Save Money By Avoiding To Pay Private Mortgage Insurance (PMI)

There’s a cost of homeownership that surprises many first-time homebuyers, one that’s easy to overlook in the excitement of going through the homebuying process. 

Given how costly PMI can be, it’s no wonder many homebuyers are eager to avoid the expense. Here are five ways you can avoid paying PMI.

Shop around for a loan that doesn’t require PMI

For example, VA loans don’t require PMI, so if you qualify you could save a bundle. Look into loans insured by the Federal Housing Administration (FHA) or the U.S. Department of Agriculture (USDA).

Check out state and local homebuyer assistance program

More communities are making affordable housing a priority, and this includes developing new programs aimed at assisting home buyers.

Look for an 80-10-10 loan

One strategy to avoid PMI involves getting an 80/10/10 loan where you put 10% down and take out a 10% home equity line of credit and use that to satisfy the 20% down payment requirement.

Pay a higher interest rate

Some lenders offer loans that allow you to avoid paying PMI in exchange for a higher interest rate. You’ll need to go through a qualification process, but if approved, you’ll be allowed to put down less than 20%.

A savvier approach for a first-time homebuyer might be to buy a “starter home,” a less expensive one that they can comfortably afford without having to incur PMI.

Buy a less expensive home

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