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Is there a good way to avoid mortgage insurance without paying 20% down?

by kristen751 from Alvada, Ohio. May 19th 2016 Reply


Yes. There are loan programs we offer that do not have mortgage insurance and do not require the 20% down

May 19th 2016
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Joseph Afonso (jafonso)
#65 ranked lender in Arizona - 195 contributions

Yes, there are different way to avoid mortgage insurance ask your lender for options.

May 19th 2016
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William J Acres (William_Acres)
#1 ranked lender in Arizona - 7,802 contributions

Most will say yes.. but the real answer is NO!.. No matter how it's pitched to you, unless you have 20% down or more, you will pay MI.. There are different types of MI.. The most common is borrower paid monthly.. This is where the premium is added to your payment each month.. But there's also "Lender Paid" for this policy, the lender raises the interest rate and then makes the payment for you.. but as you can see, it's still YOU paying.. the 3rd option is Upfront MI.. this is where a one time charge is added as a closing cost to your loan.. and depending on your loan scenario, you might be able to finance it.. but again, it's YOU paying.. But here's the key thing to understand.. Unless you pay monthly, all other types of MI are non cancelable, non refundable.. meaning if you go lender paid or upfront, you cannot have it removed unless you refinance or pay off the loan, and you will never get a refund.. this is why I always suggest you go borrower paid.. under this premium, so long as you have paid for 2 to 3 years, and so long as your value has increased enough that you have at least 20% equity, you can contact your lender and ask to have the MI removed.. so long as the value is there (supported by an appraisal you pay for), you can get it removed, and you don't have to refinance to do it.. Also, if you have really good credit scores, the pricing for MI is very low.. Example: With a 740 or above credit score, for every $100K you borrow at 95% loan to value (5% down), the borrower paid MI is only $49 per month. The premium goes down for every additional 5% down, so for 10% down (90% LTV), the premium goes to $34 PM for every $100K financed, and if you have 15% or more down (80.01% - 85% LTV), then the premium drops to less than $17 PM for every $100K financed.. Another option would be to put 5% down, and do a 20% 2nd mortgage, and a 75% first position mortgage.. this would eliminate the MI, but the interest rates on 2nd mortgages are usually much higher than the first mortgage so you wont have to pay MI, but the payment will be close to the same which would basically eliminate the benefit of using this strategy. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. William J. Acres, Lender411's number ONE lender in Arizona. 480-287-5714 WilliamAcres.com NMLS# 226347

May 19th 2016
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Joe Metzler (JoeMetzler)
#1 ranked lender in Minnesota - 3,454 contributions

If you put less than 20% down, you have to deal with mortgage insurance. The most common option is to pay monthly mortgage insurance, which can go away at 78% automatically, or you can ask to have it removed if through payments and value increases, you are now at 80% or less. The next option is borrower paid single premium. This version you pay at closing a lump sum equal to three years of monthly mortgage insurance. It is a really good deal if you have the money. Next is lender paid mortgage insurance. This is achieved by the lender increasing your interest rate enough for them to earn enough money to pay the three-year lump sum amount for you. Any lender claiming they don't have PMI is doing this version. Finally is splitting the loan, with an 80% first mortgage, and generally a 10% second mortgage. This isn't as attractive as it used to be. Everyone is different. ask your local mortgage broker for details on your personal numbers. Then pick which one works best for you. For loans in MN, WI, and SD, visit me at www.JoeMetzler.com

May 19th 2016
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