Private Mortgage Insurance (PMI) What are Your Options

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 it seems the only thing most borrowers understand about Private Mortgage Insurance (PMI) is that without it, many of them would be denied mortgages. While for many borrowers, this is indeed the case, it’s important to be aware of the other options that exist.

First, let’s start with the basics: what is PMI? As implied by the name, PMI is literally an insurance policy on your mortgage, which protects the lender in case of default. Typically, PMI is required on mortgages with a loan-to-value of greater than 80% (i.e. when the down-payment is less than 20% of the value of the mortgage). The insurance is calculated as a percentage of the the total mortgage value, and is rolled into the monthly mortgage payment.

PMI is not cheap, and will average about $1,000 per year on a $200,000 mortgage. Generally speaking, insurance premiums for fixed-rate mortgages are lower than for variable-rate mortgages. In addition, long mortgage durations (30 years, as opposed to 15 years), and high loan-to-value mortgages are associated with higher PMI premiums. This is to be expected, since mortgages with these characteristics typically have higher default rates.

One alternative to making monthly PMI payments is to roll a one-time premium into the mortgage. Thanks to current tax rules (mortgage interest is tax-deductible, while PMI premiums are not), it will be cost-effective for the average borrower to do so. Unfortunately, most borrowers are not aware of this possibility, because lenders require special authorization to process it and hence avoid mentioning it to prospective borrowers. Finally, while such a strategy will technically raise the size of your mortgage, some (or even most) of this premium will be rebated to you when it is determined that you no longer need it.

Speaking of which, mortgage insurance is only a temporary outlay. After your loan-to-value ratio exceeds 80%, you will no longer be required to pay for it. This is natural, since if your loan-to-value ratio had been this high when you first obtained the mortgage, you wouldn’t have been required to purchase PMI.  In fact, thanks to a law passed in 1999, lenders must take the initiative to cancel the mortgage insurance agreement when the LTV falls below 78%, based on the initial appraised value of the home. Borrowers are also entitled to early cancellation (though, you must request it), if your equity exceeds 25%, based on a current appraisal of the home.

As I mentioned, private mortgage insurance is quite expensive, and hence not-at-all desirable. This is because the mortgage insurer is selected by the lender – not by the borrower – which doesn’t have as much of an incentive to cut costs. Accordingly, it might be economical to pay a higher interest rate in lieu of PMI, if your lender offers you such an option. The best approach is to simply (save up until you can afford to) make a higher down-payment, such that PMI is no longer necessary.Visit Here Now http://mortgage-loan-broker.blogspot.com

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There are plenty of new and improved deals coming onto the market in the last couple of weeks. Having a look at the best buy tables there are a number of fixed rate mortgage deals that have much better interest rates but more importantly there are a couple of newer higher loan to value mortgages entering the market. There are new 30% LTV deals and interestingly new 10% deposit deals. This will be welcome news for those trying to save the hefty deposits needed.

While mortgage lenders will still have their strict lending criteria in place this does look like the market is beginning to thaw. More competition especially in the higher loan to value should translate into continued improvements in the rates available to borrowers. It is however predicted that interest rates will again increase in 2010 so this may well be the time to lock into a fixed rate mortgage deal if you are of the cautious type. Rates for fixed rate mortgages may again start to climb.

Variable deals have improved also with some great two year deals on the market. I even spotted a great first time buyer deal with a very competitive interest rate and no arrangement fee payable.

Like I always say it is best to get expert, professional advice from a qualified source especially since it is going to the biggest investment you are likely to make ever. Someone who also has local knowledge can add extra benefit. If you are buying a home in Falkirk, then look for recommended Falkirk mortgage advisers.

Things are certainly looking promising for a pickup in the mortgage market during 2010. It may be slow but it looks like a more competitive market is on the cards that should benefit us all.

Chris Borthwick writes articles covering a broad range of subjects. His main area of expertise is mortgage advice and writes many articles on mortgages for finance industry, mortgage brokers and for the general public. Most recent articles detailed the benefits of a fee free mortgage broker.

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Florida FHA Mortgage Programs

For the Florida home buyer the FHA program can simplify the purchase of a home, making financing easier and less expensive than a conventional mortgage loan product. Some highlights of the Florida FHA loan program include:

 Minimal Down Payment and Closing costs.

• Down payment less than 3.5% of Sales Price Gifts are allowed
• Seller can credit up to 6% of sales price towards closing and prepaid costs.
• 100% Financing available
• No reserves required.
• FHA regulated closing costs.

Easier Credit Qualifying Guidelines such as:

•  
  • No minimum FICO score or credit score requirements.
  • FHA will allow a home purchase 1 year after a Bankruptcy.
  • FHA will allow a home purchase 2 years after a Foreclosure

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Florida FHA Fixed Rate Mortgages

 FHA fixed-rate mortgages, or Section 203(b), are the most common and popular type of Florida FHA mortgage. The interest rate does not change with a fixed-rate mortgage. A fixed-rate Florida FHA mortgage insures the Florida mortgage lender for the total amount of the Florida mortgage in case the buyer defaults. This type of Florida mortgage requires a smaller down payment than a conventional mortgage would require. The typical down payment for a fixed-rate mortgage is 3.5 percent of the total amount borrowed. A fixed-rate Florida mortgage can offer a lower interest payment if the mortgage is taken out during a period of low-interest rates. A fixed-rate mortgage can also offer stability; your monthly payments will be the same for the life of the mortgage. Fixed-rate mortgages can be taken out for a period of  15, or 30 years.

 Florida FHA Adjustable-rate loans

FHA adjustable-rate Florida mortgages, or Section 215, have interest rates that increase and decrease, depending on the current federal index. An adjustable-rate Florida mortgage, or ARM, is attractive because interest rates are initially lower than interest rates on a fixed-rate Florida mortgage. Several factors are used to calculate an ARM, all of which can affect the interest rate. Typically, an ARM is most appealing to Florida homebuyers who don’t intend to stay in the purchased house for more than a few years, as interest rates tend to increase over time. An ARM is convenient if current interest rates are high, as ARM rates are lower than fixed rates. It may be more appealing to use an ARM once interest rates have peaked, as the subsequent interest charged over the life of the mortgage will most likely reduce, rather than increase, monthly payments.

FHA Teacher Next Door

HUD also know as The Department of Housing and Urban Development,, directly offers Florida Teacher-Next-Door program to approved teachers in the United States to purchase housing that has been acquired by FHA/HUD at a 50 percent discount. Typically, these Florida homes are offered in areas of revitalization, or areas found in low- and moderate-income neighborhoods that may have increased crime rates and many vacant houses but have been identified as good candidates for redevelopment efforts. Through HUD and FHA, teachers are able to purchase Florida homes at a 50 percent discount and are required to make only a $100 down payment if the house is financed with a FHA home loan.

FHA loan  for the Officer Next Door

 This special program is identical to the Teacher Next Door program, but it is for approved law enforcement officers of the United States. To qualify for the program, law enforcement agents must live in the purchased property for a minimum of three years.

FHA 203KRenovation Mortgages

 The FHA 203K Renovation Mortgage allows Florida homeowners to borrow money to extensively renovate their Florida home. As much as 110% of the costs needed to repair and renovate the Florida home can be financed. There are restrictions as to what types of repairs or renovations can take place, and the minimum amount of the 203(k) is $5000.

Special FHA Program: FHA Bridal Registry Program

Like a bridal registry for specialty and department stores, the FHA Bridal Registry program allows a couple to register with a Florida FHA  lender. Friends or family of the couple can make gift payments into an account that bears interest. The money gifts earn interest, and can be used as a down payment towards a FHA mortgage on a new Florida home.

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