How to avoid PMI?

Asked by Senka_bl, Oklahoma City, OK Sun Feb 27, 2011

We are looking in to building a home for aprox 220k but don't have 20% down. Do they still do 80/20 or 80/15/5 here in OKC? Our credit and debt to income ratio is not a problem at all

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Drew Brenner, , Dallas, TX
Tue Mar 29, 2011
Hello Senka! Like the others have said 100% financing is pretty much gone. An 80/15/5 however, we CAN still do. The ones we are able to get are amortized on either a 10 or 15 year and require at least a 700 mid credit score. In addition, the first mortgage lender will charge you either .75 points (if your credit is above 720,) or 1 full point (credit less than 720) for having subordinate financing. (1 point is 1 % of your loan amount. So with a 220K sales price we would have a loan amount of 80% of that which is 176K, 1% of 176K is $1760)
So it will cost a little more but will save you a lot in the long term with not having mortgage insurance. Give me a call if you wish to discuss it and your options.
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2 votes
Kenneth Brit…, Agent, Columbus, OH
Thu Jul 28, 2011
You can remove the PMI once you have 20% equity, make sure you protect your credit report from the (5)FIVE area's Identity theft and establish continuous credit monitoring. You will need to refinance your loan to remove the PMI, so you want to proactive and not reactive in maintaining your good credit!! VA loans are approved without PMI and there maybe some rural development loans that may not carry the PMI. Portfolio lender's vs Mortgage Brokers may be another variable in the scenario of how to avoid PMI, you may not be charged PMI if you meet the credit score minimum. It is good to request information about your financial RIGHTS, the Fair Credit Reporting Act of 1971 is another powerful consumer protection you should become familiar with also check my video. The more equity at closing, means the sooner you can refinance to remove the PMI !!
1 vote
Bill Oman, , Warwick, RI
Wed Jul 27, 2011
Some of the more popular options for avoiding PMI are purchasing an home through a VA mortgage if you or your spouse is a Veteran. if not, one other program without PMI is a USD Rural Developement home loan, These loans are only for specific areas, you can check an area eligibility by searching on the USDA Rural Developement website.

One other way is by financing a home with a Lender paid PMI, which is no monthly PMI but results in a slightly higher interest rate.

One thing to remember is that although an FHA loan has a monthly PMI, it is not for the life of the loan, so you have to look at all options and compare the overall cost of each program.

Working with a professional mortgage consultant who is affiliated with the largest Home mortgage lender is your best bet.
1 vote
Melissa Bark…, Agent, Washington, DC
Sun Feb 27, 2011
Have you talked to a lender? I have not seen 80/20 loans, but lenders do have some other options that might work for you. I would talk to a few lenders to see who can get you the best deal for you.

Good luck!
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1 vote
Gerard Carney, Agent, Spring Hill, FL
Wed Jul 27, 2011
From what you have told us, you can't avoid the PMI
If you have a VA option you can but you did not mention it above!
0 votes
LuAnn Simmons, , Delmar, NY
Wed Jul 27, 2011
I agree with Gregorio Denny. Your best bet (if you don't qualify for a veterans loan) is 95% conventional financing with an up front MI payment due at closing. The best part about this is you can even request a seller credit at closing to have them cover the added closing cost of paying that MI up front. If your bank tells you they don't offer this, call a different bank. Not everyone does it but the option is out there!
0 votes
Gregorio Den…, , San Diego, CA
Tue Jul 26, 2011
Old thread but since it was revived I may as well add some information.

The easiest way to avoid PMI is with a conventional loan and a one time payment to buy out the mortgage insurance. Depending on the loan to value, this can be fairly inexpensive to do.
Web Reference:  http://WeFixRates.Com
0 votes
Angela Davis, Agent, Valrico, FL
Tue Jul 26, 2011
You may want to do a Conventional 10 to 20 percent down or VA 100% down.

Angela Davis - Associate Broker
Million Dollar Guild Member

Signature Realty Associates
Direct: (813) 545- 3118
Fax: (813) 643-5776
0 votes
Rubbutter, Home Buyer, Oklahoma
Mon Jul 25, 2011
Go with a VA loan no PMI needed.
0 votes
Wilhelm Koen…, Mortgage Broker Or Lender, Oklahoma City, OK
Sat Jul 9, 2011
Congratulations on building your new home. There are many ways to avoid paying monthly mortgage insurance. Here are 3 solutions that I just came up with. Click on the link below for a report comparing the three options.

And contact me for a personalized report comparing your options, so you can make an informed decision on what will be best for you. Thanks!
0 votes
Joseph Finne…, Agent, Bethlehem, PA
Sun Feb 27, 2011
Hi Senka,

I think you are confusing some things. PMI stands for principle mortgage insurance. That is a fee/insurance you pay each month (included in your mortgage payment) when you owe more than 80% of what the home is worth.

I think your question is how do you purchase a NEW home when you don't have the 20% down payment to get a typical conventional loan.

It really depends on what kind of home construction you are doing.

If you plan on building a custom home, a draw system is commonly used (the foundation is put in and the bank gives you the money to pay for it, then the framing is done and the bank gives you the money...etc). This is a risky loan since the bank is lending you the money in allotments and the risk is whether or not the house will be fully completed and worth all the money lent to build it.

If you wait on the mortgage until after the home is finished (the builder holds the note or you buy into a development where they build it you buy it), you have many more financing options. It is possible you could do an FHA Loan with only 3.5% down.

The rules are changing every day. You should consult with a local mortgage rep to determine exactly what options you have based on what you are trying to do.


Joe Finnerty
Long & Foster Real Estate, Inc
Lehigh Valley Office, PA
0 votes
Tim Thomas, Agent, Oklahoma City, OK
Sun Feb 27, 2011
I can give you a list three reputable local lenders if you'd like. They could help you find the best loan scenario to fit your needs. Just let me know.
0 votes
Scott Godzyk, Agent, Manchester, NH
Sun Feb 27, 2011
80/20 loans are a thing of the past as most of those loans are what we are now seeing come back as foreclosed homes. You need 20% down to avoid initial PMI, when values start to increase, once your house reaches 80% loan to value you can submit an appraisial showing it and remove the pmi.
0 votes
Don Tepper, Agent, Burke, VA
Sun Feb 27, 2011
Lenders don't do 100% financing any more. Still, if you're building a home, check with your builder to see whether it offers any special financing. And, for your own protection, make sure you have a good lawyer.
0 votes
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