Commercial Property Manager/Facilities Manager · Boston, MA · Member since 2015 · 187 posts · 41 votes
Hi All,
I was wondering if any of you had any advice on how I could avoid, if at all, private mortgage insurance. I have heard that this is a significant chunk of your monthly cash flow and if I can avoid it or shrink the number that would be great. Also, if you have any recommendations of banks/lenders that don't require PMI (if this is a realistic expectation) in the Boston area please let me know.
Rental Property Investor · Gainesville, FL · Member since 2015 · 1k+ posts · 432 votes
10y
I'm not sure I ever heard of a lender that would not do PMI if the % of the down payment was below what is required.
I don't know if they still do this but have you discussed with any local lenders about doing an 80/20 or 80/10/10? I did this in 2006 when I bought my primary to avoid the PMI.
Now of course with investment property I'm not sure that is an option.
Have you tried to call any of the local lenders to discuss investment strategies? I am currently doing this with a local lender that knows I'm an investor.
Investor · Germantown, WI · Member since 2012 · 206 posts · 364 votes
10y
Is this for an owner occupy property? If so I did get a loan on my own home with 3% down and no PMI. It was a special loan offered by my bank the only kicker was that the interest rate was a half point higher.
Odessa, TX · Member since 2016 · 11 posts · 2 votes
10y
Craig Moore
Good morning sir, I was reading a post on BP a couple days back where the guys were saying you could possibly pay a lump sum payment. I would ask your lender if this is possible. The only other way I know of besides the 20/80 route would be to initially have PMI on the original loan, fix up the property enough to have your appraisal come in at the 20% equity mark and have it refinanced. Just my .02. It might not be worth much!
Is this for an owner occupy property? If so I did get a loan on my own home with 3% down and no PMI. It was a special loan offered by my bank the only kicker was that the interest rate was a half point higher.
Hey Nick,
This will be an owner-occupied property. Doesn't the point increase in interest offset the absence of PMI? Basically they're still getting it just from another source?
Investor · Germantown, WI · Member since 2012 · 206 posts · 364 votes
10y
Not exactly, the point increase was marginal, in this case it was $35 per month and the PMI was $110ish per month. I did the math and assuming I was able to eliminate the PMI after 3 years I would still have to live in the house for over 9 years to come out ahead. Being this is my first home and I have no intentions of being here for more than 9 years, and there is no guarantee I could have eliminated PMI after just 3 years the obvious choice was the higher rate loan.
For my last purchase (home I live in) I had them increase the APR and they were able to take away the PMI. I now just add the money I save each month and put it towards the principle. This will help pay off the house much faster and save a lot of money too. I got my loan through Quicken that was doing this type of loan
Milton, MA · Member since 2016 · 88 posts · 27 votes
10y
The MHP ONE Mortgage program doesn't require PMI and has the lowest interest rate around. MassHousing also has loans, they have PMI but it's much better (lower cost mortgage insurance) than FHA. NACA (Neighborhood Assistance Corp of America) also has favorable terms, although I've heard it's a long and painful process. City of Boston has a Home Center which should be able to guide you, they have a First Time Homebuyers course which is required if you're looking for their financial assistance.
Lender · Lakewood, OH · Member since 2016 · 10 posts · 4 votes
10y
Let me try to condense this for you. FHA @3.5 % down = MIP (pmi) for the life of the loan
FHA @ 10% down or greater = MIP (pmi) for 11 years
You can get conventional loans with less than 20% down and no monthly pmi from any lender, it's just absorbed into the yield or paid upfront (if your fico is below 680 the pricing will be terrible)
Example - 100k loan, 5% down, 95% LTV - Lender paid pmi on a 720 fico is about 1.75 points (it's different lender to lender and pmi provider to pmi provider) you can either pay this up front, or have it absorbed into the yield. if 4% is par, and 4,25% kick back 2 points, you can bump the rate and use it cover the additional upfront cost from the LPMI, which is much cheaper than monthly pmi.
You can do 3% down conventional, both FNMA and Freddie offer 97% LTV purchase products, just know conventional adjustments apply, and without good credit, the terms will not be favorable. Basically, unless you have a 740+ FICO, just do FHA, and refi it later. PMI and MIP are tax deductible (unless your income is over 100k then it starts phasing out)
The MHP ONE Mortgage program doesn't require PMI and has the lowest interest rate around. MassHousing also has loans, they have PMI but it's much better (lower cost mortgage insurance) than FHA. NACA (Neighborhood Assistance Corp of America) also has favorable terms, although I've heard it's a long and painful process. City of Boston has a Home Center which should be able to guide you, they have a First Time Homebuyers course which is required if you're looking for their financial assistance.
Maureen, I've been looking into this but not thoroughly enough. I've seen loans through MassHousing that require you to live in the house for a minimum of 10 years. I do not think that is realistic for me. Have you found this?
Milton, MA · Member since 2016 · 88 posts · 27 votes
10y
Craig, I'm working with a family member who has applied for the MassHousing loan and we've never seen the 10 year requirement that you mention. I suggest you contact the Agency or one of the participating lenders for more info.
Craig, I'm working with a family member who has applied for the MassHousing loan and we've never seen the 10 year requirement that you mention. I suggest you contact the Agency or one of the participating lenders for more info.
I will surely contact them. Another requirement I've seen is that you must live in the house (as your primary residence) for the duration of the loan/until it's paid off. Have you seen this?
SOME banks have PMI assigned for the LIFE of the loan :ouch: others 'can be removed' once the LTV is better than 80%
Years ago I had PMI and the value had gone up, so that the LTV was easily better than 80% (and could appraise easily as such). The bank told me to remove PMI it had to be better than 65%. The requirements to remove were greater than the standard for needing it in the first place. Maybe this has changed in the last few years and it probably varies by lender.
Real Estate Broker · Chicago, IL · Member since 2015 · 531 posts · 266 votes
10y
Ask your lender if you can "buy out" the mortgage insurance.
This means you make an upfront payment at closing and then never pay PMI ever again. I have had a handful of buyers do this versus making the 20% down payment. The last time I saw this on a closing statement I believe it was around $7k.
Real Estate Broker · Northwest Indiana, IN · Member since 2011 · 2k+ posts · 2k+ votes
10y
Well first, let's stop confusing the two different types of mortgage insurance.
FHA loans carry a Mortgage Insurance Premium. MIP (not to be confused with PMI) can be paid upfront or over the loan term. As of a couple years ago, loans with a starting LTV of 90% or greater can NEVER cancel or terminate MIP. Loans with 90% or less can not cancel until 11 years or the maturity, which ever occurs first. MIP can be paid upfront called UFMIP or through the loan periods which is simply MIP.
FHA does not have "PMI" which is Private Mortgage Insurance. That is insurance on conventional loans which exceed 80% LTV. That insurance can only be canceled on the date the principal balance of the mortgage loan is first scheduled to reach 78% of the original value of the property, or the first day of the month following the date the mid-point of the mortgage loan amortization period is reached.
So then, in order to avoid mortgage insurance all together a borrower can: (a) put down 20% or more down payment (b) take a piggy back loan (second mortgage) at origination (ie - 80/20, 80/10, 80/5, etc)
Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
10y
All FHA loans, in all cases, will have monthly mortgage insurance and upfront mortgage insurance premium (UFMIP is typically financed, which is why you get the wonky loan amounts with FHA).
This has nothing to do with who you get the loan through, etc. No one has flexibility on this. There are no exceptions (marketing BS and shell games aside). FHA loans are a governed by federal statute.
Real Estate Broker · Rock Springs, WY · Member since 2015 · 57 posts · 43 votes
10y
We purchased a property without 20% down through an FHA loan. We weren't looking to buy at the time but the returns were too good to pass up. Ours is set up so if we put at least 10% down, you still have PMI but it falls off at the 11 year mark. Not perfect but better than nothing and was worth it in this situation.