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Low down payment mortgage with no PMI

I got prequalified with BofA for a conventional loan which I thought would not have mortgage insurance. Is there an alternative? They told me I'd have to go through a private lender to avoid this? by terrellbears7846946 from Lincolnshire, Illinois. Dec 23rd 2014 Reply


Joe Metzler (JoeMetzler)
#1 ranked lender in Minnesota - 3,446 contributions

I call PMI the necessary evil. Either come up with 20% down payment, or pay the extra insurance because of your risk. ALL standard conventional mortgage loans will have mortgage insurance if you put less than 20% down payment. I can offer you a loan "with no PMI", but all I am really going to do is hide the cost of the mortgage insurance by giving you a higher interest rate. This isn't necessarily good or bad. It depends on many factors, including size of down payment, credit scores, and how loan you may or may not be in the home. There are other alternatives too, like single premium PMI, or even two loans. The application clerks at the big banks are usually less then helpful in explaining these things, so talk to a experience local mortgage broker who can help you understand all these various options. For loans in MN, WI, and SD - visit me at www.JoeMetzler.com

Dec 28th 2014
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Linda Wintersteen (Linda123)
#64 ranked lender in Arizona - 1,250 contributions

IT has to do with the amount of down payment . If you have the 20% down, there is no mortgage insurance . FHA HAS morgage insurance , and if you are a vet a VA LOAN has no mortgage insurance .. there are lenders that will do lender paid mortgage insurance , but it will be reflected in the rate.. A private lender , aka a private money investor, will have a lot higher rates.. linda

Dec 23rd 2014
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Cory Ure (coryure)
#46 ranked lender in Utah - 50 contributions

The only way to avoid mortgage insurance is to put down at least 20% or go with a VA loan, if you are eligible. Some loan officers will tell you there is not mortgage insurance on some Conventional loans, however if you look into it your interest rate will be higher because it's what's called "Lender Paid Mortgage Insurance". The reason behind mortgage insurance is that it protects the lender from losses in case of default, just like your auto insurance does in the event your car gets totaled. So you can see why banks want mortgage insurance with higher loan-to-values.

Dec 23rd 2014
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Phil Dumouchel (PhilDu)
#32 ranked lender in South Carolina - 2,224 contributions

Unless you have a 20 downpayment, or qualify for a VA or USDA loan, the mortgage will require PMI. There are ways to minimize the cost of that, or even eliminate the monthly payment but generally that means a higher interest rate and your payment may end up being the same or higher than with PMI. -PMI is insurance which allows lenders to loan you more than 80% of the price, regulations make loans without PMI less available.

Dec 24th 2014
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Bert Carpenter (BertCarpenter)
#39 ranked lender in Arizona - 1,815 contributions

All Conventional (FNMA or FHMLC) loans require PMI unless the borrower puts 20% equity into the transaction. True, HomePath eligible properties do not require 20% equity and do not have PMI, BUT, the higher interest rate these loans require are essentially because Lender paid PMI is built into the loan program. If you are going to consider a loan with less than 20% equity, and you are considering the 'Lender paid option, be careful and make sure you are comparing that option against the borrower paid. In reality the borrower is paying the lender extra interest over the life of the loan so the lender can buy an up-front PMI policy for you. Make sure you have the lender quote you the loan parameters for both lender paid and borrower paid PMI. For more information read my Blog Post on this subject. It can be found at https://www.lender411.com/mortgage-articles/12875/lender-paid-pmi-vs-borrower-paid-pmi/ ~ Bert Carpenter, The LoansA2z team of NOVA Home Loans ~ NMLS 40586 ~ Licensed in Arizona (AZLO0911876 / AZBK0902429), Washington (WALO40586 / WACL3087) and California (CADOC40586 / CAFLL6036566). We are licensed by the CA-DBO under the CFLL and CRMLA. Loans made or arranged pursuant to CFLL or CRMLA license. ~ www.LoansA2z.com ~ 888-889-9950

Dec 24th 2014
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