All You Need to Know About Mortgage Insurance
© Home Buyer’s Legal Info 2012
LEGAL INFORMATION FOR NEW HOME BUYERS
HOME BUYER’S LEGAL INFO

THE LATEST...

Average US rate on 30-year

mortgages falls to 3.86 percent

Home mortgage rates are at an all time low. It’s a great time to purchase a home. Average long-term U.S. mortgage rates declined this week following the Federal Reserve's decision to keep interest rates at record lows for now. Mortgage giant Freddie Mac said Thursday the average rate on a 30-year fixed-rate mortgage fell to 3.86 percent from 3.91 percent a week earlier. The rate on 15-year fixed-rate mortgages eased to 3.08 percent from 3.11 percent. Rates have stayed below 4 percent for nine straight weeks. Fed policymakers announced last Thursday they had decided to keep a key short-term interest rate close to zero in the face of threats from a weak global economy, persistently low inflation and unstable financial markets. But Fed Chair Janet Yellen said a rate hike was still likely this year. A majority of Fed officials on the committee that sets the federal funds rate — which controls the interest which banks charge each other — still foresee higher rates before next year. The Fed will meet next in October and then December. A rate hike by the Fed could bring higher rates for home loans. The Fed has kept the federal funds rate near zero since the financial crisis struck seven years ago. To calculate average mortgage rates, Freddie Mac surveys lenders across the country at the beginning of each week. The average doesn't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount. Mortgage rates could escalate at any time. Now is the time to get pre- approved for a loan. You can check current loan rates at zillow.com You can read more at: usnews.com

All You Need to Know About Mortgage Insurance

Mortgage insurance serves the purpose of protecting a lender if a borrower decides to default on his loan. Typically, a lender requires a buyer to pay 20 percent as the down payment. If a buyer cannot do that, purchase of mortgage insurance may be made mandatory. Once 80 percent of the total principal is paid by the buyer, however, he can request the lender to have the mortgage insurance removed. Even the law requires a borrower to be notified by his lender once the principle is paid 80 percent, or more.

Mortgage insurance benefits

Even though PMI mainly benefits lenders by protecting them against defaults, it sometimes also benefits buyers. Some buyers cannot really afford to pay the initial 20 percent deposit, or down payment. What PMI does is it lowers the initial down payment amount to make house buying easier for them. However, in a scenario like this, a buyer can expect to pay a bit more money to repay the loan than normal.

Jobless mortgage insurance

As its name suggests, jobless insurance covers the principal, the interest, insurance costs, and any taxes involved in case of a job loss. Many lenders provide jobless insurance for no cost when a buyer buys PMI. Certain state housing agencies, real estate brokers and home builders do the same, as well.

Different PMI options

Single, monthly, split, and level are the four main PMI options available. If a buyer chooses single premium, he may either pay the full cost at the time of closing, or finance the same into his home loan. In case of monthly premium, the borrower is required to pay a fixed premium monthly. Split premium works by combining a portion of the premium paid at the beginning through a loan, or out of pocket, with monthly premiums to cover the rest. This option allows the borrower to negotiate a bit during the closing time. When it comes to annual premium option, it is paid annually, but mostly deducted monthly through the escrow of the lender. It is due on closing, and the home loan can be used to finance its premium for the initial year.

Mortgage insurance by FHA

Every mortgage that is obtained through a lender who is FHA-approved is insured by FHA. The borrower is required to pay a premium upfront, and then pay monthly premiums. Just as is the case with other types of mortgage insurance, in this case too lenders get protection against borrower defaults. Qualification for FHA insurance requires a loan to meet certain set criteria. From its inception in 1934, more than 34 million properties have been insured by FHA.

Main PMI alternatives

The main PMI alternatives that exist are lender insurance, piggybank loan and reappraisal. Piggybank loans can be taken out by paying down payment of only 10 percent in most cases. The remaining part is funded by the lender against a high interest rate. As far as lender insurance goes, the lender self-insures in this case and hikes the interest rate for the borrower to compensate for the same. Reappraisals, on the other hand, may eliminate the requirement for PMI by proving that the home equity is 20 percent, or more. It does not matter whether the amount is paid by the buyer, or not.
Mortgage Contract, House, Male Icon, Question Mark
© Home Buyer’s Legal Info 2012
HOME BUYER’S LEGAL INFO

THE LATEST...

Average US rate on 30-year

mortgages falls to 3.86 percent

Home mortgage rates are at an all time low. It’s a great time to purchase a home. Average long-term U.S. mortgage rates declined this week following the Federal Reserve's decision to keep interest rates at record lows for now. Mortgage giant Freddie Mac said Thursday the average rate on a 30-year fixed-rate mortgage fell to 3.86 percent from 3.91 percent a week earlier. The rate on 15-year fixed-rate mortgages eased to 3.08 percent from 3.11 percent. Rates have stayed below 4 percent for nine straight weeks. Fed policymakers announced last Thursday they had decided to keep a key short-term interest rate close to zero in the face of threats from a weak global economy, persistently low inflation and unstable financial markets. But Fed Chair Janet Yellen said a rate hike was still likely this year. A majority of Fed officials on the committee that sets the federal funds rate — which controls the interest which banks charge each other — still foresee higher rates before next year. The Fed will meet next in October and then December. A rate hike by the Fed could bring higher rates for home loans. The Fed has kept the federal funds rate near zero since the financial crisis struck seven years ago. To calculate average mortgage rates, Freddie Mac surveys lenders across the country at the beginning of each week. The average doesn't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount. Mortgage rates could escalate at any time. Now is the time to get pre-approved for a loan. You can check current loan rates at zillow.com You can read more at: usnews.com

All You Need to Know About Mortgage

Insurance

Mortgage insurance serves the purpose of protecting a lender if a borrower decides to default on his loan. Typically, a lender requires a buyer to pay 20 percent as the down payment. If a buyer cannot do that, purchase of mortgage insurance may be made mandatory. Once 80 percent of the total principal is paid by the buyer, however, he can request the lender to have the mortgage insurance removed. Even the law requires a borrower to be notified by his lender once the principle is paid 80 percent, or more.

Mortgage insurance benefits

Even though PMI mainly benefits lenders by protecting them against defaults, it sometimes also benefits buyers. Some buyers cannot really afford to pay the initial 20 percent deposit, or down payment. What PMI does is it lowers the initial down payment amount to make house buying easier for them. However, in a scenario like this, a buyer can expect to pay a bit more money to repay the loan than normal.

Jobless mortgage insurance

As its name suggests, jobless insurance covers the principal, the interest, insurance costs, and any taxes involved in case of a job loss. Many lenders provide jobless insurance for no cost when a buyer buys PMI. Certain state housing agencies, real estate brokers and home builders do the same, as well.

Different PMI options

Single, monthly, split, and level are the four main PMI options available. If a buyer chooses single premium, he may either pay the full cost at the time of closing, or finance the same into his home loan. In case of monthly premium, the borrower is required to pay a fixed premium monthly. Split premium works by combining a portion of the premium paid at the beginning through a loan, or out of pocket, with monthly premiums to cover the rest. This option allows the borrower to negotiate a bit during the closing time. When it comes to annual premium option, it is paid annually, but mostly deducted monthly through the escrow of the lender. It is due on closing, and the home loan can be used to finance its premium for the initial year.

Mortgage insurance by FHA

Every mortgage that is obtained through a lender who is FHA-approved is insured by FHA. The borrower is required to pay a premium upfront, and then pay monthly premiums. Just as is the case with other types of mortgage insurance, in this case too lenders get protection against borrower defaults. Qualification for FHA insurance requires a loan to meet certain set criteria. From its inception in 1934, more than 34 million properties have been insured by FHA.

Main PMI alternatives

The main PMI alternatives that exist are lender insurance, piggybank loan and reappraisal. Piggybank loans can be taken out by paying down payment of only 10 percent in most cases. The remaining part is funded by the lender against a high interest rate. As far as lender insurance goes, the lender self-insures in this case and hikes the interest rate for the borrower to compensate for the same. Reappraisals, on the other hand, may eliminate the requirement for PMI by proving that the home equity is 20 percent, or more. It does not matter whether the amount is paid by the buyer, or not.