Why Mortgage Insurance Isn’t Always Required With Less Than 20% Down

For years, homebuyers have heard the same rule: “If you put less than 20% down, you have to pay mortgage insurance.”   But that’s not always true — and believing it can hold people back from buying a home sooner than they need to. Many homebuyers are surprised to learn that mortgage insurance less than 20 percent down isn’t always required, depending on the loan program and how the financing is structured. Let’s break down when mortgage insurance is required, when it isn’t, and why the 20% myth keeps sticking around.

First, what is mortgage insurance?

Mortgage insurance (MI) is a tool that protects the lender when a buyer puts less money down. It’s not a penalty — it’s simply what allows lenders to offer lower down payment options.

But here’s the part most people don’t realize: Not every loan uses mortgage insurance, even with less than 20% down.

When mortgage insurance is required

Mortgage insurance is typically required on:

• Conventional loans with less than 20% down

• FHA loans (called MIP) regardless of down payment

• Some specialty programs depending on risk factors

On Conventional loans, MI can be removed later. FHA works differently, but refinancing can eliminate it.

When mortgage insurance is not required — even with less than 20% down

There are several situations where buyers put less than 20% down and don’t pay monthly mortgage insurance:

1. Lender‑paid mortgage insurance (LPMI)

Instead of a monthly MI payment, the lender builds the cost into the interest rate. Result:

• No monthly MI

• Slightly higher rate

• Often a lower total payment than people expect

2. VA loans

If you’re eligible for VA financing:

• 0% down

• No mortgage insurance

• One of the strongest loan programs available

3. Certain portfolio or specialty programs

Some lenders offer programs where MI isn’t used at all. Instead, they price the risk into the rate — similar to LPMI but structured differently.

4. Manufactured home “home‑only” loans

Many chattel lenders don’t use MI at all. Instead, they apply a rate adder for higher loan‑to‑value ratios. (Example: Credit Human adds 1.00% to the rate above 80% LTV — no monthly MI.)

So why does the 20% myth exist?

Because for decades, Conventional loans were the standard — and Conventional loans follow the 20% rule. But today’s lending landscape is much broader, and buyers have more options than ever.

The truth is simple: You don’t need 20% down to avoid mortgage insurance. You just need the right loan structure.

What this means for buyers in today’s market

If you’re trying to buy a home and don’t have 20% down, you still have options:

• Lower monthly payments

• No monthly MI

• Flexible down payment choices

• Programs tailored to your situation

The key is understanding which loan type fits your goals — not forcing yourself into outdated rules.

If you want clarity without pressure

I help buyers compare all their options side‑by‑side so they can see:

• Which programs require MI

• Which ones don’t

• How each option affects the monthly payment

• How fast equity builds

• What makes the most sense for their long‑term plan

No sales pitch. Just education.