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


This insurance policy is made to protect the lender from buyers who will not pay up on time. There are those who are known to default so much that the lender goes on a loss. Most lenders will ensure that they have looked up your credit score before giving you any money but this does not protect them from buyers who will not pay. The essence of PMI is to provide lenders with extra security. Once you know that you do not need this coverage, you will realize that it will work to your benefit.

One of the ways of avoiding PMI is getting a loan that does not have PMI. Getting there, however, is the challenge to many people who find it a burden to pay off their mortgages. How this is accomplished is by making sure he has paid off 20% of the value of the home as down payment. In all cases, paying off 20% of the value of the home will not attract any mortgage insurance. If you are not going to be able to pay off the 20%, buy a less expensive property or use the funds you got from any property you sold to make it 20%. Another alternative is to find a lender who will trade the PMI rate with higher interest rates. Higher interest rates will mean that you will have to pay off a lot more as mortgage every month and most of the time it is less than what you would have paid off every month when you have PMI.

Those who cannot pay the 20% down payment can talk to their lenders can talk to their lenders for some other alternatives like the piggyback loan. This depends on what compromises the lender is able to make. The piggyback loan will split the loan into two parts and the borrower will be able to make the 20% that was required for the removal of PMI.

When the value of your home has come down to such a place that the LTV is more than 80%, the lender can ask the borrower to remove the PMI from the monthly payments. At the moment, there is no legislation that makes it the responsibility of the lender to remove the PMI once the LTV is more than 80%. So, it is upon the borrower himself to make an appraisal of his home and justify to the lender the removal of PMI from his monthly payments of the mortgage.

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