Suppose you’re buying a $350,000 home in the city of Richmond. That’s a round working figure, so confirm the current city-level median through Virginia REALTORS before you rely on it. On an FHA loan with 3.5% down, annual mortgage insurance runs about $155 a month plus a 1.75% upfront premium. On a conventional loan with 5% down, private mortgage insurance (PMI) might run about $194 a month under this guide’s assumptions. On a VA loan there is no monthly mortgage insurance, only a one-time funding fee. Ten years in, the insurance paid in this example ranges from about $7,525 to about $24,500. All figures here are illustrations, not quotes.
A fair mortgage insurance cost comparison across FHA, VA, and conventional loans looks at the whole loan: upfront charges, monthly premiums, how long they last, and what it costs to get out. Rate alone won’t tell you that. By Duane Buziak, NMLS #1110647. Details below reflect rules as of October 2026.
Contents
- 1. Compare the Insurance Structure Before the Price
- 2. Run a Worked Dollar Example at the Richmond Median Price
- 3. Use Credit Score to Price Conventional PMI
- 4. Compare How Long Each Insurance Lasts
- 5. Increase Your Down Payment Strategically to Cut PMI
- 6. Choose Between Paying Insurance Monthly, Upfront, or Financing It
- 7. Check Exemptions and Waivers Before You Compare
- 8. Plan Your Exit: Refinance or Remove Insurance Later
- Frequently asked questions
1. Compare the Insurance Structure Before the Price
Each program charges for lender risk differently, so a quote that looks cheaper on one line can cost more overall. Four terms matter here:
- MIP is FHA’s mortgage insurance premium, charged upfront and annually.
- PMI is private mortgage insurance on conventional loans.
- VA funding fee is a one-time charge on VA loans, with no monthly premium.
- LTV is loan-to-value, the loan balance divided by the home’s value.
Illustration on the $350,000 home:
- FHA with 3.5% down carries a 1.75% upfront MIP ($5,911) and annual MIP of 0.55% on the base loan, about $155 a month.
- Conventional with 5% down carries PMI at an assumed 0.70%, about $194 a month.
- VA with 0% down carries a 2.15% first-use funding fee ($7,525) and no monthly insurance.
FHA rates and duration are published by HUD, and the VA fee table is on va.gov. Confirm both on the day you quote, since they can change.
| Feature | FHA Loan | Conventional Loan | VA Loan |
|---|---|---|---|
| Minimum down payment | 3.5% | 3% to 5% depending on program | 0% for eligible borrowers |
| Upfront charge | 1.75% upfront MIP | None for standard monthly PMI | Funding fee, unless exempt |
| Monthly insurance | Annual MIP, paid monthly | PMI, priced by credit and down payment | None |
| Duration | 11 years or life of loan, by down payment | Removable at 80% LTV on request | Not applicable |
The common mistake is comparing interest rates and ignoring insurance. To avoid it, ask for all three programs when you’re eligible and put the upfront and monthly insurance lines from each Loan Estimate side by side. Duane Buziak calls this “Dare to Compare” on the whole loan, not the rate. Our mortgage rate comparison for FHA, VA, and conventional loans shows how to line those quotes up.
Measure total monthly payment and total insurance paid at year 5 and year 10.
2. Run a Worked Dollar Example at the Richmond Median Price
Rates become real once you turn them into payments at a real price. The key is holding every assumption equal so the gap reflects the program, not the inputs.
Here is a labelled illustration at $350,000 and an assumed 6.00% on a 30-year fixed for all three loans. Taxes and homeowners insurance are held equal and left out.
- FHA, 3.5% down ($12,250): base loan $337,750, plus financed upfront MIP of $5,911 gives $343,661. Principal and interest is $2,060, plus $155 monthly MIP, for $2,215 a month.
- Conventional, 5% down ($17,500): loan $332,500. Principal and interest is $1,994, plus assumed PMI of $194, for $2,187 a month.
- VA, 0% down: loan $350,000, plus financed funding fee of $7,525 gives $357,525. Principal and interest is $2,144, with no insurance, for $2,144 a month.
The monthly delta is $72 between FHA and VA, and $44 between conventional and VA. That is small. The cash story differs more: $12,250 down for FHA, $17,500 for conventional, nothing for VA. For simplicity, the MIP figure uses the base loan. Real annual MIP recalculates on a declining balance, so actual figures run slightly lower.
- Confirm the current city median from Virginia REALTORS or another city-level source.
- Check the 30-year average on the Freddie Mac Primary Mortgage Market Survey for context, then set one assumed rate for all programs.
- Compute principal and interest on the financed loan amount, then add insurance.
- Replace the assumptions with live quotes once you have them.
The mistake to avoid is using a different rate, price, or down payment for each program and calling the result a comparison. To plug in your own numbers, try a mortgage insurance cost calculator built around Richmond loan programs. Measure the monthly payment delta and the 5- and 10-year cumulative cost.
3. Use Credit Score to Price Conventional PMI
Conventional PMI is priced by credit tier, and FHA annual MIP largely isn’t. That creates a crossover: a lower score pushes conventional PMI up while FHA stays flat, and a higher score reverses it.
Illustration on the $350,000 home with 5% down conventional ($332,500 loan) against FHA at 3.5% down. Rates are held at 6.00%, and the PMI rates of 1.10% at 680 and 0.40% at 760 are assumptions for this example only. Real PMI quotes vary by insurer, and a lower score often raises the conventional interest rate too, which would widen the gap.
- At 680: conventional costs $1,994 plus $305 PMI, or $2,298. FHA is $2,215. FHA wins by about $83 a month.
- At 760: conventional costs $1,994 plus $111 PMI, or $2,104. FHA is still $2,215. Conventional wins by about $111 a month.
The pitfall is assuming FHA is cheaper for every borrower under 700. Somewhere between those scores the winner flips, and where it flips depends on your down payment and the PMI quote.
- Start with a NoTouch Credit Pull, which gives a realistic score estimate without a hard inquiry.
- Request FHA and conventional quotes at that actual score, not a generic tier.
- Ask what score improvement would move you into the next PMI tier, so you know your target.
- Re-quote after any improvement, since a few points can change the answer.
Measure monthly insurance cost at your current score against the cost at the score you expect after improvement. If the saving beats the cost of waiting, whether in rent or a rising price, the wait pays. If it doesn’t, move forward. If a low score or collections are holding you back, our guide to mortgage options after a bad credit denial walks through the next steps.
4. Compare How Long Each Insurance Lasts
Duration often matters more than the monthly figure. A cheaper-looking FHA payment that never ends can cost more than a higher PMI payment that disappears.
The rule that surprises people: on FHA loans with a down payment under 10%, annual MIP generally lasts for the life of the loan. With 10% or more down, it generally runs 11 years. Verify the current schedule in HUD’s FHA guidance and Handbook 4000.1. Conventional PMI can be requested off at 80% LTV, and lenders must terminate it automatically at 78% on the original amortization schedule. The CFPB explains the Homeowners Protection Act rules in plain terms.
Cumulative insurance paid on the illustrative $350,000 home, using the same assumptions as above:
| Year | FHA, 3.5% down | Conventional, 5% down | VA, 0% down |
|---|---|---|---|
| 1 | $7,768 | $2,328 | $7,525 |
| 5 | $15,199 | $11,638 | $7,525 |
| 10 | $24,487 | $22,693 | $7,525 |
| 15 | $33,775 | $22,693 | $7,525 |
| 30 | $61,639 | $22,693 | $7,525 |
PMI ends in this example around month 117, when scheduled payments alone bring the balance to 80% of the original value. FHA keeps charging. By year 10 the two look close, and by year 30 the gap is about $39,000. The VA loan versus FHA loan comparison breaks down how those costs play out for eligible veterans.
- Pull the duration rule for your FHA down payment tier.
- Calculate when your conventional balance reaches 80% and 78% of the original value.
- Build the year-by-year table for your own numbers.
Measure years until insurance ends and cumulative premiums paid at the date you expect to sell or refinance.
5. Increase Your Down Payment Strategically to Cut PMI
On a conventional loan, each step up in down payment lowers both the loan balance and the PMI rate, and PMI disappears at 20%. The savings shrink as you go, though, so the cheapest PMI dollar to eliminate is the first one.
Illustration on $350,000 with assumed PMI rates for a mid-700s score (3% at 0.95%, 5% at 0.70%, 10% at 0.45%, 20% none):
- 3% down ($10,500): loan $339,500, PMI about $269 a month.
- 5% down ($17,500): loan $332,500, PMI about $194.
- 10% down ($35,000): loan $315,000, PMI about $118.
- 20% down ($70,000): loan $280,000, no PMI.
Going from 3% to 5% costs $7,000 more and saves about $75 a month in PMI, or roughly $10.69 per month per extra $1,000. From 5% to 10% it is about $4.33 per $1,000, and from 10% to 20% about $3.38. Principal and interest also fall as the loan shrinks, which adds to the benefit.
The common mistake is draining reserves to dodge PMI. A buyer who hits 20% down but has no cushion for a roof, a job gap, or a move is worse off than one paying $118 a month in PMI with six months of savings. If you have little cash to bring, zero down payment mortgage programs are worth a look before you decide how much to put down.
- Get written quotes at each tier, 3%, 5%, 10%, and 20%.
- Divide the PMI savings by the extra cash for each step.
- Set a reserve floor first, then spend only what is above it.
- Remember that loans above the 2026 conforming limit of $832,750 (per FHFA) are jumbo loans, where insurance and down payment rules differ.
Measure PMI savings per extra $1,000 of down payment, and months of reserves left after closing.
6. Choose Between Paying Insurance Monthly, Upfront, or Financing It
How you pay changes the cash you need at closing and what you owe later. Both the FHA upfront MIP and the VA funding fee can be financed into the loan, and PMI can be paid monthly, as a single premium, or built into the rate.
Illustration at an assumed 6.00% on 30 years. Financing the $5,911 FHA upfront MIP adds about $35 a month. Financing the $7,525 VA funding fee adds about $45 a month. Paying either in cash saves that monthly amount, and the simple payback is about 167 months, or roughly 14 years, before counting what the cash could earn elsewhere. If you expect to sell or refinance sooner, financing usually leaves you ahead. If you’ll hold the loan 15 years or more and have spare cash beyond your reserves, paying upfront can make sense.
Lender-paid PMI (LPMI) works differently. Suppose it raises the rate on the $332,500 loan from 6.00% to an assumed 6.50%. Principal and interest rise about $108 a month, against $194 for borrower-paid PMI. That looks cheaper, and under these assumptions it stays cheaper until roughly year 17, since borrower-paid PMI ends near month 117 and the higher rate does not. The pitfall is choosing LPMI without noticing that the rate increase continues unless you refinance. Because every option also moves your cash to close, review how to read a closing cost estimate sheet before you pick a structure.
- Request quotes for each structure: financed, paid in cash, monthly PMI, single premium, and LPMI.
- Estimate how long you will realistically keep the loan.
- Compute break-even in months for each pairing.
Measure the break-even month and total interest plus insurance over your expected holding period, not the full 30 years.
7. Check Exemptions and Waivers Before You Compare
Veterans with a VA service-connected disability rating that carries compensation are generally exempt from the VA funding fee. So are Purple Heart recipients and eligible surviving spouses receiving Dependency and Indemnity Compensation. The VA’s funding fee page lists current exemptions and rates. For an exempt borrower, VA has no upfront insurance charge and no monthly premium, which changes the whole comparison. If you’re a service member or retiree, see our guides on mortgages for active duty military and mortgages for retired military.
Illustration: a veteran with a disability rating buys the $350,000 home with no down payment and an assumed 6.00% rate.
- VA, exempt: loan $350,000, payment about $2,098, with no funding fee and no monthly insurance.
- FHA, 3.5% down: about $2,215 a month, plus $12,250 down and $5,911 upfront MIP financed.
- Conventional, 5% down: about $2,187 a month, plus $17,500 down.
That is roughly $117 a month less than FHA and $89 less than conventional, with the most cash kept in your pocket. A non-exempt VA borrower in the earlier example paid a $7,525 financed fee, and the exempt borrower avoids it entirely.
The usual mistake is skipping VA because a down payment seems available, or because of a rumor that VA loans carry hidden monthly PMI. They don’t. A larger down payment does lower the funding fee percentage, but it is a choice, not a requirement.
- Request your Certificate of Eligibility.
- Confirm your exemption status on va.gov or through your award letter.
- Run VA first, then FHA and conventional against it.
Measure the upfront fee and monthly insurance under VA against the next-best program, in both dollars per month and total cash to close.
8. Plan Your Exit: Refinance or Remove Insurance Later
Insurance cost doesn’t end at closing, so choose a loan with the exit in mind. FHA borrowers with low down payments usually exit by refinancing, and conventional borrowers by removing PMI.
Illustration: the FHA borrower from Strategy 2 pays on schedule for five years. The balance falls to about $319,800, and the home appraises at an assumed $410,000, putting LTV near 78%. Refinancing into a conventional loan removes the roughly $150 monthly MIP. If refinance closing costs are an assumed $6,500 and the new rate matches the old, break-even is about 43 months. A higher new rate would stretch that, and a lower one would shorten it. A refinance closing costs breakdown helps you pressure-test that $6,500 assumption.
For conventional PMI, you can generally request cancellation at 80% LTV of the original value if you’re current on payments, and PMI terminates automatically at 78% on schedule. Lenders may require a seasoning period or a new appraisal if you’re relying on appreciation, and requirements vary. Confirm yours through the CFPB’s guidance and your servicer.
The mistake is refinancing without comparing closing costs against the insurance savings, or refinancing into a higher rate that wipes out the gain.
- Set a calendar reminder to check LTV every six months.
- Ask your servicer what documentation they need to cancel PMI and whether they require an appraisal.
- Get a refinance quote and divide closing costs by the monthly savings.
- Compare against simply waiting for automatic termination.
Measure break-even in months, and track current LTV against the 80% and 78% thresholds.
Frequently asked questions about mortgage insurance costs in Richmond
Does a VA loan have monthly mortgage insurance?
No, VA loans have no monthly mortgage insurance. They carry a one-time funding fee unless you qualify for an exemption.
Is FHA mortgage insurance cheaper than PMI?
It depends on your credit score and down payment. FHA annual MIP is largely flat across scores, while PMI drops sharply for higher scores, so strong credit often favors conventional.
How long do I pay FHA mortgage insurance?
With under 10% down, annual MIP generally lasts for the life of the loan; with 10% or more down, it generally lasts 11 years. Confirm the current schedule on hud.gov.
Can I remove PMI on a conventional loan?
Yes, you can generally request removal at 80% LTV, and it terminates automatically at 78% on the original schedule. Lender requirements on payment history and appraisals apply.
What is the VA funding fee?
The VA funding fee is a one-time charge that helps fund the VA loan program. The percentage depends on down payment and whether it is your first use, and it can be financed.
Who is exempt from the VA funding fee?
Veterans receiving VA disability compensation, Purple Heart recipients, and eligible surviving spouses are generally exempt. Check va.gov for the current list.
What is lender-paid PMI?
Lender-paid PMI means the lender covers the premium in exchange for a higher interest rate. The higher rate generally stays for the life of the loan unless you refinance.
Does a higher down payment lower mortgage insurance?
On conventional loans, yes: each tier lowers the PMI rate and PMI ends at 20% down. On FHA, a down payment of 10% or more shortens the MIP duration.
What credit score do I need to compare FHA and conventional?
There is no single crossover score, but quote both at your actual score. Duane Buziak starts with a NoTouch Credit Pull so you can compare without a hard inquiry.
How do I compare mortgage insurance quotes from different lenders?
Compare the upfront charge, monthly premium, duration, and rate on the same loan amount and down payment. Mismatched assumptions make the comparison meaningless.
Where to Start When Insurance Quotes Don’t Line Up
Start with eligibility. If you’re a veteran or service member, confirm your VA entitlement and exemption status first, because it can remove insurance costs entirely. Then run the side-by-side dollar example on the same price, down payment, and rate for every program you qualify for. Only after that is it worth tuning credit and down payment, since those adjust conventional PMI more than anything else.
One caution: don’t chase the lowest monthly number if it comes with insurance you can’t remove. Check duration first, then payment.
Whether you’re a veteran ready to use your hard-earned benefits or a homebuyer exploring your financing options, your path to homeownership starts with expert guidance you can trust. Connect with Duane today for a personalized consultation and discover the mortgage solution tailored to your unique goals in the Stafford County and Richmond area. Richmond Home Loans by Duane Buziak is ready when you are.