How Can I Avoid Paying Private Mortgage Insurance (PMI)?
There are a few options when looking to avoid paying private mortgage insurance on your conventional loan. Private mortgage insurance is tacked on to a conventional loan when less than 20% down payment is paid.
How Can I Avoid Paying PMI without 20% Equity?
The first and most obvious way to avoid paying PMI is to pay the full 20% down payment but of course, the majority of us are not blissfully sitting on a pile of cash in search of a home.
Find a conventional loan with low down payment requirement and no mortgage insurance. Yes, such programs exist and if you have a credit score of 620 or higher talk to your lender as you’ll likely qualify for many of the programs.
Find a lender-paid MIP or an LPMI. While this option does not eliminate having to pay the insurance premium, it changes the structure in which you pay. This option allows the flexibility to either pay a lump sum which will be determined by the lender, or the lender can make an adjustment to the mortgage rate which will ultimately result in a larger mortgage payment every month. This will remove having to make a secondary or separate payment for the insurance premium.
If you are currently or have served previously in the military you can seek out a VA Loan. VA loans require no down payment, no mortgage insurance, low rates and there are loose credit requirements -– this should be the first option for any military veteran.