Is there a way to avoid paying outrageous PMI if you plan to finance 100% of a new home?

Question

My husband and I are planning to purchase a new home in the next couple of months. I know that traditionally, without 20% down payment, banks require you to pay PMI. While I understand the bank's perspective on this, as a buyer - it seems like money thrown to the wind every month.
My husband has impeccable credit, so we can get a good interest rate. We just aren't in a position to put 20% down at this time. I have heard about 80/20 loans, but I am not sure if that is a better option. I am only intrested in a 30 year fixed rate mortgage - no ARM! Do I have any other options other than PMI???

Answer 1

Every buyer hates paying PMI but unfortunately when you borrow more than 80% of the homes value you have to pay it. Your only options are:
1) An 80% 1st mtg and 20% second mtg- you will have 2 monthly payments and 2nd mortgage rates are higher so sometimes this is not beneficial.
2) A 75% 1st mtg and 25% second mtg-same draw backs as listed above.
3) If you qualify for a VA loan they will finance up to 100% without PMI.
4) Rural Development programs also do not have PMI.
One benefit of PMI effective this year you can take a tax deduction on the PMI paid if you fall in the designated income bracket.

Now, there are some loan programs that have a reduced PMI premium:
FHA
My Community Mortgage

Lender paid MI- is an option but you will be trading in your lower rate for this. However, I would suggest you get a quote on this to see if it would be beneficial for you.
Let me know if you have any other questions. Good Luck.

Answer 2

An 80/20 or 75/25 loan eliminates the PMI requirement. The first mortgage has a lower interest rate based on credit and other items. The second mortgage has a higher interest rate, also based on credit, and comes in different flavors, i.e. terms.

Be sure the second mortgage is a LOAN and NOT a HELOC (home equity line of credit). And make absolutely certain you understand the "term" portion of the second mortgage.

Answer 3

Try these 3 tactics;

a; a lease option to buy and ask the seller to
pay the PMI [or buy direct and put in the contract
that the seller reimburse you for the PMI]

b; find a foreclosure home and see if you can
get it for 25-50% below market value.
Then, the lender is insured.

c. Create a small home business that excites you and have it pay the PMI and also
earn you tons of money. [no joke, I suggest
people do this all the time to
help pay bills and have an outside income.]
just NOT mlm or other BS thing.
IT must be something you love.

i will help if you wish, no cost

Answer 4

you can get a loan with lender paid mortgage insurance (LPMI). It wouldn't matter if you had an ARM or not. Less than 20 % down , you are going to pay MI. MI is now deductible. 80/20 may be the way to go, you'll get a good rate on the 1st and with extra payments to principal you can pay down the 2nd early, and get rid of the higher rate payment

Answer 5

If the merchandising fee is $120k you will would desire to place down a minimum of $24k to circumvent PMI. The eighty% discern is predicated upon the decrease of the appraised fee or the merchandising fee. do no longer positioned ANY inventory in internet-based valuations. they're often ineffective.

Answer 6

there is discounted PMI with MyCommunity/HomePossible programs..you would need to qualify.

FHA is 2.25% down and it has very good PMI rates....

or you can take a higher interest rate and have the lender paid PMI product

Answer 7

I'm pretty sure most will require it. However, in the US you should be able to deduct your PMI payments come income tax time.

Answer 8

You can do an 80% first that is FIXED and you can do a 20% that has a fixed feature to it, which is a popular option.

Answer 9

Pretty much any lender will require PMI if you don't have 20% equity in your home.