Private mortgage insurance, commonly called PMI, is one of the most frequently misunderstood parts of buying a home with less than 20% down. Many buyers assume that every conventional mortgage automatically requires PMI whenever the down payment is below 20%. While that is often true for conforming conventional loans, jumbo mortgages can work differently.
PMI is not universally required on jumbo mortgages. Because jumbo loans are not purchased under the standard Fannie Mae and Freddie Mac conforming guidelines, individual banks, mortgage companies, credit unions, and private investors can establish their own requirements. Some jumbo programs require mortgage insurance when the first mortgage exceeds 80% of the property value. Other programs offer 90% or even 95% financing without a separate monthly PMI payment.
The absence of monthly PMI does not necessarily mean the additional lending risk is free. A lender may account for the higher loan-to-value ratio through a slightly higher interest rate, additional reserve requirements, stricter credit standards, a lender-paid insurance arrangement, or a combination first and second mortgage.
For qualified borrowers, these alternatives can still provide a valuable way to purchase an expensive home without waiting years to accumulate a 20% down payment.
📊 What Is Private Mortgage Insurance?
PMI is an insurance policy that protects the mortgage lender rather than the homebuyer. If the borrower stops making payments and the property is eventually sold for less than the outstanding mortgage balance, the insurance may reimburse the lender for part of its loss.
Mortgage insurance reduces the lender’s risk and makes it possible for borrowers to obtain certain loans with smaller down payments. However, it also increases the borrower’s housing expense. PMI may be charged monthly, collected as a single premium at closing, financed into the loan, or paid by the lender in exchange for different mortgage pricing.
The Consumer Financial Protection Bureau explains that borrowers making down payments below 20% typically need mortgage insurance. On conventional loans, the coverage is generally obtained from a private mortgage insurance company, and its cost can vary based on the borrower’s credit, down payment, loan characteristics, and other risk factors.
PMI should not be confused with homeowners insurance. Homeowners insurance protects the home against covered property losses. PMI protects the lender or bank against certain losses associated with borrower default.
💰 What Is Considered a Jumbo Mortgage in 2026?
A jumbo mortgage is a conventional home loan with a balance above the conforming loan limit that applies to the property’s location. Conforming limits are established annually by the Federal Housing Finance Agency, or FHFA, for loans eligible to be purchased by Fannie Mae and Freddie Mac.
For 2026, the baseline conforming loan limit for a one-unit property in most areas of the United States is $832,750. This represents an increase from the 2025 baseline limit of $806,500.
High-cost counties can have higher limits based on local home values. The maximum one-unit conforming loan limit for high-cost areas in 2026 is $1,249,125, which is 150% of the national baseline limit. Special limits apply in Alaska, Hawaii, etc. In those areas, the 2026 one-unit baseline is $1,249,125, while the maximum ceiling is $1,873,675.
This means a mortgage of $900,000 could be considered jumbo in a standard-cost county where the limit is $832,750. The same $900,000 mortgage may remain a conforming high-balance loan in a county with a higher local limit.
The property’s county matters. Buyers should not assume that every loan above $832,750 is automatically jumbo because high-cost conforming limits may apply.
🗺️ Conforming High-Balance Loans Versus Jumbo Loans
A high-balance conforming loan is not the same as a jumbo loan. High-balance loans exceed the national baseline limit but remain within the higher county-specific conforming limit.
For example, consider a one-unit property in a county where the 2026 limit is the maximum $1,249,125. A $1.1 million mortgage could potentially qualify as a conforming high-balance loan. A mortgage above $1,249,125 would generally be considered jumbo in that county.
This distinction is particularly important when discussing PMI. Fannie Mae requires mortgage insurance coverage on eligible high-balance loans when the loan-to-value ratio exceeds 80%. Therefore, a high-balance conforming loan with less than 20% down will generally follow conforming mortgage insurance requirements rather than private jumbo-program rules.
A true jumbo loan is funded outside the standard conforming framework. The lender or investor determines whether PMI is required, what maximum financing is available, and how the increased risk will be priced.
🔍 Is PMI Always Required With Less Than 20% Down?
PMI is not always required on jumbo mortgages with less than 20% down. Some mortgage companies offer single-loan jumbo programs with no separate monthly mortgage insurance, even when financing 85%, 90%, or 95% of the purchase price.
These programs are generally designed for borrowers with strong overall financial profiles. The lender may evaluate several compensating factors, including:
- Excellent or very good credit
- Stable employment and documented income
- Manageable debt-to-income ratios
- Significant cash reserves after closing
- A strong history of managing mortgage or housing payments
- An acceptable property type and location
- Limited additional financed properties
- A reasonable loan amount for the down payment being made
A lender may offer no monthly PMI because it retains the loan in its own portfolio or sells it to a private investor with different risk standards. The lender may also build part of the risk cost into the interest rate rather than charging a visible monthly insurance premium.
Borrowers should compare the entire loan package rather than focusing only on whether the payment includes a line item labeled PMI.
🏦 Why Jumbo PMI Rules Vary by Lender
Conforming mortgages are subject to standardized eligibility and mortgage insurance requirements because they are designed for purchase by Fannie Mae or Freddie Mac. Jumbo loans do not fit within those conforming limits, so they are funded through private mortgage markets.
One lender may permit 90% jumbo financing without monthly PMI, while another may require mortgage insurance at the same loan-to-value ratio. A third lender may limit its standard jumbo loan to 80% financing but offer a combination first and second mortgage for buyers with smaller down payments.
Jumbo loan requirements may also change depending on:
- The requested loan amount
- The down payment
- The borrower’s credit score
- The property’s occupancy
- Whether the property is a house, condominium, or multi-unit property
- The number of financed properties owned
- The borrower’s employment type
- The size of the required financial reserves
- Whether the loan has a fixed or adjustable interest rate
This variation is why borrowers shopping for a low-down-payment jumbo mortgage should compare more than one program. A borrower who receives a 20% down requirement from one lender may still qualify for a 10% or 5% down option through another.
🔗 How an 80-10-10 Piggyback Loan Works
An 80-10-10 piggyback mortgage combines two loans with a 10% down payment.
The financing is typically divided as follows:
- The first mortgage finances 80% of the purchase price.
- The second mortgage finances 10% of the purchase price.
- The buyer contributes the remaining 10% as a down payment.
Because the first mortgage is limited to 80% of the property value, it may not require private mortgage insurance. The second mortgage fills the gap between the first loan and the buyer’s down payment.
For example, assume a buyer is purchasing a $1.5 million home. An 80-10-10 structure could consist of:
- A $1.2 million first mortgage
- A $150,000 second mortgage
- A $150,000 down payment
The buyer is financing 90% of the property’s value, but the first mortgage has an 80% loan-to-value ratio. This can allow the first mortgage to avoid traditional PMI, depending on the lender’s program.
The second mortgage may be a fixed-rate home equity loan or an adjustable-rate home equity line of credit. Its interest rate will normally be higher than the rate on the first mortgage.
🏠 How an 80-15-5 Piggyback Loan Works
An 80-15-5 piggyback loan is designed for buyers making a 5% down payment.
The structure generally includes:
- An 80% first mortgage
- A 15% second mortgage
- A 5% buyer down payment
Using the same $1.5 million purchase price, the financing could be divided into:
- A $1.2 million first mortgage
- A $225,000 second mortgage
- A $75,000 down payment
This structure gives the buyer 95% combined financing while keeping the first mortgage at 80% of the property’s value.
The 80-15-5 option can be particularly useful for high-income homebuyers who can comfortably afford the monthly payments but have not accumulated a traditional 20% down payment. It may also help buyers retain funds for renovations, moving costs, furnishings, emergency savings, or other investments.
Not every lender offers an 80-15-5 structure, and the maximum loan amounts can vary substantially. The borrower must also qualify while including the payment on both mortgages in the debt-to-income calculation.
🛡️ Why Piggyback Loans May Avoid PMI
A piggyback loan does not eliminate the lender’s risk. Instead, it divides the financing into two separate liens.
Traditional PMI requirements are normally based on the loan-to-value ratio of the first mortgage. By keeping the first mortgage at or below 80% of the property value, the structure may avoid mortgage insurance on that loan even though the borrower’s combined financing exceeds 80%.
The CFPB describes a piggyback mortgage as a home equity loan or HELOC obtained at the same time as the main mortgage. Its purpose is to provide additional financing so a borrower with a smaller down payment may qualify for a first mortgage without paying PMI. Also noted that the second mortgage normally carries a higher rate and may have an adjustable rate.
In jumbo lending, 80-10-10 and 80-15-5 structures remain useful tools for borrowers who want to minimize their initial cash contribution while avoiding a traditional monthly PMI charge.
Availability depends on the first-mortgage lender, the second-mortgage provider, the loan amount, and the borrower’s financial profile.
📉 Comparing PMI With a Piggyback Second Mortgage
Avoiding PMI does not automatically make a piggyback loan less expensive. The correct comparison should include the payment, interest rate, closing costs, and long-term cost of both mortgages.
A single 90% jumbo mortgage might have a competitive fixed interest rate and no separately disclosed monthly PMI. An 80-10-10 structure might provide a lower rate on the first mortgage but a substantially higher rate on the second loan.
Likewise, an 80-15-5 combination may reduce the buyer’s cash requirement, but the 15% second mortgage can create a meaningful monthly payment.
Before selecting a structure, buyers should compare:
- The interest rate on the first mortgage
- The interest rate on the second mortgage
- Whether the second mortgage rate is fixed or adjustable
- Monthly PMI, if applicable
- Lender-paid mortgage insurance costs
- Loan origination charges
- Appraisal and closing costs
- The estimated payment over the expected ownership period
- Early payoff or prepayment provisions
- Future refinancing flexibility
- Closing Costs
It’s important to compare the total cost of a piggyback structure with the cost of a single mortgage that includes mortgage insurance. It also cautions that refinancing can be more complicated when a second mortgage is attached to the property.
💵 Benefits of Lower-Down-Payment Jumbo Mortgages
The most obvious benefit of a lower-down-payment jumbo loan is that the buyer does not have to contribute 20% of an expensive home’s purchase price.
On a $1.5 million home, a 20% down payment would equal $300,000. A 10% down payment would equal $150,000, while a 5% down payment would equal $75,000.
Reducing the down payment could allow the buyer to retain between $150,000 and $225,000. That liquidity may be valuable even when the borrower has enough assets to make the larger down payment.
Homebuyers may prefer to retain cash for:
- Repairs or renovations
- Furniture and moving expenses
- Property taxes and homeowners insurance
- Emergency reserves
- Business working capital
- Education expenses
- Retirement or investment accounts
- The purchase of another property
- Paying off higher-cost debt
A lower down payment can also help buyers enter a competitive housing market sooner. Waiting to save an additional 10% or 15% could take years, particularly in expensive markets where home prices may continue changing while the buyer saves.
👨👩👧 Why Low-Down-Payment Jumbo Loans Help First-Time Buyers
Not every jumbo borrower is an established homeowner bringing substantial equity from a previous property. Many first-time buyers work in high-paying fields but have had limited time to accumulate savings.
Doctors, attorneys, executives, engineers, technology professionals, business owners, and other high-income borrowers may earn enough to support a large mortgage payment while still lacking the cash needed for a 20% down payment.
Some borrowers have directed their available funds toward:
- Medical or graduate school
- Student loan payments
- Building a new business
- Retirement contributions
- Relocation costs
- Childcare expenses
- Professional licensing and training
- Other long-term investments
A 5% or 10% down jumbo program may allow these borrowers to purchase a suitable home without exhausting their liquid assets. Strong income alone does not guarantee approval, but it may support the application when combined with good credit, adequate reserves, and a manageable debt-to-income ratio.
🔨 Retaining Cash for Improvements and Repairs
Higher-priced properties can still require substantial improvements after closing. A buyer may need funds for a new roof, updated kitchen, flooring, landscaping, appliances, hurricane protection, energy-efficiency upgrades, or other improvements.
Putting every available dollar into the down payment can leave the homeowner with limited flexibility after closing. Even if the larger down payment reduces the mortgage balance, the borrower may later need to use credit cards, personal loans, or a home equity loan to complete necessary work.
A lower-down-payment jumbo mortgage may allow the buyer to reserve funds for planned improvements from the beginning. This can be especially helpful when purchasing an older luxury property or a home that is structurally sound but cosmetically outdated.
The buyer should still retain sufficient emergency reserves and avoid using every remaining dollar immediately after closing.
📈 Preserving Funds for Other Investments
Some experienced buyers choose a lower down payment even when they have enough cash to put down 20% or more. Their goal may be to preserve liquidity for investments, business expansion, or the purchase of additional real estate.
Whether that strategy makes sense depends on the mortgage rate, expected investment return, taxes, risk tolerance, and the borrower’s overall financial plan. Investment returns are never guaranteed, while mortgage payments are contractual obligations.
The decision should not be based solely on the idea that keeping more money invested is always better. Buyers should consider how they would handle the mortgage payments if investment values declined, business income slowed, or an unexpected expense occurred.
For financially stable borrowers with strong reserves, a lower down payment may provide greater flexibility. For buyers with limited reserves or variable income, a larger down payment may offer more security and a lower monthly housing expense.
🧾 Credit, Income, and Reserve Requirements
Low-down-payment jumbo loans typically require stronger qualifications than standard conforming mortgages. Because the lender is financing a large percentage of an expensive property, the financial review can be more detailed.
Borrowers should expect the lender to evaluate:
- Credit scores and payment history
- Employment stability
- Salary, bonus, commission, or self-employment income
- Debt-to-income ratios
- Bank, retirement, and investment accounts
- Funds needed for closing
- Post-closing reserves
- The source of large deposits
- Other properties and mortgage obligations
- Property type and appraisal results
Reserve requirements are especially important. A lender may require enough verified assets to cover several months of mortgage payments after the down payment and closing costs have been paid.
The exact credit score and reserve requirement will depend on the loan amount, property, occupancy, and financing percentage. A borrower seeking 95% jumbo financing will generally face more restrictive standards than someone making a 15% or 20% down payment.
⚖️ Potential Drawbacks of Avoiding PMI
Avoiding a monthly PMI charge can be beneficial, but buyers should understand the possible tradeoffs.
A no-PMI jumbo mortgage may have a higher interest rate than an otherwise comparable loan with borrower-paid mortgage insurance. Because the higher rate applies to the entire first mortgage balance, it could cost more than PMI over time.
A piggyback second mortgage may also create:
- A second monthly payment
- A higher or adjustable interest rate
- Additional closing costs with a second mortgage
- Less refinancing flexibility
- More complicated payoff requirements
- Greater exposure if property values decline
A second lender may need to approve a future refinance or agree to keep its lien in a subordinate position. Alternatively, the borrower may need to pay off the second mortgage when refinancing.
Buyers should also consider that PMI on some conventional loans may eventually be canceled after the mortgage reaches the required equity level. A higher permanent interest rate generally does not disappear unless the borrower refinances.
📋 Questions to Ask Before Selecting a Jumbo Loan
Before deciding on a low-down-payment jumbo mortgage, ask the lender for a complete breakdown of each available option.
Important questions include:
- Is monthly PMI required?
- Is any mortgage insurance cost included in the interest rate?
- Is the quoted rate higher because the lender is paying for insurance?
- Is a single 90% or 95% jumbo loan available?
- Can the loan be structured as an 80-10-10 or 80-15-5?
- Is the second mortgage fixed or adjustable?
- What is the maximum first-mortgage amount?
- What are the minimum credit requirements?
- How many months of reserves are required?
- Can retirement assets count toward the reserve requirement?
- Are condominiums or multi-unit properties eligible?
- Are there restrictions for first-time buyers?
- Is there a prepayment penalty?
- What happens to the second mortgage during a refinance?
Request side-by-side Loan Estimates whenever possible. Comparing written disclosures is more reliable than comparing only advertised rates or estimated monthly payments.
✅ Final Thoughts on PMI and Jumbo Mortgages
PMI is not automatically required on every jumbo mortgage with less than 20% down. Unlike conforming loans, jumbo mortgages are governed by the requirements of the individual lender or private investor.
Some borrowers can obtain a single jumbo mortgage with 10% or even 5% down and no separate monthly PMI payment. Other buyers may use an 80-10-10 or 80-15-5 piggyback structure to keep the first mortgage at 80% of the property value.
These options can help first-time and experienced homebuyers retain cash for improvements, emergency reserves, business needs, investments, or other financial priorities. However, avoiding PMI should not be the only goal. The interest rates, second-mortgage payment, closing costs, reserve requirements, and total long-term expense must all be considered.
The best structure will depend on the purchase price, property location, credit profile, income, available assets, and length of time the buyer expects to keep the mortgage. Comparing a single no-PMI jumbo loan, a jumbo loan with mortgage insurance, and a piggyback combination can help identify the most practical and cost-effective solution.
Buyers can obtain a personalized quote today by calling above, or just submit the Quick Call Form on this page. Specialist are available 7 days a week.
