Ditech : Private Mortgage Insurance: How to Avoid Paying Private Mortgage Insurance

If you are in the process of purchasing your home without the necessary down payment you need to consider how Private Mortgage Insurance could affect your plans. Private Mortgage Insurance can add hundreds of dollars to your monthly payment amount unnecessarily. There are ways to secure financing for your home without paying Private Mortgage Insurance; here are tips to get you started.

Some people will tell you Private Mortgage Insurance is a good way to purchase your dream home without a 20% down payment; these people are probably selling Private Mortgage Insurance. If you accept Private mortgage Insurance you will be throwing your money away to pay those premiums unnecessarily.

Private Mortgage Insurance protects mortgage lenders from certain losses due to foreclosure. If you default on your mortgage the lender will recoup some of the expenses from seizing your home. Private Mortgage Insurance does nothing for the homeowner except drain your wallet. You can avoid this unnecessary expense by taking out what is referred to as a “piggyback loan” for the down payment amount you do not have.

This piggyback loan will typically come from a second lender; this means you will have two mortgage payments each month. There are lenders that offer 100% financing, you can even qualify for 103% financing to cover closing costs without Private Mortgage Insurance. Private Mortgage Insurance is a waste of your money. Anyone that tells you otherwise is selling something. To learn more about your mortgage options, including common mistakes to avoid, register for a free mortgage guidebook: “Five Things You Need to Know About Your Mortgage.”