10. Who Can Avoid Mortgage Insurance
Although there are benefits to mortgage insurance, having it adds to the cost of getting a home loan. The following alternatives to mortgage insurance can help you cut costs even with less than 20 percent down:
– Pay a higher interest rate. Some lenders might waive PMI in exchange for charging a higher interest rate.
– Get a piggyback loan. These home equity loans or credit lines let you borrow your down payment money. Review the fine print carefully to see if the total monthly cost is actually cheaper than paying for mortgage insurance.
– Consider a non-conforming loan. A non-conforming conventional loan doesn’t require mortgage insurance, even with less than 20 percent down. “These are often referred to as portfolio loans, and each bank will have its own requirements or restrictions, but they often require higher credit scores, more assets in the bank, cleaner credit profiles and larger loan amounts,” said Michael Power, branch manager of BBMC Mortgage in Schaumburg, Ill.