

Option 5: USDA loan (rural properties)

USDA guaranteed loans are 100% financing (zero down) and do not use PMI. They have a 1% upfront guarantee fee and 0.35% annual guarantee fee.

When it works: The property is in a USDA-eligible rural area (check at eligibility.sc.egov.usda.gov), you meet income limits (115% of area median income or less), and you plan to use the home as your primary residence.

Trade-off: Property eligibility is strict. Many suburban areas do not qualify. Income limits can disqualify dual-earner households. The guarantee fee is lower than FHA MIP but applies for the full loan term.

Best for: Rural and small-town buyers at or below moderate income levels.

Option 6: Doctor loans and professional loan programs

Some banks offer special mortgage programs for doctors, dentists, lawyers, accountants, and other professionals that waive PMI with as little as 0 to 5 percent down.

When it works: You are in a qualifying profession, usually with specific education or licensure proof. Programs vary widely by lender.

Trade-off: Rates and terms vary significantly. Some programs charge higher rates to compensate for the risk. Not all professionals qualify.

Best for: Early-career professionals with strong income potential but limited savings.

Option 7: Save for 20% while paying down existing debt

Not an immediate avoidance strategy but worth considering: boost your credit score and reduce your DTI while you save. Each 20-point credit score improvement reduces PMI, each percentage-point DTI reduction improves loan terms, and more cash means more options.

When it works: You are 12-24 months out from buying and have flexibility.

Trade-off: Waiting costs you time, and prices and rates may change.

Options that do NOT work

Avoid these myths:

"Just ask the lender to waive PMI." Lenders cannot waive PMI on loans sold to Fannie Mae or Freddie Mac. The requirement comes from the investor, not the lender.
"Lie about your intention to use the home as a rental." Occupancy fraud is a federal crime (18 U.S.C. § 1014). Investment property PMI exists because investment properties are riskier. Lying about occupancy to get a lower rate or avoid PMI is fraud.
"Transfer the loan to someone else to avoid PMI." Conventional loans are not generally assumable, and attempts to transfer the obligation without lender approval typically trigger the due-on-sale clause.
"Overpay for the home to pump up the appraisal." Appraisers compare recent sales. Paying 20 percent more than the appraised value just means you overpaid; the loan is still underwritten against the appraisal.

Decision framework

Walk through these questions in order:

Are you a veteran? If yes, use a VA loan. Full stop. Even with the funding fee, this is almost always cheapest.
Is the property USDA-eligible rural and are you under the income limits? If yes, USDA is usually cheaper than conventional with PMI.
Can you comfortably put 20% down? If yes, do it. Simplest path.
Do you have 10%+ down and good credit? Run the piggyback math. If piggyback saves more than $5,000 over your expected stay, do it.
Will you stay in the loan less than 7 years? If yes, LPMI may win. Check with our LPMI vs BPMI comparison.
None of the above apply. Take BPMI, work on paying down the balance, and request cancellation at 80% LTV. Our removal calculator shows exactly when.