The Quick Read: A VA loan has no monthly mortgage insurance, so a whole line disappears from your payment. The size of that saving depends on what the conventional alternative would charge you, and that depends on your down payment, your credit, and your loan size. The one-time VA funding fee is the main offset. Financed, it nudges your monthly principal and interest up a little. Waived, it costs nothing.
Key Takeaways
- A VA purchase loan carries no mortgage insurance of any kind, and it allows 100% financing when the price is not above the appraised value.
- PMI is a recurring charge on conventional loans with less than 20% down. A VA loan has no such line.
- The funding fee replaces it as a one-time cost. First use runs 2.15% with less than 5% down, and it can be financed.
- Veterans receiving compensation for a service-connected disability are exempt from the fee, which makes the saving largest for them.
- The saving shrinks with strong credit, a big down payment, or a small loan. Your own side-by-side comparison settles it.
Why Does a VA Loan Skip Monthly Mortgage Insurance?
A VA loan skips monthly mortgage insurance because the Department of Veterans Affairs backs a portion of each loan. That backing protects the lender if a borrower defaults, so no private insurer is needed.
VA payment estimate
Starting assumptions reflect an example price with no down payment and a first-use funding fee. Replace them with your own figures.
Editable benchmark: 7.32% as of October 22, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not a VA loan quote.
Illustrative starting assumptions: a $350,000 price, no down payment with full entitlement, a first-use funding fee financed into the loan, a thirty-year term at the current Freddie Mac benchmark, and property taxes and insurance estimated at typical national rates. Every field is editable.
Illustrative estimate only — not a Loan Estimate, approval, quote, or commitment to lend. The rate field carries the weekly Freddie Mac thirty-year conventional benchmark, a market reference and not a VA loan quote; your rate is set by the lender at lock. The funding fee follows VA’s published table for the use and down payment entered; the residual-income figure is VA’s guideline for the region and family size, and the rough residual shown subtracts only the housing payment and the debts entered, while VA also deducts taxes, maintenance and utilities. Taxes, insurance and dues are editable estimates; closing costs are not included. Licensed in sixteen states for consumer mortgages. Lendmire is not affiliated with or acting on behalf of the Department of Veterans Affairs.
VA News explains that this backing is why the program allows no down payment and no monthly private mortgage insurance. The funding fee helps offset the program’s cost to taxpayers.
Conventional loans work differently. Private mortgage insurance, or PMI, is a policy a lender requires when you put down less than 20%. It protects the lender, not you. If you miss payments, PMI does not keep you out of foreclosure. The Consumer Financial Protection Bureau describes it the same way.
The premium is folded into your monthly payment. That is the line a VA borrower never sees.
Across the wholesale programs Lendmire places VA files with, the pattern is consistent. A first-time buyer with a small down payment would face PMI on a conventional loan. That same buyer on a VA loan faces none. The comparison is that simple. The math underneath is where the real answer sits.
What Does a First-Time Buyer Actually Save Each Month?
The saving equals the PMI you would have paid on a conventional loan, minus the small payment increase from financing the funding fee. For an exempt veteran, the second part is zero. No flat dollar figure is honest here, because every input moves it.
Here is the logic, step by step.
1. Start with the conventional alternative. A buyer putting less than 20% down on a conventional loan typically pays PMI each month until enough equity builds up. The premium is a yearly percentage of the loan. It is higher for lower credit scores and smaller down payments.
2. Remove it. On a VA loan, that line is gone. Principal, interest, taxes, and homeowner’s insurance remain.
3. Add back the fee effect. If you finance the funding fee, your loan balance is that much larger. Principal and interest rise in proportion. With a first-use fee of 2.15%, the balance grows by about 2.15% of the loan amount. The monthly principal and interest rise by roughly that same proportion.
4. Compare the two. The saving is PMI avoided, less the extra payment from the financed fee. If you are exempt, nothing is added back.
That last step is the one most “VA saves you hundreds a month” claims skip. The fee is a real cost. It is spread across the payment instead of hitting you at closing.
A Scenario Without Dollar Figures
Picture a first-time buyer with a fair credit score and no savings beyond closing costs. A conventional loan would need a small down payment and PMI. The VA loan needs no down payment and no PMI.
Because the VA loan finances the full price, its balance is larger than the conventional loan by the down payment percentage. The payment on that extra balance eats a slice of the saving. You still skip PMI. The funding fee adds a second slice, unless you are exempt.
For many buyers in this spot, the PMI line still outweighs both slices. That is especially true when credit is on the lower side, since PMI tends to be heavier there. When credit is strong, PMI is lighter and the gap narrows. We see that on real files regularly.
The Funding Fee: What Replaces PMI
The funding fee is a one-time charge paid to VA on most VA loans. It is not mortgage insurance, and it does not recur. The VA Lenders Handbook says each veteran must pay the fee at closing, and the loan amount may include it.
The percentage depends on how much you put down and whether it is your first use of the benefit:
| Situation | Funding fee |
|---|---|
| First use, under 5% down | 2.15% |
| First use, 5% to under 10% down | 1.5% |
| First use, 10% or more down | 1.25% |
| Subsequent use, under 5% down | 3.3% |
| Subsequent use, 5% or more down | Same 1.5% / 1.25% tiers |
Those are the purchase tiers Lendmire’s wholesale programs follow. Programs and lenders can differ, and everything is subject to lender guidelines and full file review.
Three practical points matter here:
- You can pay it in cash or finance it. The fee can be included in the loan. A seller or another party may also pay it on your behalf, within VA’s concession rules.
- On a purchase, only the funding fee rolls into the loan. Other closing costs cannot be wrapped in the same way. Refinances follow different rules.
- Exempt veterans pay nothing. The VA Buyer’s Guide says veterans receiving VA compensation for a service-connected disability do not pay the fee. Certain other groups are also exempt. Your certificate of eligibility should show your status before closing.
If you are exempt, the saving is the full PMI you avoid. No offset. Nothing to net out.
How the Saving Changes With Your Situation
Four inputs decide how big your saving is. Change any one and the number moves.
| Factor | Bigger saving when… | Smaller saving when… |
|---|---|---|
| Credit profile | Credit is lower, so PMI would run heavier | Credit is strong, so PMI would run lighter |
| Down payment | You have little cash to put down | You could put 20% down on a conventional loan |
| Loan size | The loan is large, since PMI scales with it | The loan is small |
| Funding fee | You are exempt | You are non-exempt and finance the fee |
Look at the down-payment row closely. A buyer who can bring 20% to a conventional loan avoids PMI there too. The monthly gap then comes mostly from other loan terms, not from insurance. That buyer should compare the loans on equal footing.
FHA is the other common low-down-payment path. It carries its own mortgage insurance structure, which can differ in how long it lasts.
Here is a plain side-by-side of the monthly insurance picture:
| Item | VA purchase | Conventional, under 20% down | FHA |
|---|---|---|---|
| Monthly mortgage insurance | None | PMI | Yes |
| Upfront charge | Funding fee, reviewable | Typically none for PMI | Yes |
| Down payment | None required | Some required | Some required |
| Exemption possible | Yes, for disability compensation | No | No |
When Does the Saving Stop Mattering?
PMI on a conventional loan does not last forever. Federal law lets you request cancellation once you reach certain equity thresholds. The funding fee, if financed, stays in your balance and accrues interest for the life of the loan.
So the honest picture looks like this:
- Early years. VA’s payment advantage is clearest here, because PMI would still be running.
- Later years. A conventional borrower’s PMI drops off as equity builds. The VA payment advantage from skipping PMI ends there, but the financed fee remains part of your balance.
- Over the whole loan. You compare the PMI you would have paid for those years against the funding fee you pay once. For a lower-credit, low-down-payment buyer, VA often comes out ahead. For a strong-credit buyer who could drop PMI quickly, it may be closer.
An exempt veteran never has the fee in the comparison. Not a close call.
One more effect works in your favor. A lower monthly obligation leaves more residual income, which is VA’s main underwriting test. More on that below.
How Underwriting Treats the Lower Payment
VA underwriting leans on residual income, the money left each month after your major obligations and living costs. Because there is no PMI, your payment is lower, and your residual income is higher.
The 41% debt-to-income figure is a guideline, not a hard cap. A ratio above it needs residual income well above the table’s standard. So a borrower with a higher ratio can still be reviewed, subject to lender guidelines.
On credit, VA itself sets no minimum score. The wholesale programs Lendmire places VA loans with start at a 580 decision score. Some lenders set a higher floor. Your score still shapes what is available to you, even with no PMI in the picture.
The appraisal matters too. A VA appraisal checks that the home meets minimum property requirements, and the loan cannot exceed the home’s reasonable value. If it comes in low, the numbers change.
You can read more about VA loan programs. Full entitlement carries no VA loan limit. With remaining entitlement, a down payment may be required, so speak with a loan officer about your situation.
What Counts as a “First-Time” VA Buyer?
For the funding fee, “first-time” means first use of your VA home loan benefit. It does not mean you have never owned a home. A veteran who has owned before but never used the benefit still gets the first-use tier.
The distinction matters because second use costs more. With less than 5% down, the subsequent-use fee is 3.3% instead of 2.15%. The 5% and 10% down tiers match first use. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
VA News notes that the exact amount depends on your down payment and how many times you have used the benefit. A first-time buyer sits on the lowest no-down tier.
Where the General Rule Breaks
Some cases do not fit the “VA saves you money every month” story. Know them before you decide.
- A high credit score and a big down payment. If PMI would be light or absent, the VA advantage mostly comes from other loan terms.
- A small loan. PMI scales with loan size, so there is less to avoid.
- A non-exempt buyer who finances the fee. The financed fee takes a bite out of the monthly saving. It can be a meaningful bite.
- A disability rating that arrives later. A veteran later awarded compensation with an effective date before closing may be eligible for a refund of the fee. Confirm the details with VA.
- Remaining entitlement. If you have used part of your entitlement, a down payment may be needed.
- A refinance. The funding fee applies to refinances too, and other fees can be financed only on refinances. A VA refinance of a loan that already carries PMI can remove the PMI. The saving is the premium avoided, less the new fee.
- Occupancy. VA purchase loans are for a home you will live in. A rental or second home changes the leverage and the program.
Myths That Trip Up First-Time Buyers
“No PMI means no cost.” The funding fee exists. It is not PMI, but it is a real cost unless you are exempt.
“The fee is the same for everyone.” It varies with down payment, first or later use, and exemption.
“PMI protects me.” It protects the lender.
“I can roll all my closing costs into the loan.” On a purchase, only the funding fee can be financed.
“VA has a hard 41% debt-to-income cap or a minimum score.” The 41% figure is a guideline. Credit floors typically come from the lender’s own overlays.
How to Check Your Own Number
You do not need to guess. You can build your own comparison with a few steps:
1. Confirm your eligibility and exemption status on your certificate of eligibility.
2. Ask for a Loan Estimate on the VA loan and on a conventional loan with the down payment you would really use. Because you are buying a home to live in, both come with the standard Loan Estimate and Closing Disclosure.
3. Compare the mortgage insurance line on each estimate. Then look at the principal and interest line on the VA estimate, since a financed fee shows up there.
4. Ask about seller concessions. A seller may be able to pay the funding fee, within VA’s rules.
5. Look at your residual income. If the payment is lower, you may have room to spare.
Do the comparison on equal terms. If you compare a VA loan and a conventional loan with different down payments, you are comparing more than PMI.
If you are buying a home and want to see whether a VA loan fits your file, Lendmire can help you compare the options and what each one asks of the file. Every figure here is subject to lender guidelines and full file review, and none of it is a commitment to lend.
Key Terms Defined
PMI (private mortgage insurance): A policy a conventional lender requires when you put down less than 20%. It protects the lender and is added to your monthly payment.
Funding fee: A one-time charge paid to VA on most VA loans. It can be financed into the loan, and exempt veterans do not pay it.
Certificate of eligibility (COE): The VA document that confirms your service and entitlement. It also shows exemption status.
Residual income: The money left each month after major obligations and living costs. It is the controlling test in VA underwriting.
Entitlement: The amount of the benefit VA will stand behind.
Debt-to-income ratio (DTI): Your monthly debt payments divided by your monthly income. For VA, 41% is a guideline, not a cap.
Frequently Asked Questions
Do VA loans have PMI?
No. A VA purchase loan has no mortgage insurance of any kind. VA backs a portion of the loan, which protects the lender instead. A one-time funding fee applies unless you are exempt.
Is the funding fee the same thing as PMI?
No. PMI is a recurring charge that protects the lender and usually ends once you build enough equity. The funding fee is paid once. It can be financed, which raises your balance slightly, but it does not appear as a separate monthly line.
Can I finance the funding fee?
Yes. The fee can be included in the loan amount, so cash to close can stay low. A financed fee makes your balance a little larger, which raises your monthly principal and interest by about the same proportion. A seller may also pay it, within VA’s concession rules.
Who does not pay the funding fee?
Veterans receiving compensation for a service-connected disability are exempt. Other groups are exempt too, including some surviving spouses and active-duty members with a Purple Heart.
Is a VA loan always cheaper per month than a conventional loan?
Not always. It usually wins when you would pay meaningful PMI on a conventional loan. If you have strong credit or can put 20% down, PMI shrinks or disappears, and the gap narrows. A financed fee can also take a bite. Compare Loan Estimates side by side.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage serving homeowners and home buyers in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending channels; Lendmire brokers the financing and the lender underwrites each application. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. VA News: VA funding fee, who pays and who is exempt
2. CFPB: What is private mortgage insurance?
3. VA Pamphlet 26-7, Chapter 8: Borrower Fees and Charges and the VA Funding Fee
4. VA Home Loan Guaranty Buyer’s Guide
This article is part of Lendmire’s VA loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: VA Loan Income Rules for a First-Time User on Active Duty · VA Loan Appraisal Requirements for a First-Time Active-Duty Buyer · Can a First-Time VA Loan Buyer on Active Duty Have the Spouse Occupy?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.