SJ Real Estate

An Overview Of Private Mortgage Insurance

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An Overview Of Private Mortgage InsuranceWhen you are going through the process of looking for a new home, you are probably focused on the sticker price of that home. Even though it is important to think about your down payment, your monthly mortgage payment, and the total amount of the loan, there are other expenses that you might need to cover as well. If you do not put down enough money, there is a chance that the lender could ask you to pay for something called private mortgage insurance. What is private mortgage insurance and how much do you have to pay? There are several important points that you should keep in mind.

Why You Might Purchase PMI

Private mortgage insurance is something that the lender may ask you to purchase as a way to reduce their risk. If you do not make a sizable down payment, then the lender is responsible for funding most of the cost of your home. If you end up defaulting on the cost of that loan, the lender will lose a major amount of money. With PMI, the lender will be able to get his or her money back in the event that you default. Even though the exact cost of PMI will vary, you should expect to pay somewhere between 0.5 percent and 2 percent of the loan. You might be able to ask the lender to check with multiple options to find the least expensive policy possible for you. Once the PMI policy is instituted, this is something that you will have to pay on top of your monthly mortgage payment.

Avoiding PMI Payments

Importantly, there are ways that you can avoid PMI. You might be able to avoid this insurance policy altogether if you are able to increase the size of your down payment. If you cannot do that, the PMI policy will usually be canceled when you reach a certain threshold in equity. This is something that you should negotiate with the lender before you sign on the dotted line. In some cases, the PMI policy as waved when you reach 10 percent of the loan amount paid back. Even though you should check with a professional accountant, PMI is likely tax-deductible, similar to mortgage insurance.

 

The Top Tips For Impressing A Potential Buyer At Showings

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The Top Tips For Impressing A Potential Buyer At ShowingsFor those who are getting ready to put their home on the market, they want to make sure they get as much money as possible for their home. This means making a positive first impression. There is never a second chance to make a first impression. Therefore, homeowners need to make sure they do everything possible to “wow” potential buyers at open houses and showings. What are a few of the top tips that homeowners should keep in mind?

Listen To The Agent

Homeowners know their home the best. Therefore, they feel like they are able to show their home in the best manner possible. Even though they should have some input, homeowners are ultimately selling a building. They are not selling their memories.It is a prudent idea to listen to the agent. For example, the real estate agent may recommend staging the home in a certain way. The real estate agent may even recommend that he or she hosts the open house personally. Homeowners will need to listen to the experience of their real estate agent in order to have the best showing possible. 

Clean The Home Thoroughly

Homeowners also need to make sure they clean the home thoroughly. There is a high chance that the real estate agent may even recommend a cleaning service to scrub the house from top to bottom. Even though a potential buyer is probably going to clean the home after he or she buys it, nobody likes to see a dirty house. If there are any children or pets living in the home, try to eliminate all traces of them. 

Put Away Family Photos And Memories

Finally, homeowners also need to put away any family photos or personal items they have left out. When someone is looking for a new home, they want to envision what their life might be like in that home. This is going to be challenging if the current homeowner has family photos all over the walls. Remember, selling a home does not mean selling the memories in it. As a result, homeowners should try to put away their family photos and trinkets before the open house or showing. This will increase the chances of getting a great offer.

 

Case-Shiller Reports Home Prices Rise at Fastest Pace in 7 Years

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Case-Shiller Reports Home Prices Rise at Fastest Pace in 7 YearsS & P Case-Shiller Home Price Indices reported the fastest pace of U.S home price growth in seven years. National home prices grew by 10.40 percent year-over-year in December as compared to November’s reading of  9.50 percent home price growth on a year-over-year basis.

The S&P Case-Shiller 20-City Home Price Index reported home price growth in 18 of 20 cities included in the index. Detroit, Michigan did not report home price data for December. Phoenix, Arizona held the top position in the 20-City Index for the 19th consecutive month with year-over-year home price growth averaging 14.40 percent. Home prices in Seattle, Washington home prices held second place with year-over-year growth of 13.60 percent. San Diego, California home prices grew 13.00 percent year-over-year.

The Federal Housing Finance Agency released home price data for homes owned or financed by Fannie Mae and Freddie Mac. Home prices rose by 10.80 percent in the fourth quarter of 2020 as compared to home prices in the fourth quarter of 2019. Home prices reported by FHFA rose by 3.80 percent between the third and fourth quarters of 2020.

Idaho home prices reported by FHFA rose by 21.10 percent year-over-year.  Montana home prices grew by 15.50 percent; Utah followed closely with 15.40 percent home price growth. FHFA reported the highest pace of home price growth for cities in Boise, Idaho; home prices in San Francisco, California grew at the slowest pace. This data supports the trend of homeowners moving from costly metro areas to inland suburbs where they can buy larger homes for lower prices.

Rapidly Rising Home Prices Impact Affordability

While homeowners welcome quickly rising home prices, affordability issues worry real estate analysts and prospective home buyers. The covid-19 pandemic caused home prices to rise as homeowners fled congested urban areas for suburban and rural areas.

Supplies of available homes fall as demand for homes keeps rising during the pandemic. Millennials are in their peak home-buying years but many current homeowners are waiting out the pandemic to sell. Low inventories of available homes and rising building materials costs add to the shortage of homes in general and affordable homes in particular.

First-time and moderate-income home buyers face increasing challenges as home prices and mortgage rates rise. Mortgage approval standards are difficult to meet as rising home prices cause housing payments and down payment requirements to increase. In addition to property taxes and hazard insurance, buyers who cannot pay 20 percent down must also pay for mortgage insurance.

Skyrocketing home prices should ease when demand for homes slows, but that won’t happen until supplies of available homes catch up to buyer demand.

What Homeowners Must Do When Behind On Mortgage Payments

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What Homeowners Must Do When Behind On Mortgage PaymentsThere are lots of homeowners who fall on rough times from time to time. For example, some people may be in the midst of changing jobs. Other people might be going back to school. When this happens, it can be hard for homeowners to keep up with their mortgage payments. Even though they might be thinking about waiting for the bank to do something, this would be the ultimate mistake.

There are ways to handle late mortgage payments as long as homeowners reach out to the lender to discuss their options. What should homeowners do if they start falling behind on their mortgage payments?

Let The Lender Know Why They Are Falling Behind

If lenders do not hear anything from the homeowners, they are not going to know what is going on. Therefore, they may end up taking drastic action. The first thing that homeowners need to do is to let the lender know that they are falling behind on their mortgage payments. That way, the lender understands that the homeowner knows he or she is behind on the mortgage. Then, let the lender know why the mortgage payments will be coming in late. For example, there might be an unexpected medical expense that took the mortgage payment that month. Or, the homeowner might be looking for a new job. These are all understandable reasons why the mortgage payments might be late. 

Ask The Lender To Go Over The Options

Next, the homeowner also should discuss with the lender all of the options when it comes to late mortgage payments. There are lots of options available. If there is a one-time unexpected expense, the lender might simply break up that payment and spread it out over the upcoming payments without charging any extra interest. Or, the lender might be willing to simply add a few months to the mortgage in exchange for not charging a late fee. These are a few of the many options the lender has at his or her disposal.

Do Not Ignore Late Mortgage Payments

The only mistake that homeowners can make with late mortgage payments is not communicating with the lender. As long as the lender understands what is going on, homeowners should have options at their disposal.

 

What’s Ahead For Mortgage Rates This Week – February 22, 2021

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What's Ahead For Mortgage Rates This Week - February 22, 2021Last week’s economic reporting included readings from the National Association of Home Builders Housing Market Index, Commerce Department readings on housing starts and building permits issued along with data on sales of previously-owned homes. Weekly readings on mortgage rates and jobless claims were also released.

NAHB: Home Builders Index Rises One Point in February

Homebuilder confidence rose by one index point to 84 according to the National Association of Home Builders Housing Market Index. Readings over 50 in the Housing Market Index indicate that most homebuilders are confident about U.S. housing market conditions.

Component readings for the housing market index were mixed in February. Builder confidence in current market conditions for new single-family homes was unchanged with an index reading of 90; builder confidence in new home sales for the next six months fell by three points to a reading of 83. Builder confidence in buyer traffic in new single-family developments rose four points to an index reading of 72.  Before the pandemic, readings for buyer traffic in new housing developments were typically below 50, but the pandemic has created more interest in new single-family homes as families moved from congested urban areas to suburban areas.

Builders cited ongoing concerns including rising materials costs and affordability issues for first-time and low-income homebuyers.

Housing Starts Lower in January as Building Permits Rise

The Commerce Department reported fewer housing starts in January based on 1.58 million starts reported on a seasonally-adjusted annual basis, 1.67 million starts were reported in December and analysts expected a pace of 1.68 million housing starts for January.

Building permits issued rose in January to a seasonally-adjusted annual pace of 1.88 million permits. Analysts expected a reading of 1.67 million permits issued based on 1.70 million permits issued in December. Winter weather conditions likely contributed to fewer housing starts, but builders took out more building permits in anticipation of improving weather and continuing demand for homes due to shortages of available homes for sale and higher demand due to the covid-19 pandemic.

The National Association of Realtors® reported 6.69 million sales of previously-owned homes on a seasonally adjusted annual basis as of January. Low inventories of available homes and high demand for single-family homes continue to drive home sales during the pandemic. Rising home prices caused by high demand and low inventories of homes for sale created affordability issues in suburban areas as well as traditionally high-priced metro areas.

Mortgage Rates Rise, Jobless Claims Mixed

Freddie Mac reported higher mortgage rates last week as the average rate for 30-year fixed-rate mortgages rose by eight basis points to 2.81 percent. Rates for 15-year fixed-rate mortgages averaged 2.21 percent and were two basis points higher. Rates for 5/1 adjustable rate mortgages averaged 2.77 percent and two basis points lower than the prior week.

Weekly jobless claims data was mixed last week with 861,000 initial jobless claims filed as compared to the prior week’s reading of 848,000 first-time jobless claims filed. Ongoing jobless claims fell to 4.49 million continuing claims as compared to the prior week’s reading of 4.56 million continuing jobless claims filed.

What’s Next

This week’s scheduled economic readings include S&P Case-Shiller Home Price Indices, the Federal Housing Finance Agency’s Home Price Index, and data on pending home sales. The University of Michigan will issue its reading on consumer sentiment and weekly readings on mortgage rates and jobless claims will also be published.

Do You Need Mortgage Insurance Even If It’s Not Required By Your Lender? Let’s Take A Look

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Do You Need Mortgage Insurance Even if It's Not Required by Your Lender? Let's Take a LookFinding a proper mortgage loan and understanding the processing procedures behind the loan is the basis of good research. The down payment on a mortgage loan is typically significant when dealing with mortgage insurance.

Most loan applications with less than 20% down payment are required to include mortgage insurance with the loan. However, mortgage insurance may still be required even if it’s not typically required by your lender.

Underwriting Requirements

Most home mortgage applications undergo a strict set of standards for approval. These standards are known as underwriting and make up the bulk of time spent on a mortgage application. Unique situations in employment or credit history may require an additional down payment percentage to avoid PMI or private mortgage insurance.

Most underwriting requirements require adequate information on the borrower’s credit and employment history for complete application. Self-employed individuals or those with alternative forms of credit may need a few additional hoops to jump through when dealing with mortgage insurance requirements.

Lender-paid Mortgage Insurance

Lender-paid mortgage insurance is a popular option with potential homeowners that seek to avoid the cost of a PMI or FHA-backed insurance on a home loan. Most lenders incorporate payment of private mortgage insurance in exchange for a slightly higher interest rate.

This is one example of the points system on a mortgage application that eliminates the cost of PMI. The increase in interest rate may or may not warrant the need for a lender-paid mortgage insurance arrangement.

What’s Involved With Risk Assessment?

Strict lending requirements and banking policy now limit the number of mortgages with zero down payment options. Conventional mortgages and FHA both require private mortgage insurance if it is less than 20% down payment. However, FHA loans can be more flexible with the initial down payment requirements with adequate credit. FHA mortgage costs are now for the life of the loan. Lenders will look at mortgage insurance as risk protection.

The risk protection process may or may not require mortgage insurance in your home loan. For example, VA and USDA loans do not usually require mortgage insurance if the borrower’s credit and employment history are adequate.

Conventional loans have a reduction in risk once there is at least 20% equity in the home compared to the principal of the mortgage. Don’t hesitate to contact your trusted mortgage professional about potentially dropping mortgage insurance in the future to reduce overall loan costs.