{"id":2687,"date":"2017-09-25T14:29:27","date_gmt":"2017-09-25T19:29:27","guid":{"rendered":"https:\/\/riverbankfinance.com\/blog\/?p=2687"},"modified":"2017-09-25T14:30:33","modified_gmt":"2017-09-25T19:30:33","slug":"how-to-avoid-or-get-rid-of-pmi","status":"publish","type":"post","link":"https:\/\/riverbankfinance.com\/blog\/how-to-avoid-or-get-rid-of-pmi\/","title":{"rendered":"How to avoid or get rid of PMI"},"content":{"rendered":"

Private Mortgage Insurance (PMI) protects the lender in case you default on your loan. In most cases, unless you have a 20% down payment, you would have to pay PMI. But if that sounds like one more expense you can\u2019t afford, here are some ways you can avoid PMI or get rid of it if you\u2019re already paying for it.<\/span><\/p>\n

Lender-paid PMI<\/strong><\/h1>\n

The way PMI usually works is that you, the borrower, would have to pay an extra fee, along with your monthly mortgage. That extra fee can really squeeze your budget, especially if it\u2019s already tight. <\/span><\/p>\n

However, some lenders will offer to pay your PMI. Here\u2019s how that works: They\u2019d pay the full amount of the PMI up front, and you\u2019d have to pay it back in the form of interest. It would slightly increase your mortgage rate, meaning that you\u2019d have a higher monthly payment. <\/span><\/p>\n

To figure out whether this is a good option for you, you\u2019ll have to calculate whether the monthly cost of PMI would be more or less than the increase to your mortgage rate if your lender chooses to pay the PMI for you. Either way, the lender isn\u2019t really paying it \u2014 you are. It\u2019s just being distributed differently. <\/span><\/p>\n

20% Down Payment on a Conventional Loan<\/strong><\/h1>\n

The best, and most obvious, way to avoid PMI is to have a 20% down payment on a Conventional Loan. Since you\u2019re putting down 20%, the lender wouldn\u2019t need that extra protection against defaults. So you\u2019d be in the clear.<\/span><\/p>\n

However, if you couldn\u2019t afford a 20% down payment and had to opt for an FHA Loan, for example, you could still get rid of your PMI once you reach 20% in home equity. Some types of loans have PMI attached to them for their entire lifespan, so in that case, you\u2019d have to refinance to a Conventional Loan when you have 20% in home equity in order to drop the PMI.<\/span><\/p>\n

VA Loans<\/strong><\/h1>\n

If you are a veteran or are currently serving in the military, you are eligible for a VA Loan. The government created this loan program so that returning military members could purchase their own home with zero down payment, low monthly payments and more flexibility than traditional loans. The best part is, VA Loans require no PMI because the government provides a guaranty on the loan in case of default. So if you qualify, you can get a 15 or 30-year fixed VA Loan with zero down and no PMI. <\/span><\/p>\n

The gift of equity<\/strong><\/h1>\n

If you are purchasing your home from a family member, you can accept a gift of equity to lower the loan-to-value ratio. A gift of equity is when a family member sells you his or her house for a lower price than the listed price, and the difference can be used to make your down payment or pay off debt so you can qualify for the loan. <\/span><\/p>\n

You can\u2019t use a gift of equity on a VA Loan or Jumbo Loan. With an FHA Loan, you could also get a gift of equity from your in-laws or a non-profit organization. In any case, it must come with a letter that says it\u2019s a gift. <\/span><\/p>\n

For more information on avoiding PMI or getting rid of PMI on your existing loan, contact Riverbank Finance at (800) 555-2098 to schedule an appointment with one of our professional loan officers.<\/span><\/p>\n\n

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