Bank of America recently announced it is offering no-fee mortgages and will not charge for private mortgage insurance (PMI), which is good news for a number of reasons.
Bank of America is one of the most well-known banks in the country, offering a wide range of rewarding checking, savings, and investing options for banking customers.
They also offer robust home financing options, like mortgages, refinancing, and home equity loans. These loans come with competitive rates, a solid reputation, and a streamlined process.
Their home loans additionally come without PMI, a huge benefit you won’t find with every mortgage lender.
If you’re wondering why Bank of America’s offer is worth your consideration, read on for an overview of BofA’s mortgage offerings and our best tips to avoid PMI.
What Is PMI?
Before we dive into what Bank of America has to offer, we need to define what PMI is.
When you take out a traditional home loan, there’s a good chance your lender will require you to pay private mortgage insurance. PMI ensures that your lender is covered in case you default on your loan. If your home sells for less than the amount left on your mortgage in an instance of foreclosure, PMI kicks in to fill the gap.
If you can’t make a 20% downpayment, you’ll likely be slapped with the expense of PMI. Likewise, if you’re refinancing with less than 20% equity, you can expect to pay PMI with some lenders.
Until you have 20% equity, you’ll be required to make PMI payments. Once you reach that point, you can contact your lender about getting PMI removed from your payments, which could take months to verify and process.
PMI payments, on average, range between around .5% and 1% of the full amount of the loan. Depending on the cost of your home, that could be a fairly significant amount to add to your monthly premiums, equating to hundreds (or thousands) of dollars a year.
Now, as a result of the 2017 Tax Cuts and Jobs Act, private mortgage insurance is no longer tax deductible.
All in all, PMI is an expensive product that offers little reward to homebuyers, making Bank of America’s offer an appealing one.
The Basics of Bank of America Mortgages
When you work with Bank of America to finance your home, you get low fees and plenty of perks. Below are some of the key features of Bank of America’s mortgage offerings, followed by advice on how to avoid PMI.
With Bank of America…
You will not pay fees for: Bank of America will not charge for applications, appraisals, loan originations, title insurance, or flood certifications. BoA has also announced they will not charge for PMI, an enormous benefit if you know you’ll only be able to put anything less than a 20 percent down-payment of the house’s purchase price.
You will pay fees for: Refinacing. Refinancing is not covered under their new program and borrowers are still responsible for transfer taxes, recording fees, their own title insurance (which is not always necessary!) and legal fees, among other charges. You can expect to find these types of fees with the majority of lenders.
Other perks: To remain competitive with their rates, Bank of America will also pay $250 to people who obtain mortgage approvals but close with other lenders. BoA also guarantees the loans will close within 25 days unless the customer requests more time or there are extenuating circumstances. If you’ve played the waiting game at signing time, you know how worthwhile this guarantee is.
Why are they doing this when no one else is? Bank of America is the nation’s 2nd largest bank, and it seems as though they are making moves to take over the top spot. This is the latest in a series of moves that are intended to shake up the industry, and more importantly, bring lasting customers to BoA.
Concerning this most recent deal, Floyd Robinson, the president of BoA’s home loan business said, “We’ve found that when a customer has a mortgage with the bank, he typically buys five other products, so it’s a great way to build a relationship.”
If you are in the market for a new home, it can’t hurt to at least look at Bank of America as an option. It might even save you a couple thousand dollars.
While you’re there, take a look around. You may just find a banking product, auto loan, or investment account that suits your fancy. There’s nothing like the ease of managing multiple financial accounts in one place.
Other Options for Avoiding Fees
There are several types of mortgages which allow you to eliminate fees and PMI. PMI is a pain for homeowners, but private lenders depend on it to protect themselves. That’s why many mortgage shoppers opt for the loan options below. Each of these loans is issued by an accepted private lender and backed by the federal government, eliminating the need for some of the fees associated with private loans.
The top options include:
- FHA Loans
- USDA Loans
- VA Loans
The top companies to work with for these special mortgages include:
Avoiding PMI – Don’t Pay it if You Don’t Have to!
When you’re looking to buy a home, there are dozens and dozens of different fees you’re going to pay. One of the most notable is the PMI.
Whether you’ve known and dreaded the PMI after paying premiums for years, or you’ve just discovered this homebuying expense, take heart knowing there are ways to sidestep private mortgage insurance. Getting your mortgage through BoA is a great way to avoid the PMI charges, but there are several other strategies for obtaining a mortgage without being required to get PMI.
One of the most obvious ways to avoid the PMI is to put at least 20% down on your mortgage.
With just about any mortgage company, you won’t be required to get mortgage insurance if you put 20% down. It’s a lot of money to save up, but it can save you thousands and thousands of dollars throughout the course of your loan. You might also be able to avoid PMI if you refinance your mortgage.
Other types of loans, like one called an 80-10-10, might help you achieve the same goal, with less out of pocket. In a nutshell, the 80% is the main mortgage loan, while 10% is the buyer’s down payment, and the final 10% is a second loan. This second loan, which piggybacks the 80% loan, will complete the full value of the loan needed, but without traditional PMI payments.
Private mortgage insurance is difficult to avoid with a traditional loan and less than 20% down, but it isn’t impossible.
You should take the time to shop around for the best mortgage options out there. When you do, be sure to read the fine print so you’re aware of all the expenses you’ll be responsible for in addition to your monthly mortgage payments.
Bank of America is one viable option for financing your home without paying PMI. The premier national bank offers rewarding options for financing your new home and is worth your consideration.
Whether you choose to finance your home with BofA or one of the federally-backed lending options above, you don’t have to worry about the added cost of PMI.