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

Private Mortgage Insurance, or PMI, is an additional monthly fee required by most lenders when the down payment on a home is less than 20 percent. Here are some ways to get around PMI.

Difficulty: Moderately Easy

Instructions

Things You'll Need:

• Online Mortgage/finance Services

1. Gather or borrow enough funds to make your down payment greater than 20 percent.

2. Buy a less expensive property to get your down payment to or above 20 percent.

3. Increase the amount of the purchase price of the home and have seller credit the additional money toward a greater down payment.

4. Find a lender who will charge a slightly higher interest rate in lieu of requiring PMI. The benefit here is that you'll be paying a slightly higher payment due to the higher interest rate, but all the interest will be tax deductible.

Tips & Warnings

• When the loan is paid down to 20% of the original loan amount (not purchase price) the homeowner may request that the PMI be removed with the necessary
• documentation (an appraisal). The lender will not notify the borrower (as
• it is not currently required by law) when the homeowner has reached that magic
• number of 80% loan to value. Legislation is pending currently to make lenders more responsive to borrowers regarding notification and removal of PMI.

on 11/22/2005 If you can put down 10%, then borrow 80% on a first mortgage, the remaining 10% on a second. No PMI, all interest is deductible.

on 11/22/2005 A borrower may also apply for a "piggyback" loan, splitting the 80% loan and the remainder 20%. PMI will thereby be dropped or not issued.

Ginger Faria
Mortgage Broker

on 11/22/2005 You don't necessarily need to pay the mortgage down to 80% of the original loan to get rid of the PMI. If the value of your home rises so that the magic 80% loan to value is reached, you can request to have the PMI dropped. You would need to have an appraisal done when this value is reached.

on 11/22/2005 Get a 1st mortgage for 80%, and a 15% 2nd mortgage. There will be no PMI! The interest is higher on the 2nd, but the interest is tax deductible, and MI is NOT.