There are a few ways to avoid paying PMI when you purchase a home. Let us help you choose the best option for your situation.
Down-payment of 20%
The best way to get a loan with No PMI is to make a 20% down-payment on your new home. Putting a 20% down-payment will allow you to avoid paying PMI on a conventional loan. This does not apply to an FHA loan.
Get a VA Loan (if you are Veteran)
If you are a Veteran, you can also avoid mortgage insurance by obtaining a VA loan. VA loans do not have PMI and you can borrow up to 100%.
Get a Second Loan
You also have the option of obtaining a 2nd lien to avoid paying PMI. To make this work you get a conventional first lien mortgage loan for 80% of the value and a second lien up to 95% of the value. Second loans have a slightly higher rate than normal first liens but is another option to avoid PMI. Not available for FHA loans.
Buy out the PMI
Another option is to pay an upfront fee to the lender to “buy out” the Mortgage Insurance. This an option if the house will not appreciate to 20% equity in the near future.
Take Higher Interest Rate to Avoid PMI
The last way to avoid PMI is to take higher interest rate in exchange for a loan with No PMI. This is the least popular way to eliminate PMI, since you will have a higher interest rate for the life of your loan.