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Suppose I purchase a house for $250K and only put down $40K - 45K, will I automatically have to pay PMI? Or is there any way to avoid it? I am only talking about fixed-rate 30-year loans. Thanks!
Generally, yes. But it depends on the product you go with. With 45k down, you are at 82% LTV. If you have to pay PMI, it should only be until you can pay the loan down to 80% LTV. Yoi could try to get a another loan to cover the 2% or have someone Gift you the money.
Some places have "no pmi" loans, but you will probably pay for it in extra up front fees or a worse rate.
Sure you can avoid PMI. One way is the split your loan into a first and second lien. The first mortgage would be for 80% of the purchase price and the 2nd lien would be for the remainder. Since the first mortgage is 80%, you are not required to pay PMI.
Other lenders offer LPMI, where your rate is a little higher and they pay the PMI for you. other lenders offer Single Premium where you pay a one time upfront fee and have no monthly charge.
With the amount you want to put down, i would not suggest the single premium or the LPMI. The first and second lien would be your better option.
To avoid paying PMI my husband and I purchased a home and did an "80-10-10"... First mortgage for 80%, second mortgage for 10% and down payment of 10%. We were considering doing it again recently for our next home purchase. Our loan officer said the numbers wouldn't have to be exactly 80-10-10, since we had almost 20% down. The only caveat is the second mortgage couldn't be greater than the down payment. Hope this helps!
Not all areas of the country have access to 80/10/10 loans. I am one of the few that has them in the Mid-Atlantic area. Typically, it's the smaller regional banks that have this option. When the mortgage crisis hit, the 80/10/10 loans dried up first, with no one wanting to be in second lien position in a real estate market that is having trouble holding value. The bank's rate on the second is higher than market, but still well below the payments with MI.
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Do something like an 80-10-10
