If you’re shopping for a home in Canton, Michigan, one of the biggest cost traps to avoid is Private Mortgage Insurance (PMI). PMI is an extra fee tacked onto your mortgage when your down payment is less than 20% of the home’s purchase price. It protects the lender against default—you don’t get a benefit from it. Movement Mortgage+2Eaton Realty+2
Avoiding PMI means lower monthly payments and a faster path to real equity. Below is a blueprint to help you avoid PMI when buying in Canton (or anywhere in Michigan), along with some local strategies and caveats to keep in mind.
What Is PMI & Why It’s Important to Avoid
When a buyer puts down less than 20%, many conventional loans require PMI to reduce the lender’s risk. Movement Mortgage+2DSLD Mortgage+2 The cost of PMI typically ranges from 0.5% to 1.8% (or more) of the loan amount per year, distributed across your mortgage payments. Michigan First+2The Mortgage Reports+2
Because PMI protects the lender, not you, it’s an expense many homeowners want to minimize or eliminate as soon as possible. Eaton Realty+2DSLD Mortgage+2
1. Save for a 20% Down Payment (or More)
This is the simplest and most foolproof path:
- Goal: When you make a down payment of 20% or more of the purchase price, most conventional lenders waive PMI altogether. New American Funding+3DSLD Mortgage+3The Mortgage Reports+3
- Strategy: Set up a disciplined savings plan. Automate transfers into a high-yield account. Use bonuses or tax refunds to boost the stash.
- Challenge in Canton: With local home prices rising, saving 20% can feel like a toll booth. You may also need to compete with buyers who have access to grants or other forms of assistance.
If you can stretch to 20%, you’ll avoid PMI permanently (as long as you don’t refinance into a higher LTV). Even if you start with a lower amount, you can build equity and request PMI removal later. Bankrate+2Michigan First+2
2. Use a “Piggyback” or 80-10-10 Loan Structure
If 20% down feels out of reach, a creative workaround is a piggyback loan (sometimes called an “80-10-10” or “80/15/5,” depending on structuring). DSLD Mortgage+3Investopedia+3Clever Real Estate+3
Here’s how 80-10-10 works:
- You take one mortgage for 80% of the home value (the main loan).
- You take a second loan for 10% (or so) to cover part of the down payment (or “top-up” portion).
- You contribute 10% in cash as the actual down payment.
Because neither loan exceeds 80% in principal on its own, you can dodge PMI. That said:
- The second loan often has a higher interest or variable rate, so it carries risk. Investopedia+2DSLD Mortgage+2
- It can complicate qualifying and add closing costs.
- If the home value drops, the LTV for combined loans may still creep high.
In Canton, this structure might appeal if you’re short on cash but have the capacity for servicing two loans. Be sure to compare costs and terms carefully.
3. Choose a Loan That Doesn’t Require PMI
Not all mortgages demand PMI in the same way. Here are some alternatives:
- VA Loans (for eligible veterans / active-duty personnel) typically don’t require PMI, although they may include an upfront funding fee. Experian+2New American Funding+2
- USDA Loans in eligible rural or semi-rural locations sometimes offer 100% financing and may waive mortgage insurance (or charge a different insurance model). Experian+1
- Some lenders may offer “lender-paid PMI” (LPMI): the lender pays the PMI but recoups the cost via a slightly higher interest rate for the life of the loan. DSLD Mortgage+2Clever Real Estate+2
- Special no-PMI programs exist with some credit unions or local banks. While rare, they occasionally promote zero-PMI loans in promotions. Arbor Financial Credit Union+1
Before choosing one of these options, run total cost comparisons (interest vs. PMI) over 5, 10, and 30 years to see which option is more economical in your specific case.
4. Use Down Payment Assistance (DPA) & Grants in Michigan
Since Canton is located in Michigan, you may be eligible for state or local assistance to help increase your down payment and avoid PMI.
- MSHDA (Michigan State Housing Development Authority) offers programs that help with down payments, closing costs, and even first-generation homebuyer grants. FHA+4Michigan+4Mortgage 1 Inc.+4
- Their MI Home Loan program allows lower down payments (e.g., 3%) and pairs with DPA to reduce your out-of-pocket costs. The Mortgage Reports+1
- In some cases, you may receive a deferred, zero-interest second mortgage for down payment assistance, repaid only when you sell or refinance. FHA+1
- Local credit unions or county housing programs might offer additional matches, grants, or assistance to first-time buyers.
If you bundle DPA with your purchase, you might move closer to that 20% threshold—or reduce your PMI burden. Be careful, though: some DPA structures are considered second liens and don’t eliminate the PMI requirement if your primary mortgage’s LTV remains > 80%.
5. Accelerate Your Equity Build-Up & Request PMI Removal
If you do have PMI initially, you can eliminate it later:
- Make extra principal payments or apply windfalls (bonuses, tax refunds) directly toward principal.
- Once your mortgage balance reaches 80% of the original value, you can formally request the removal of PMI. Experian+3Bankrate+3Michigan First+3
- At 22% equity, many lenders must automatically cancel PMI under the Homeowners Protection Act (if you’re current on payments). The Mortgage Reports+1
- Alternatively, if home values in Canton rise significantly, you might get an appraisal to show your equity even faster. If the new value justifies it, PMI could be removed ahead of schedule. Michigan First+1
- Refinancing to a conventional loan with < 80% LTV is another route, though you’ll have to factor in closing costs. New American Funding+2Bankrate+2
The key is being vigilant—track your home’s value, know your principal balance, and communicate proactively with your lender.
6. Improve Your Credit & Minimize Risk Factors
Even when using lower down payment strategies, your credit profile influences whether lenders will require PMI, or how much they’ll charge:
- A higher credit score can lead to lower PMI rates. Clever Real Estate+1
- A lower debt-to-income ratio (DTI) improves your borrowing terms and may make lenders more flexible. Clever Real Estate+1
- Stabilize your employment and avoid large unexplained deposits in your accounts (which lenders may scrutinize).
- When shopping for lenders, compare PMI options (monthly premium, upfront, and lender-paid) across several banks or credit unions in Canton or Wayne County.
Considerations & Caveats for Canton / Michigan Buyers
- Real estate markets vary. In Canton, property appreciation may help you hit equity faster — but the flip side is that home prices can also stall.
- Some down payment assistance programs are limited by ZIP code, household income, or home price caps.
- Piggyback loans’ secondary mortgages may have variable rates or shorter terms; if rates jump, you could be squeezed.
- If you refinance later, ensure closing costs don’t wipe out the savings from removing PMI.
- Always read fine print: some “no PMI” programs still carry hidden fees or higher rates baked in.
Summary & Action Plan for Canton Buyers
- Target 20% down if possible — it’s the cleanest route to avoid PMI.
- If that’s too steep, explore 80-10-10 or piggyback loans as a workaround.
- Use VA, USDA, or lender-paid PMI alternatives where applicable.
- Leverage Michigan’s down payment assistance programs (MSHDA and local grants) to boost your down payment.
- After purchase, aggressively pay down principal and request PMI removal once you hit 80% equity (or 22% for auto-cancel).
- Improve your credit profile and compare lenders to lower your PMI cost or make lenders more flexible.
By combining these strategies thoughtfully—tailoring them to Canton’s housing market and to your financial capabilities—you can often purchase a home without being saddled by an expensive PMI burden for years.
