Avoid Mortgage Insurance

If you're thinking about buying a house, you've probably done a little research about mortgages and what's involved in getting one. One thing that may have jumped out at you is mortgage insurance. Mortgage insurance is a type of insurance some lenders require to protect the loan they give you.

Since mortgage insurance will add an extra bill on top of your new mortgage, you are probably wondering how you can avoid this insurance.

Make at least a 20 percent down payment on your home.
If you plan to purchase a $200,000 home, plan to have $40,000 in the bank. It may take some time to save this money, or you can borrow from friends and family, but it will definitely keep you from paying mortgage insurance.

Get an 80/20 mortgage.
If you go this route, you will end up with two mortgages on your house. One mortgage will be for 80 percent of the loan and the other mortgage will be for 20 percent of the loan. While you can bypass mortgage insurance, there is a catch; typically, the interest rate is higher on the 20 percent loan than the 80 percent loan. You will end up paying back more over the life of the loan unless you refinance later.

Ask your lender about lender paid mortgage insurance.
Some lenders offer lender paid mortgage insurance if you don't have at least a 20 percent down payment. You will likely have to agree to a higher interest rate, but it will get you out of paying for mortgage insurance and will cost less in the short-term.

Find a lender that doesn't require mortgage insurance.
This can be tough, especially considering today's housing market, but it isn't impossible. Research different lenders online and talk to banks in your town to find out if any banks will give you a mortgage without a 20 percent down payment and not require mortgage insurance. Before you jump into buying a home, make sure you do the research and explore all your options so you can avoid mortgage insurance. Mortgage payments are high enough without incurring this additional cost.

http://www.bankrate.com/finance/mortgages/the-basics-of-private-mortgage-insurance-pmi.aspx