Yes, it is possible to avoid PMI without 20% down payment. There are several ways to do this, including taking out a piggyback mortgage, qualifying for a VA or USDA loan, opting for lender-paid PMI, building equity in your home, and negotiating with your lender. It’s important to research and discuss these options with a mortgage professional to determine the best approach for your situation.
Private Mortgage Insurance (PMI) is a type of insurance required by lenders when a borrower makes a down payment of less than 20% of the home’s purchase price. It protects the lender against the risk of default by the borrower. PMI adds an additional cost to your monthly mortgage payments, making homeownership less affordable. However, there are several ways to avoid PMI without making a 20% down payment. Here are some of the ways:
Piggyback mortgage
A piggyback mortgage is a second mortgage taken out at the same time as the first mortgage. The piggyback mortgage is used to cover the remaining balance of the purchase price after making a down payment of less than 20%. For example, if you make a 10% down payment on a $200,000 home, you would need a piggyback mortgage for $20,000 to avoid PMI.
VA loan
If you are a veteran or active-duty military, you may be eligible for a VA loan. VA loans do not require a down payment or PMI. However, there are certain eligibility requirements that you must meet to qualify for a VA loan.
USDA loan
If you are buying a home in a rural area, you may be eligible for a USDA loan. USDA loans do not require a down payment or PMI. However, there are income and location requirements that you must meet to qualify for a USDA loan.
Lender-paid PMI
With lender-paid PMI, the lender pays for the PMI on your behalf in exchange for a higher interest rate on your mortgage. This option may be beneficial for borrowers who have a good credit score and plan to stay in their home for a long time.
Build equity
You can avoid PMI by building equity in your home. Equity is the difference between the value of your home and the amount you owe on your mortgage. As you make mortgage payments, your equity will increase, and you may be able to request to have PMI removed once you reach a certain amount of equity in your home.
Negotiate with the lender
You can negotiate with your lender to waive PMI if you have a good credit score and are willing to pay a higher interest rate on your mortgage. This option may be beneficial for borrowers who plan to stay in their home for a long time.
How do I get my PMI waived?
To get your PMI waived, you will need to meet certain requirements set by your lender or loan servicer. Typically, you can request to have your PMI removed once you have built up enough equity in your home through mortgage payments. Some lenders may require a certain amount of equity, such as 20% of the home’s value. You can also explore options such as refinancing your mortgage or negotiating with your lender. It’s important to review your mortgage agreement and speak with your lender or loan servicer to determine the specific requirements for having your PMI waived.
How do I outsmart PMI?
There are several strategies you can use to outsmart PMI and avoid paying unnecessary insurance premiums. One approach is to make a larger down payment when purchasing your home, which can reduce the amount of your mortgage and the likelihood of needing PMI. You can also consider alternative loan programs, such as VA or USDA loans, that do not require PMI. Another option is to negotiate with your lender to waive the PMI or to consider lender-paid PMI, which involves paying a higher interest rate instead of a separate insurance premium. It’s important to research and explore your options to determine the best approach for your situation.
How can I get rid of my PMI before 20?
If you want to get rid of your PMI before reaching 20% equity in your home, you may be able to do so by making extra payments towards your principal balance or by making home improvements that increase the value of your property. Once you reach a certain amount of equity, typically 20%, you can request to have your PMI removed. You can also consider refinancing your mortgage to a loan with no PMI or negotiating with your lender to remove the PMI requirement. It’s important to review your mortgage agreement and speak with your lender to determine the specific requirements for having your PMI removed early.
Is it possible to not have PMI without 20 down?
Yes, it is possible to avoid PMI without making a 20% down payment. There are several ways to do this, including taking out a piggyback mortgage, qualifying for a VA or USDA loan, opting for lender-paid PMI, building equity in your home, and negotiating with your lender. It’s important to research and discuss these options with a mortgage professional to determine the best approach for your situation.
Conclusion
PMI is an additional cost that can make homeownership less affordable. However, there are several ways to avoid PMI without making a 20% down payment. You can explore options such as piggyback mortgages, VA loans, USDA loans, lender-paid PMI, building equity, and negotiating with your lender. It is important to do your research and speak with a mortgage professional to determine which option is best for you.
