How to Avoid PMI Insurance with VA Loans
Private mortgage insurance (PMI) is a type of insurance required by lenders for certain mortgages, such as a conventional loan. Conventional mortgages often require private mortgage insurance when less than 20% of a home’s purchase price is put down.
The cost of PMI insurance can vary, but a good guideline is between 0.5 – 1% of the loan amount annually. How you go about paying your PMI depends on your specific lender. The most common option is a monthly premium added onto your mortgage payment.
Typically, private mortgage insurance is eligible for cancellation when the loan-to-value on the original loan is 80% or less.
In addition to canceling PMI, it is also possible to avoid having to pay mortgage insurance all together. One way to do so is by getting a VA loan.
VA loans are the only type of loan that doesn’t require mortgage insurance regardless of your down payment. Instead, borrowers are required to pay an upfront fee. The purpose of the fee is to offset the cost of the lender administering the loan. This is helpful with ensuring that VA loans continue to require no down payment or monthly mortgage payments.
You are exempt from the VA funding fee if you fall under any of the following categories:
- You currently receive VA disability payments
- You have an eligible surviving spouse who receives Dependency Indemnity Compensation (DIC) benefits
- You are an active duty Purple Heart recipient
Private mortgage insurance can be expensive for home buyers, adding to their monthly mortgage expenses. When borrowers get a VA loan, they can avoid paying for PMI.
Contact our team at Georgia Platinum Mortgage for more information and to find out if a VA loan is right for you.