Conventional. FHA. Fifteen-year. Thirty-year. Fixed-rate. Adjustable-rate. Who knew Havasu home buyers had so many options when it came to financing a mortgage? No matter which one you choose, unless you put down 20% or more, you end up paying PMI (private mortgage insurance). And can add a couple of hundred extra dollars to your monthly mortgage payment. What is PMI? How do you get rid of it? Are there alternative mortgage loans that come without a PMI requirement?
PMI and the Home Buyer
What is PMI?
When you borrow more than 80% of the purchase price for your Havasu home with a conventional loan, lenders charge Private Mortgage Insurance. This insurance protects the lender in case you default on your loan. However, if you put 20% or more down, you don’t pay this insurance. If you only put the 3.5% minimum down, you can request to have the PMI removed when the loan balance falls below 80% of your home’s value. With FHA loans, you pay MIP (mortgage insurance premiums) on every loan. And this cannot be removed for at least 11 years as long as you put 10% or more down initially. VA loans do not require any private mortgage insurance. But only current members of the military or veterans may utilize a VA loan.
How Do I Get Rid of It?
Let’s say you bought your Havasu home a few years ago. Home prices in the Lake Havasu real estate market keep going up. Now, your loan balance falls below 80% of your purchase price. With a conventional loan, contact your lender to discuss eliminating your private mortgage insurance. But, if you purchased the property with an FHI loan, you might want to consider refinancing to another type of loan altogether.
Alternative Mortgage Loans
If you don’t have the 20% to put down on a conventional loan, don’t worry. You do have other options to choose from. Bank of America offers an Affordable Loan Solution mortgage. With this loan, you only need 3% down for up to $510,400. It also comes with income limits and may require that first-time homebuyers attend education courses.
Are you just starting out on your professional career? Consider Flagstar Banks’ Professional Loan. If you just earned your medical degree, nursing license, veterinarian degree, transportation pilot license or recently passed the bar to become a licensed lawyer, you may qualify for a professional loan. This allows you to buy a home for up to $1.5 million based on your earned income potential. As a bonus, school loans may not be considered as part of your debt ratio.
Finally, Citi’s HomeRun Mortgage allows you to put as little as 3% down for up to $510,400 and requires no PMI. Their interest rates run comparable to conventional loans. They offer flexible credit guidelines. Like B of A’s Affordable Loan Solution, you may also need to attend homebuyer education courses as part of the loan process.
Other loan programs exist that you might qualify for as well. Contact your lender to see what program works best for your financial situation. When you’re ready to look for a new Havasu home, contact me at (928) 208-5184 or send me an email. I look forward to working with you.
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