How to Avoid Paying PMI (Private Mortgage Insurance)
PMI, or private mortgage insurance, is required when purchasing a home when a buyer’s down payment is less than 20%.
Pacor Mortgage Corp. shares five ways to avoid paying PMI below:
20% Down Payment
The first option is to pay 20% or more for a down payment on the house. With 20% equity, PMI does not apply.
VA Loan
Eligible military borrowers can apply for a Veterans Affair loan (VA loan) which help active-duty military personnel, veterans and certain other groups become homeowners at an affordable cost. There is no down payment required, no mortgage insurance required and low closing costs.
Federal Housing Administration Loan
Another option for a smaller down payment is an FHA loan. The FHA backs the loan and is also the insurance provider. This loan option is common for the first time home buyers because it allows as low as 3.5% down payments with credit scores of 580+. Pacor Mortgage Corp. offers FHA loan products.
Lender-Paid Mortgage Insurance
Most often lenders have the option of LPMI which is similar to PMI except the lender pays the cost in exchange for a higher interest rate. It means you won’t have a separate monthly fee for mortgage insurance. Instead, you pay a higher rate on your mortgage loan which results in a higher monthly mortgage payment. Even with the slightly higher interest rate, this is often the best option for keeping your total monthly payment low.
Down Payment Assistance
Pacor Mortgage Corp. offers Down Payment Assistance. Rural Development loans are primarily used to help low-income individuals or households purchase homes in rural areas. Guaranteed loans are flexible to accommodate buyers who need financing, expanded ratios to qualify, and flexible credit guidelines. The USDA Rural Development Benefits include:
No down payment required if funds are not available.
Down payment assistance may reduce the effective interest rate, thus, reducing the monthly payment.
Note interest rate is fixed.
Some closing costs may be included in the loan.
Private Mortgage Insurance (PMI) is not required.
Contact a Pacor Mortgage loan officer at 773-881-7744 for more information on the Down Payment Assistance or visit our website to learn more.
