The down payment you actually need is probably smaller than you think. Here's how much a down payment on a house really costs in Colorado — from 0% VA loans to 3.5% FHA — plus the assistance programs that can cover part of it.
What Is Mortgage Insurance? PMI, MIP & VA Explained
The short answer: Mortgage insurance is a monthly fee that protects the lender, not you, if you default on your loan. Conventional loans typically require private mortgage insurance (PMI) when you put less than 20% down; FHA loans charge a mortgage insurance premium (MIP) instead. VA loans never carry monthly mortgage insurance. PMI on conventional loans auto-terminates at 78% loan-to-value under federal law.
If you are budgeting for a home in Colorado Springs and you do not have 20% to put down, mortgage insurance is probably going to show up on your loan estimate. Most first-time buyers see the line item and assume it protects them. It does not. Here is what it actually is, who pays it, and how to make it go away.
What is mortgage insurance (PMI) in plain English?
Mortgage insurance is coverage that pays the lender if you stop making payments and the home sells for less than what you owe. You pay the premium, but the lender is the beneficiary. It exists because low-down-payment loans are statistically riskier, and the insurance is what makes lenders comfortable approving them.
That sounds like a raw deal, but it is also the reason you can buy a home with far less than 20% down. Without mortgage insurance, conventional lenders would simply require larger down payments, and a lot of buyers — especially younger military families moving to Fort Carson or Peterson Space Force Base on PCS orders — would be locked out of the market for years while they saved.
There are several flavors, and they behave very differently. The big three are private mortgage insurance (PMI) on conventional loans, the mortgage insurance premium (MIP) on Federal Housing Administration (FHA) loans, and the VA structure, which charges no monthly mortgage insurance at all.
How does private mortgage insurance work on conventional loans?
Conventional loans — the standard loans that fall within Federal Housing Finance Agency (FHFA) conforming loan limits — typically require private mortgage insurance when the down payment is less than 20%. For 2026, the conforming loan limit in El Paso County and most of Colorado is $832,750, so a wide range of local price points fit inside a conventional loan. PMI is also what makes low-down-payment lending work at scale: Fannie Mae and Freddie Mac require it on sub-20%-down conventional loans they purchase on the secondary mortgage market.
PMI is priced based on risk. Your credit score, your down payment size, and your debt-to-income ratio all feed into the monthly premium, which typically adds about 0.5% to 1.5% of the original loan amount per year to the monthly mortgage payment. Borrowers with credit scores of 740 or above typically earn the best pricing tiers, which lowers both the interest rate and the PMI cost. A buyer with a thin down payment and a lower score pays noticeably more per month than a buyer with the same loan amount and strong credit — but PMI is also what lets conventional buyers qualify with as little as 3% to 5% down instead of waiting for 20%.
The critical feature of PMI — and the thing that makes it more borrower-friendly than FHA insurance — is that it is temporary by law. Under the federal Homeowners Protection Act, PMI auto-terminates when your loan balance reaches 78% of the home’s original value, and you can request removal once you reach 80% loan-to-value. You do not pay it for the life of the loan, unlike FHA’s MIP in most low-down-payment scenarios.
What is FHA mortgage insurance (MIP)?
FHA loans, backed by the Federal Housing Administration, do not use PMI. They charge their own version called the mortgage insurance premium, or MIP. It comes in two parts: an upfront MIP of 1.75% of the total loan amount, usually rolled into the balance, and an annual MIP paid monthly as part of your mortgage payment.
The tradeoff is access. FHA loans allow 3.5% down with a minimum credit score of 580, which makes them the workhorse program for buyers with limited savings or imperfect credit. The cost of that access is MIP that, unlike conventional PMI, generally does not cancel automatically: with less than 10% down, MIP lasts for the life of the loan (with 10% or more down, it ends after 11 years). For many FHA borrowers, the practical exit from MIP is refinancing into a conventional loan once they have built enough equity — keeping in mind that refinance closing costs commonly run about 2% to 5% of the loan amount.
That is not a knock on FHA. For a buyer in Colorado Springs who needs the lower credit threshold or the smaller down payment, FHA is often the right door into the market. The smart play is to treat MIP as a temporary toll and plan the conventional refinance for when equity and credit allow it.
Do VA and USDA loans have mortgage insurance?
VA loans never carry monthly mortgage insurance. This is one of the most underappreciated benefits of the program, and in a market as military-heavy as Colorado Springs it is a big deal. VA loans also require no down payment for eligible borrowers, and with full entitlement there is no VA loan limit. Instead, the VA charges a one-time VA funding fee — ranging from 0.5% to 3.3% of the loan amount depending on down payment and prior use — which can typically be financed into the loan. Many borrowers, including veterans receiving compensation for service-connected disabilities, are exempt from it entirely.
For an active-duty buyer using Basic Allowance for Housing (BAH) to qualify, the absence of monthly mortgage insurance means more of that allowance goes to principal, interest, property taxes, and homeowners insurance — and none of it to insuring the lender.
USDA loans, available for eligible rural buyers, offer 100% financing. They do not use PMI either; the U.S. Department of Agriculture charges an upfront guarantee fee plus an annual fee instead. In El Paso County, some outlying areas may qualify, so it is worth checking eligibility before assuming USDA is off the table.
Jumbo loans — those above the conforming limit — are set by individual lenders. Many jumbo programs require larger down payments instead of mortgage insurance, though structures vary.
How do the programs compare on mortgage insurance?
| Loan type | Monthly mortgage insurance | How it ends |
|---|---|---|
| Conventional | PMI, typically required below 20% down (about 0.5%–1.5%/year) | Auto-terminates at 78% LTV; removal can be requested at 80% LTV |
| FHA | Upfront MIP (1.75%) plus annual MIP paid monthly | Life of loan under 10% down; 11 years with 10%+ down; or refinance to conventional |
| VA | None — one-time VA funding fee instead (0.5%–3.3%) | Nothing monthly to remove |
| USDA | No PMI; upfront guarantee fee plus annual fee | Per program rules |
How do you get rid of mortgage insurance?
On a conventional loan, you have three main paths. First, wait: under the Homeowners Protection Act, PMI auto-terminates at 78% loan-to-value based on the original value of the home, as long as you are current on payments. Second, ask: once you reach 80% loan-to-value, you can request removal from your servicer in writing. Third, leverage appreciation: if Colorado home values have pushed your equity past the threshold faster than your amortization schedule, talk to your servicer about removal based on current value, which may require a new appraisal.
On an FHA loan, the realistic exit is a refinance into a conventional loan once your equity and credit support it. Run the math first, since closing costs of roughly 2% to 5% of the loan amount need to be recovered through the monthly savings.
On a VA loan, there is nothing to remove. And if rates drop later, the Interest Rate Reduction Refinance Loan (IRRRL) gives VA borrowers a streamlined path to a lower rate without ever adding mortgage insurance.
Is paying mortgage insurance worth it to buy sooner?
Often, yes. The alternative to paying PMI is usually waiting years to save a full 20% down while home prices and rents move on without you. Mortgage insurance is a finite, removable cost on a conventional loan; missed appreciation and years of rent are gone for good. The honest answer depends on your numbers, your timeline, and how fast you can reach 80% loan-to-value.
Colorado buyers also have tools to shrink the problem. The Colorado Housing and Finance Authority (CHFA) offers down payment assistance programs, subject to income limits, that can boost your effective down payment and reduce the loan-to-value you start from. A bigger starting down payment means cheaper PMI and a faster path to canceling it.
What should you do next?
Before you accept any mortgage insurance quote, get your full picture priced: credit report pulled, debt-to-income ratio calculated, and conventional, FHA, and VA options compared side by side — the best fit depends on your financial situation. If you are a veteran or active-duty service member in the Pikes Peak region, start with VA eligibility, because no monthly mortgage insurance changes the entire comparison.
719 Lending Inc. (NMLS #1601989) is a Colorado Springs mortgage broker that shops multiple lenders to compare these structures for you. Call (844) 719-5363 to see what mortgage insurance, if any, your scenario actually requires.
Frequently asked questions
Does mortgage insurance protect me if I die or get disabled?
No. Mortgage insurance (PMI or FHA MIP) protects the lender if you default — not the homeowner. It is not life insurance or disability coverage. Products that pay off your mortgage if you die are sold separately as mortgage life insurance, which is a different thing entirely.
How do I avoid paying PMI on a conventional loan?
Put 20% or more down, use a VA loan if you are eligible (VA loans never carry monthly mortgage insurance), or explore lender-paid PMI structures where the cost is built into the rate. Down payment assistance through the Colorado Housing and Finance Authority (CHFA) can also help you start at a lower loan-to-value.
When does PMI automatically come off my mortgage?
Under the federal Homeowners Protection Act, PMI on a conventional loan auto-terminates when your balance reaches 78% of the home’s original value, provided you are current on payments. You can request removal earlier, at 80% loan-to-value.
Is FHA mortgage insurance the same as PMI?
No. PMI is private insurance on conventional loans and cancels under federal law. FHA’s MIP is a government premium with both upfront (1.75%) and monthly components, and with less than 10% down it can last the life of the loan; most FHA borrowers eliminate it by refinancing into a conventional loan once they have enough equity.
How much is PMI on a $300,000 or $400,000 loan?
At the typical 0.5% to 1.5% of the original loan amount per year, PMI on a $300,000 loan runs roughly $1,500 to $4,500 annually — about $125 to $375 per month. On a $400,000 loan, roughly $2,000 to $6,000 per year, or about $167 to $500 per month. Your exact premium depends on credit score, down payment size, and loan type.
719 Lending Inc. is a private mortgage broker and is not affiliated with the U.S. Department of Veterans Affairs, FHA, HUD, or any government agency.
719 Lending Inc., NMLS #1601989 · Equal Housing Opportunity · This article is educational only, is not a commitment to lend, and not all applicants will qualify. Rates referenced are national survey averages, not offered rates.
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