If you get a mortgage for more than 80% of your Santa Cruz real estate’s fair market value, your lender will require that you pay Private Mortgage Insurance (PMI). PMI payments are expensive at about 0.5% to 1% of the entire loan amount on an annual basis.
Obviously, it would be a good thing if you didn’t have to pay PMI. To help you achieve that goal, here are several tips to avoid paying PMI on your Santa Cruz real estate:
• Save for a big down payment: The easiest way to avoid PMI is to have a down payment of at least 20% of the value of the home you want to purchase.
• Borrow to get 20% down: Check with friends and family for down payment assistance. You can offer repayment with interest and still never pay as much as you would have to for PMI.
• Get a Second Mortgage: Getting a second mortgage to cover the difference between your down payment on your first mortgage and the 20% threshold for your PMI can make a substantial difference in your monthly payments. Talk to a qualified mortgage professional to discuss your options.
• Pay More Interest: Some lenders will waive PMI if you agree to a higher interest rate. Again, discuss your options with a mortgage professional.
• Consider a Less Expensive Home: This goes back to being able to hit that 20% threshold. As we've all seen in this tough economy, stretching beyond your means can have dire consequences if your circumstances change. Consider if you really need that extra bedroom and extra expense. If you haven’t saved enough to afford an expensive home, downsize your expectations and buy within your means.
If you’d like a referral to an outstanding mortgage professional or need help finding Santa Cruz real estate that fits your budget, give me a call today at 831.662.6522 or email me at Lauren@LaurenSpencer.com.
For additional information please visit my website at www.MySantaCruzRealEstate.com.