Can I pay for PMI upfront?
You can pay for your mortgage insurance premium up front on most conventional loans. This is very worth while to look into and ask your mortgage professional about. While you will have to either pay for this large amount of money up front or finance it into your loan amount, many times you can save thousands of dollars by paying for the entire premium up front versus paying it monthly. Also, consider looking into a lower term for your financing than 30 years. By financing on a 25, 20 or even a 15 year mortgage or lower you can usually save a lot of money on PMI charges.
There are several alternatives to paying PMI monthly. One alternative is some times referred to as Tax Advantage MI. This type of MI is paid for in the interest rate. An adjustment is made to the interest rate so that you have approximately the same monthly payments but the increased interest rate means more of the payment is tax deductible
One tool that many savvy home buyers use is to have the seller pay for their PMI as a single upfront charge. For this to work you will need the services of a Realtor good with contracts and a seller that is willing to negotiate. Seller Paid Private Mortgage Insurance is usually accomplished through the use of a seller concession, where the seller helps the buyer with some or all of the closing costs.
Some types of loans require you to pay for mortgage insurance up front. A FHA loan is one example of this, where you are charged an Up Front Mortgage Insurance Premium (UFMIP) that is 1.5% of the loan amount. This is actually in addition to the monthly mortgage insurance you pay. However if you sell, refinance, or payoff you loan within the first 5 years you will receive a portion of the UFMIP back in the form of a refund.