Saturday, April 25, 2009

How To Avoid PMI (Private Mortgage Insurance)

Do you need to know how to avoid PMI (Private Mortgage Insurance)? If you are purchasing a home and unable to put down a down payment of 20% of the purchase price the lender will most likely require that you carry PMI or Private Mortgage Insurance. The problem with this kind of insurance is that it is very expensive. Private Mortgage Insurance is usually $300-$500 per month or more. This is a huge expense for the home buyer. Are you ready to learn how to avoid PMI (Private Mortgage Insurance)?

To avoid PMI you need to put down 20% of the purchase price of the home. This can be done by one of the following:

GIFT - If you have a friend or family member that can give you the amount you need to get a full 20% down payment you can receive a gift. They will have to write a letter to the mortgage lender for your home loan to tell them that the amount of money given is a gift and that you do not need to repay it. Of course, if you want to repay it or are required to repay it by the gift giver, that is another story.

SECOND MORTGAGE - You can try to get a second mortgage loan at the same time as your first mortgage loan. Many times a mortgage broker can find a lender to give you enough to have a 20% down payment. You will then have a second small home loan that you will need to pay and the interest rate on that loan will sometimes be more than the interest rate on your primary mortgage loan.

ACCEPT PMI - If you want to accept the PMI with the knowledge that you will only need to pay it for a short period of time and then you will refinance your loan, you can do it. You will need to make sure that you do not have a pre payment penalty with your lender.

This is how to avoid PMI (Private Mortgage Insurance).

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