NO Mortgage Insurance Program Reduces Mortgage Payment
PMI is an insurance policy provided by private mortgage insurers to protect lenders against loss if a borrower defaults. Most lenders require PMI for loans with less than 20% down payment. The NO PMI or no private mortgage insurance program can save you a lot of money on your mortgage payment by eliminating the monthly PMI portion of the payment. You will need a minimum 5% down payment and excellent credit usually around 700+ to qualify for the program. Also, you will need to pay a one-time fee at closing to get rid of the PMI. For example, you will need to pay approximately $4,300 on a $200,000 loan to eliminate PMI. The fee may seem a little high but when you consider the monthly savings and you plan to stay in the home long-term then it may be worth it. A $200,000 FHA loan requires $142 monthly PMI and it would take approximately 23 months to break even on $4,300 cost based on 25% tax bracket.* Bottom line, you will save $142 per month or $1,700 per year on the NO PMI program.
If your credit score is below 700 then you should work on improving your credit at least 3-6 months prior to buying a home if you want to qualify for this program. You may only need to do some minor things to improve your credit score above 700 such as paying down a few credit card balances but you need to allow 30-60 days for the credit bureaus to make the updates to your credit report.
PMI is becoming more costly these days especially on higher loan amounts and FHA loans and first time home buyers with excellent credit should look at the the NO PMI program to significantly reduce their monthly mortgage payment and increase their chances of getting approved for the first time home buyer program. Please contact us at 847-516-5743 or email firstname.lastname@example.org for more information on this program.
*Consult your tax advisor on tax deductibility in your particular situation.