| this cost whenever possible!
Private Mortgage Insurance (PMI) is insurance that the lender requires on loans that have less than 20% down payment. This can cost you somewhere between 80-200 dollars per month! This could put the house of your dreams out of your budget. Luckily, in most cases, there are ways around these extra costs.
The best way to avoid PMI is to find a lender with programs that finance above 80% with out charging PMI. At Fifth Third Bank I have the ability to finance loans up to 100% without charging PMI. These loans do have guidelines that you must qualify for but if you do meet the criteria then take it! You could end up in your home with no down payment and no PMI. If you don't qualify for these programs don't worry, there is another way!
You can also avoid paying PMI by doing an 80/20 loan. This type of loan splits the financing up into two different loans. You can think of this as borrowing money from the bank as a down payment. You will be carrying two loans at two different interest rates.
The first mortgage, which would make up 80% of the purchase price, will be on a lower rate. The second mortgage will be on a slightly higher rate, but your payment will be lower than choosing a loan with PMI. The second mortgage is also tax deductible. PMI is NOT tax deductible!
The name of the game is saving money! When you are shopping around for a mortgage make sure you ask your loan officer about special programs that avoid PMI. If you cannot qualify for these then ask about their 80/20 programs. Mortgage shopping can be confusing and frustrating, but it doesn't have to be. Find a lender who wants to save you money. Good luck and happy shopping!
About The Author
Copyright 2006 Cecilia Sherrard.
Cecilia Sherrard is a top producing REALTOR with Realty One Real Living Cleveland Ohio. She has helped many buyers and sellers relocate and find their perfect home. You can find many useful tips and information on her site http://www.youshouldown.com
This article was posted on September 12, 2006 |
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