Many home owners and home buyers are under the impression that there is only one PMI program. Though there are a few different options, they all provide one key element: it allows the customer to bring less of a down payment when buying a house without being required to have 20% down.

Most people think there is only one PMI opportunity. However, the lenders have a few options:

• Traditional monthly, where the borrower pays a monthly amount.
• Lender Paid Mortgage Premium (LPMI), which is when the lender pays the mortgage insurance (financed through a higher rate). With the FHA monthly premiums increasing (almost doubled over the last 24 months), in certain occasions using a LPMI is a cheaper route over the 1st 10 years of the loan. The borrower in turn may pay 1/2% higher in interest rate but it could still be much less than the traditional Mortgage Insurance.
• FHA, which is government mortgage insurance (1% + monthly amount)
• Hybrid Mortgage Insurance is like government mortgage insurance but used for conventional loans in which you pay some upfront, thus reducing your monthly amount. These can be cheaper than the government program. The advantage to this is that a buyer can actually have the seller pay for this cost in a seller concession. Sellers are doing more concessions in this market and the buyer can benefit more because the payment is lower than they would get by just asking for a lower sales price. Both Seller and Buyer win in this scenario. The seller keeps a higher price and the buyer gets a lower payment.

Any of these mortgage insurance options allows lenders to lend more Loan-To-Value (LTV) than they normally would. Also, under some circumstances with income, the mortgage insurance is still tax deductible just like mortgage interest is. To determine if you qualify, check with your CPA.