Pay the PMI or pay the Down Payment Assistance Loan?

[Anonymous]

Hello!

I have been looking into the various options for low down payment mortgages, usually coming with a healthy amount of PMI, and also looking at down payment assistance. Around Colorado, where I live, there are some programs that are grant or gift money, but a lot of them are a 0% loan or lien and I'm not sure I fully understand the pros and cons of each. 

The question is, do I put 3-4% down of my own money and pay a bunch of PMI upfront and over the first 4-5 years? This seems like waste of money all together...

Or, do I see about getting one of these little or no interest down payment loans, so my mortgage can come with 20% equity at the start and my principal can be less, my payment can be less - and then just pay off the DPA over time instead of paying the PMI over time?

Instincts tell me that I should avoid PMI at all costs, including at the cost of DPA loans.

Does anyone have experience with this?

Thanks!! 
Kayla

[ShanetheMortgageMan]

If you can get enough down payment assistance to avoid PMI then I'd lean towards that route... as the interest is non-existant (or very low) on down payment assistance programs.  Often they can only be used in conjunction with FHA, VA, or USDA financing though, so conventional may not be an option... and FHA will have PMI (or it's just referred to as MI) no matter how much you put down.

If your credit is good and you can put 5% down, then I'd consider conventional financing... there will still be PMI (unless you can find a 1st mortgage to 80% LTV + a 2nd mortgage that will go to 95%) but it'd be cheaper than FHA's MI.