Private Mortgage Insurance (PMI) can significantly increase your monthly mortgage payments and is often a concern for homebuyers in Nevada. Fortunately, there are several strategies to avoid PMI, allowing you to save money and keep your budget on track.
The most straightforward way to avoid PMI is by putting down at least 20% of the home's purchase price. By making a larger down payment, lenders often waive the PMI requirement. If you're aiming for a home in Nevada, calculate your potential down payment carefully to see if reaching the 20% threshold is feasible for you.
A piggyback loan is another effective strategy to avoid PMI. This involves taking out a second mortgage alongside your primary mortgage. Typically, you would borrow 80% through the first mortgage and 10% through the second, allowing you to make a 10% down payment. By keeping your primary loan at or below 80% of the home's value, PMI can often be avoided. However, it’s essential to consider the terms and interest rates of both loans before proceeding.
If you’re a veteran or an active-duty military member, consider applying for a VA loan. These loans do not require PMI, regardless of your down payment amount. This can be particularly advantageous in Nevada, where many lenders offer favorable terms for veterans. Make sure to check your eligibility and gather the necessary documentation to take advantage of this benefit.
For those looking to buy a home in rural areas of Nevada, USDA loans are an excellent option. Similar to VA loans, USDA loans do not require PMI. Instead, they may have an upfront guarantee fee and an annual fee, which typically result in lower overall costs. Ensure that the property you’re interested in qualifies for a USDA loan to benefit from this program.
With Lender-Paid Mortgage Insurance, the lender covers the cost of PMI in exchange for a slightly higher interest rate on your mortgage. This option can be beneficial if you want to avoid the upfront costs associated with PMI while possibly making lower monthly payments. Carefully evaluate if this works out more favorably in your budget over the long term.
If you have already taken on a mortgage with PMI, keep an eye on your equity. Once you reach at least 20% equity in your home through payments or appreciation, you can request the cancellation of PMI. Contact your lender to understand the criteria they have in place for PMI cancellation in Nevada.
Avoiding PMI on your mortgage in Nevada is attainable by employing various strategies. Whether through larger down payments, exploring specific loan programs, or considering lender-paid options, there are ways to save money over the life of your mortgage. Always consult with a financial advisor or mortgage professional to determine the best plan tailored to your financial situation.
