WARNING—this can be expensive. In most cases, it is an added cost of several thousand dollars.
Another alternative option for PMI payment is “lender paid” PMI. This is where the lender pays the PMI for you but increases your interest rate on the mortgage loan in return. This increased rate gives them more profit. That extra profit is what allows them to pay the PMI for you.
WARNING—this too can be expensive. In most cases, it can increase your interest rate by 0.500% or more.
How can you avoid it?
The easiest way to avoid PMI is obtaining a conventional loan with 20% down. A down payment of that size prevents the mortgage lender from acquiring an insurance policy on your loan.
What if you don’t have 20% down?
No worries! PMI is not evil. In fact, a large percentage of people with mortgage loans pay PMI. In my professional opinion, PMI should not be a deterrent from obtaining a mortgage. However, it’s always a good idea to seek advice from a wise mortgage advisor on how PMI should be structured.
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