"How to Get a Loan Without Private Mortgage Insurance (PMI)"

For many individuals and families who are looking at purchasing a home, or any other real estate, private mortgage insurance (PMI) can be a major cost factor. This kind of insurance is expensive and doesn’t really help the borrower insure anything. Rather, it’s a general requirement imposed on property sales by the lender. Buyers have options when it comes to private mortgage insurance, but not all consumers understand how this insurance works, and more home buyers just can’t figure out their own specific requirements. Here are some basic steps for getting rid of this burdensome insurance element.

Learn about the use of private mortgage insurance. As mentioned, this insurance policy really protects the lender. It’s just a way of further ensuring that the borrower will not default on the loan. Since most serious home buyers have already done the research to make sure they will not have to default, PMI can be just another expensive extra when responsible buyers go to settlement. The first step in getting rid of PMI is to understand that in most cases, you don’t need this coverage, and if you can get out of it, it generally works to your advantage.

Look at the cost of private mortgage insurance. A private mortgage insurance policy can be as much as several thousand dollars tacked onto your mortgage or sale price. When you have a good idea of what PMI will cost you, you’ll be better able to make decisions about whether it’s worth trying to cut this extra cost from your real estate lending contract.

Collect the largest down payment possible. If you can provide 20 percent or more of the entire loan amount up front, you can avoid private mortgage insurance entirely. Look at all your assets and cash flows to see if you can use this common strategy for avoiding this insurance.

Check out alternative lending practices. If you simply cannot amass the 20 percent down payment, which many borrowers can’t, then you still have options for avoiding PMI through talking to your lender about getting other kinds of specialty loans that don’t include this requirement.

In general, experienced homebuyers and others who know about the mortgage industry understand that many elements of traditional home loans include a kind of “quid pro quo” approach where the lender is willing to negotiate over various aspects of the loan agreement.
One kind of alternative loan, called a “piggyback loan,” splits the original loan into two pieces in order to help the borrower be at the 20 percent mark that nullifies the need for PMI.
Another alternative is to buy-out the PMI. This will be less expensive in the long run and reputable mortgage lenders will be able to explore prices for you.

Call me today to discuss your options.

craig picCraig Thibeau
Senior Loan Officer
North East Financial Middletown, CT
Ph 860-334-1354
NMLS 398576 Company NMLS 117273
craig@northeast-mortgage.com
www.northeast-mortgage.com