Avoiding PMI
by: Max Hunter
PMI - a recurring, monthly, unwelcome guest. It sounds similar to and is about as welcomed as a similar acronym. PMI is private mortgage insurance. This insurance policy is paid for by the homebuyer when the amount of their primary mortgage is greater than 80% of the value of the property.
You will note that the term "primary mortgage" was used. This is for a specific reason. It is not the total of all mortgages and home loans on the property that is evaluated, but rather the amount of the primary or largest mortgage on the property that can trigger PMI.
PMI is calculated by taking 0.5% of your primary loan balance and dividing it by 12 (12 monthly payments). For example, if your primary mortgage is $200,000 and you are required to pay PMI, your mortgage payments would be an additional $83.34 per month. For most homebuyers, this additional premium is a considerable financial burden to undertake.
There are ways around PMI for those homebuyers unable to put down 20% or more on their new home. Mortgage lenders have created loan packages which include two or more home loans that when combined exceed the 80% threshold, while no one of the loans exceed that threshold. Typically there is a primary mortgage and either one or two home equity loans taken out simultaneously which are 81% - 100% (or sometimes more) of the home value. This affords the homebuyer to put less than 20% down, or perhaps put nothing down at all while at the same time eliminating the need to pay PMI.
If you know you are going to be putting less than 20% down on the purchase of your home you should immediately speak to your home lender about avoiding PMI. A good home lender will inform you about these types of packages. Though the rules on these packages may differ from state to state, the vast majority of states allow for these types of loan packages.
When you review this type of package you will note that there will invariably be a different interest rate on the mortgage than there is on the home equity loan(s). The mortgage rate may have a slightly lower interest rate or perhaps even a considerably lower interest rate. You should be able to calculate what the monthly payments would be for the combined loans and then determine if it comes out less than a single mortgage with PMI. Obviously, a good lender is only going to present you the package if the payments are cheaper than a single loan with PMI.
You are able to refinance the loans at any point and combine them into one payment. You would only do this when the value of the home is more than 20% above of the amount you will mortgage. As the value of your home increases through home improvements or time, you can receive an appraisal and speak to your home loan professional to determine if refinancing the loans into one loan makes sense.
These types of loans are often referred to as 80-10-10 loans or 80-15 loans, among other names. An 80-10-10 loan is a mortgage at 80% of the amount to be financed and than two home equity loans at 10% each. You will likely find that all three loans will have a different interest rate with this type of package. 80-15 loans are similar but would be the main loan at 80% and a secondary loan at 15% with the buyer putting down the additional 5%.
It is important to note that when financing 90% - 100% of a home, or more, the appraisal will play a key role in the loan approval process. If the appraisal does not come out at a pre-determined amount, the lender may feel that the transaction is not a sound one. You may need to go back and renegotiate the purchase price of the home or run the risk of being denied the mortgage. Most real estate contracts, however, do have a clause in them that allows the buyer out of the contract if they are denied a mortgage. You will want to speak to the lawyers and real estate agent in advance if you are planning for applying for this type of loan. Some contingency clauses in contracts specify a maximum percentage of a loan you need to qualify for and if you are denied for a loan at a higher percentage you are not protected by this clause.
It is important for you to have all of this information in place before you start your home search. By knowing how your financing is going to be handled you will be able to make sure you are protected in the transaction and you will also be able to negotiate a better deal since your financing has been completed or is close to being completed. The key is knowing in advance what percentage of the value of the home you are able to and willing to put down on your new home.
About The Author
Max Hunter is the author of many credit related articles. If you are looking for help with Home Loans or any type of credit issue please visit us at http://www.homeloanave.com.
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Mortgage Brokers ? The Nuts and Bolts
Mortgage Brokers ? The Nuts and Bolts
by: Dan Lewis
Using a mortgage broker to shop for home loans can make the borrowing process a lot less stressful than doing it yourself. Here are the nuts and bolts on getting a good broker.
Competent Mortgage Brokers
There are a couple of obvious situations where going with a mortgage broker makes perfect sense. If you have less than perfect credit, a mortgage broker is going to be able to open your eyes to numerous loan options a traditional bank would never tell you about. If the idea of handling the mass of paperwork involved in the loan application scares you, a mortgage broker is definitely going to be a savior since they will take on that burden. Still, how do you know if you are talking to a competent broker?
The first issue to address when considering whether to use a mortgage broker is scope.
Scope refers to the number of different lenders the mortgage broker works with in home...
Financing > Mortgage Brokers ? The Nuts and Bolts
12 Great Things About Successful Real Estate Note Holders
12 Great Things About Successful Real Estate Note Holders
by: Richard Wills
1. They make sure that the insurance policy on the property is issued for an amount that represents at least the full value of the note still owed to them.
2. They also make sure that the note is recorded and they are listed as mortgagee, trustee, or the first contract holder on the policy.
This guarantees that they will be entitled to any proceeds from any claim ahead of the borrower.
3. They make sure that they get a notice of cancellation if the borrower fails to keep a current policy on the property.
4. They make sure that real estate taxes are paid on time by the borrower, and if necessary the note holder will pay the taxes themselves.
5. They make it a habit to drive by the property on a regular basis or have someone drive by to make sure that their investment is still intact.
6. They keep all pertinent information on...
12 Great Things About Successful Real Estate Note Holders
Financing > 12 Great Things About Successful Real Estate Note Holders
Home Equity Loan Comparison - Access Your Home's Equity Through A Second Mortgage Or Equity Loan
Home Equity Loan Comparison - Access Your Home's Equity Through A Second Mortgage Or Equity Loan
by: Carrie Reeder
You can access your home equity without the cost of refinancing with two financing options. A second mortgage will give you a lump sum check with a fixed or adjustable rate. A home equity line lets you tap into your equity when you want to. Both options allow you to write off interest on your taxes and avoid high financing costs.
Benefits Of A Second Mortgage
A second mortgage allows you to borrow up to 90% of your home?s value. The lender, which doesn?t have to be your primary mortgage lender, writes you one check. You can choose to pay off credit cards or make a major purchase.
Fees are none to minimal with a second mortgage. Rates are usually fixed and last 15 or more years. A 15 year loan lets you pay off the debt quicker, saving you cash on extended interest payments.
Benefits Of A Home Equity Line
A home...
Home Equity Loan Comparison - Access Your Home's Equity Through A Second Mortgage Or Equity Loan
Financing > Home Equity Loan Comparison - Access Your Home's Equity Through A Second Mortgage Or Equity Loan
Finding the Right Online Loan for You
Finding the Right Online Loan for You
by: John Mussi
If you're looking for an online loan, you might be having problems deciding which type of loan and lender is best for you. While you can get an online loan from several different types of lenders, the interest rates, loan terms, and collateral requirements tend to differ from one to the next.
Below you'll find information on the different types of online lending services, from online branches of traditional banks to solely online lending companies, as well as information about the differences from one type of online loan to the next.
Exploring loan options
Several different types of loans can be found via online services, and it can sometimes be difficult to decide which online loan is the right loan for your needs.
Low value secured and unsecured loans can be found, usually on the websites of real-world finance companies. These loans provide small amounts of cash at the...
Finding the Right Online Loan for You
Financing > Finding the Right Online Loan for You
What is MLM?
What is MLM?
by: Tal Fighel
Multi level marketing (MLM) is a form of direct selling. Companies market goods and services through networks of people who are called independent distributors. These people either buy products for themselves from the company and then resell them to consumers. They can also refer people to the company and when someone buys, they get a commission.
Another way that these independent distributors make money is by building their...
puppy training What is MLM? Financing Avoiding PMI
Financing > What is MLM?