How to Get a Loan Without Private Mortgage Insurance (PMI). Private Mortgage Insurance, or PMI, is an additional monthly fee required by most lenders when the down payment on a home is less than 20 percent. Here are some ways to get around PMI.
Gather or borrow enough funds to make your down payment greater than 20 percent.
Buy a less expensive property to get your down payment to or above 20 percent.
Increase the amount of the purchase price of the home and have seller credit the additional money toward a greater down payment.
Find a lender who will charge a slightly higher interest rate in lieu of requiring PMI. The benefit here is that you'll be paying a slightly higher payment due to the higher interest rate, but all the interest will be tax deductible.
When the loan is paid down to 20% of the original loan amount (not purchase price) the homeowner may request that the PMI be removed with the necessary documentation (an appraisal). The lender will not notify the borrower (as it is not currently required by law) when the homeowner has reached that magic number of 80% loan to value. Legislation is pending currently to make lenders more responsive to borrowers regarding notification and removal of PMI.