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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.
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Several valuable resources for Mortgage Insurance can be found on this site...
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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%.
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Additional commentary and news regarding
Mortgage Insurance
can be found
below... |
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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.
| Ray Corbett |
Editor -
Mortgage Insurance
Facts,
Information
Resources And Benefits
| More Links And Related Information For Mortgage Insurance |
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The Single Most
Effective Method
You Can Use To
Do A FAST
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That Will Save
You Both Time
And Money... |
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Just
as a
search
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Mortgage Insurance
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Since
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to
some
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an
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this
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As a
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bring
you
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and
informative
links
from
Google
for
websites
pertaining
to
your
Mortgage Insurance
search.
Some
of
these
resources
are
listed
below... |
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The Four Most
Important Things You
Need To Know About
Mortgage Insurance That
Could Save You
Time And Money!...It's
All About Integrity
And Service. |
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1.)
Is the website reliable? A high search engine ranking usually indicates a website of substance and quality. Search Engines don't rank sites for integrity. However, they do rank them for the overall accuracy and relevancy of the sites' content, and this it what is important to you.
Also, it
never
hurts to
check
with the
Chamber
of
Commerce
to see
if there
are any
complaints
from
former
customers. |
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2.)
What is the website's Privacy Policy? All trustworthy websites have a Privacy Policy statement that states their legal position with regard to the use of your name and personal information. The privacy statement is usually located on the home page at the bottom navigation bar. You do not want to provide your email address, only to be constantly spammed by a company's email advertising campaign in the future. What's worse, some disreputable companies sell the email addresses they have collected to other online companies, including porn sites. Read the Privacy Policy carefully before you provide any detailed personal information.
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3.)
Does the company have a Terms Of Service agreement on their website?
After you have selected a
Mortgage Insurance
Website, read their Terms Of Service Agreement, usually located in the bottom navigation bar of the home page. This agreement will cover the responsibilities of the
Mortgage Insurance provider if you choose to
use
their
products
or
services. If you don't see a terms of use or service agreement on the home page, ask for a copy to be emailed to you. |
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4.)
Does the firm advertise with Google, Yahoo or MSN? Simply advertising with one of these search engine giants isn't a guaranteed a seal of approval. However, no
Mortgage Insurance
website can advertise with the above companies without first being accepted as a client. The main criteria for all search engines is relevancy. Their advertisers must provide quality information related directly to the consumers' search
objective.
All
major
search
engines
have
rules
for
their
advertisers
to
attempt
to
prevent
fraud. |
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While
following
the
above
suggestions
will not
guarantee
that you
are
dealing
with a
reputable
company,
it will
increase
the
odds.
Anything
you can
do to
prevent
being
ripped
off by a
potentially
unscrupulous
company
is
definitely
worth
the
effort,
since
you
could
easily
save
yourself
and your
family
hundreds
or even
thousands
of
dollars
by
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only
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reputable
company.
Consider
some of
the
resources
on this
site and
check
them
against
the
rules
above.
Step #4
has
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you, as
all of
our
listings
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clients
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Google.
Most of
the
information
you need
to check
- other
than
rule # 1
above -
can
usually
be found
on the
first
page of
the
site...simple
and
fast.
It's
worth
the
little
extra
effort.
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Finally,
and most
important,
the most
accurate information
for
Mortgage Insurance
is based on many
variables and can
vary
considerably.
Check
with several online
resources to insure
that you are getting
the best information
possible for your
situation.
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