With gas prices soaring and bills piling up it is important to save money any way possible. The same is true when financing a home. All loans are not created equal. Some loans have costs that you should avoid. One of those costs is PMI. In my opinion you should avoid 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!
Cecilia Sherrard is a full time dedicated Realtor
in Northeast Ohio. With years of experience and knowledge servicing the
Cleveland Ohio area. She has maintained a multi-million dollar
producer status. From relocation to tips and articles. Everything you
want and need to know about buying or selling a home. Visit her website
Cleveland Ohio Real
Estate you can also view her Ohio Real Estate
Blog
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