Did you know there are alternatives to paying mortgage insurances on a home loan? That’s right there are a handful of lenders that offer no PMI loans in today’s marketplace. There are now other options for getting a no PMI mortgage. If you want to not pay that extra $100 or $200 per month, there are options available in the 2017 home financing market to help you reach your goal. You need help learning about no PMI mortgage programs that may be available with your qualifications.
Lender Paid Mortgage Insurance
Some lenders will allow you to use LPMI which basically means that the lender is paying the PMI for you. Sounds like a great deal, right? Well the down side is that you will accept having a .75% mortgage rate increase. Your payment will be higher, but not paying PMI, that can be a good deal. So in 2017, lender paid mortgage insurance options are the most sought after no PMI loans in most states.
This could work out well for you, but you will want to talk about lender paid mortgage insurance with your lender carefully before you do it. If you do opt for LPMI, you will not be able to cancel the insurance when you reach 20% equity. Your only option to get rid of PMI is to refinance into a no PMI loan.
Some buyers decide that lender paid mortgage insurance is a good deal and they go for it. They like the fact that you can buy more house if you do not have to save for a 20% down payment. If you do not have to put as much money down, you can use that thousands of extra cash to pay for home improvements. This is one of the many reasons people are raving about no PMI mortgage financing.
Note that money that you pay for mortgage interest can be written off each year, but you cannot do that with PMI payments. So you will want to avoid paying PMI if you can.
A popular way to avoid PMI is to bring at least a 10% down payment. Rather than getting one 90% mortgage, you will get two mortgages that have been piggybacked onto one another. A common deal is to have an 80% first mortgage and a 10% second mortgage, followed by a 10% down payment. This arrangement can avoid PMI. Piggyback loans are definitely the “old school” method for no PMI loans.
Shop Around for No PMI Loans
There are lenders available that advertise no PMI loans if you bring a 5% down payment to the table. The most likely way they are able to offer this is by paying the PMI for you and charging you a higher interest rate.
Is this a good deal? It depends. We advise that you run the numbers on the mortgage with and without PMI at the different rates. See which no PMI mortgage requires you to pay more.
If you have a conventional loan and you are nearing 20% equity, you need to request that your lender cancel your PMI. If you do not request it, it is likely that the lender will continue to charge you the insurance. So don’t give away money – tell your lender to cancel your mortgage insurance.
However, if you have an FHA insured loan, you will have to pay mortgage insurance for the entire life of the loan, regardless of what your amount of equity is. This obviously is a bad deal, so when you are close to 20% equity, we strongly advise that you consider refinancing out of your FHA mortgage. There are many loan products available once you have 20% equity to avoid paying PMI.
Many people do not have the ability to put 20% down to buy their home. Or, they may have the down payment, but putting down 20% would eat up most or all of their available cash.
Most people want to do home improvements soon after they buy a home. So rather than having to put down 20% to avoid PMI, it is a good idea to avoid PMI in another way if you can.
We like the no PMI mortgage option of the lender paying for mortgage insurance. Even if you have to pay a higher rate, remember that you can write off that mortgage interest at tax time. You can’t write off your PMI payments.