How to Avoid PMI

How to Avoid PMI: Private Mortgage Insurance

Private mortgage insurance, or PMI, is insurance written by a private company that protects the lender from losses if a borrower defaults or is unable to repay the loan. The PMI is a monthly payment that can range from .4% – 1.2% of the loan amount. All FHA loans require monthly PMI payments.

There are four ways to avoid PMI:

From offering low down payment options to helping you avoid PMI, finding you the right mortgage is our first priority. Our loan officers work with you to make your home purchase more affordable. Learn more about our services for home buyers:

  •       Make a 20% Down Payment
  • Any loan with 20% down will not be required to have private mortgage insurance.

  •       Split Loan or Piggyback Loan
  • If you have good or excellent credit, then a split loan is a good solution to lower your mortgage payment by avoiding PMI. With a split loan, you can secure an 80% first loan (lien) and a 10% or 15% second loan (lien), based on the down payment made. The second loan is piggybacked on the first, so in total you are borrowing 90% or 95% of the value/price of the home. By having the first loan be 80%, no PMI is required. Our team can help you with an 80% first lien and refer you to a second lien lender. Some geographic and credit score limits apply.

  •       USDA Loan
  • A USDA Guaranteed Loan is a rural, government-insured, 100% financed program that requires no down payment. This loan does not have monthly PMI. This is a 30-year, fixed rate mortgage and eligibility depends on income, location and price of the home. Holly Springs and Fuquay-Varina are two Triangle-area locations that may qualify. If you’ve found a property you love and want to know if it is USDA eligible, ask a Cornerstone Home Lending, Inc. representative now!

  •       Lender-Paid PMI
  • Note that you must have excellent credit scores (over 739) to take full advantage of this strategy. By raising the interest rate slightly, we will pay the mortgage insurance policy in one lump sum. In this way there will be no monthly PMI payment on your loan. Note that this strategy requires careful consideration and is not the best choice for everyone, but it is worth considering.

Do you still have questions about PMI?

The mortgage professionals at Cornerstone can help!