What You Need To Know About Mortgage Insurance

If you are on the verge of buying real estate, you've probably heard the term Private Mortgage Insurance. Mortgage professionals talk about it a great deal, but you may be asking, "What is it exactly? And why should I care?"

Private Mortgage Insurance Defined

PMI is required by lenders if the down payment of a purchase is less than 20 percent of the home's value. It protects the lender if the borrower defaults on the loan.

It also makes the lender more apt to loan, even if the down payment is as low as 3%, because in the long run, the lender's investment is protected.

You Pay For It

Unlike other types of insurance which you pay to protect your interest in an asset, you pay Private Mortgage Insurance to the mortgage company to protect its interest in your new real estate. (Note that PMI is not usually tax deductible. Check with a tax professional for details.)

Make It Go Away: PMI Can Be Terminated Once You've Paid Down Your Loan

Once you pay down your mortgage to the point where it hits the magical 80% of the original purchase price or appraised value, whichever is less, you can request cancellation of PMI. The Homeowners Protection Act requires that loans made after 1999 include notifications to the borrower when you arrive at this point in your payments.

Your PMI payments must be automatically canceled once you pay down your loan to 78%. At closing, and on a yearly basis, you should receive information from your lender about when you can request cancellation.

Whether you're ready to buy real estate or need more information before taking the plunge, I can help. Contact your trusted mortgage professional today.

Before And After Tips When Dealing With A Disaster

Weather patterns across the United States seem to be getting more and more erratic. From tornadoes and earthquakes to flash floods and wild fires, there are many natural disasters that can quickly consume your home without warning. Because you never know when disaster might strike, it's best to be prepared.

Disaster insurance is the only precaution you can put in place to ensure compensation for your belongings and get your life back to normal as soon as possible. Below are the tips to take before misfortune strikes.

Create An Inventory

Most insurance agencies prefer if you include photographs of every room, including the insides of closets and cabinets. Shooting a video is even better. Then you can include audio of how much things cost or if they're one of a kind.

It's also a good idea to create a spreadsheet with a list of major items and their value by room. Be sure to email these to yourself, so that you can access them anywhere.

Double-Check Your Coverage

Once you've inventoried your possessions, then ensure you have enough coverage. Also, speak with your agent to see if there are any supplemental disaster insurance policies he or she would recommend for your region.

Tips To Do After A Disaster Does Strike

Contact Your Insurer Immediately

Call your agent as soon as possible and be prepared for mountains of paperwork. Be sure to ask for the claim number for your region and use it on all paperwork and in every conversation. This will help expedite your claim.

Secure Your Property

It's your responsibility to ensure your property is secure after the disaster. Be sure to take photographs and video and then cover or stabilize any vulnerable points. You don't want the insurance agency to have any discrepancies when determining if the damage was done during the disaster or afterward.

Keep A Correspondence Record

You are going to be completely overwhelmed after such an unfortunate event, but it's important to maintain your wits. Keep a log of every conversation you have with insurance agents. Log the time, name, phone number and the key points of the conversation. This will help minimize the he-said-she-said accusations that can arise during these hectic times.

Hopefully you'll never have file a disaster insurance claim. However, if you do, it's best to be as prepared as possible. Create an inventory of your possessions and make sure you have the appropriate coverage. Then if mayhem strikes, you'll be that much closer to putting your life back together.

How To Interview An Architect When Building A New Home

Making the decision to build a home might be one of the biggest you make in your life. You've found the perfect plot of land and have a vision of what type of home you want, but you need someone to bring your dream to life.

That means it's time to start interviewing architects.

Hiring an architect isn't as simple as just calling up a few and seeing who might have the time.

You'll want to ensure you choose a professional that understands your design aesthetic, communicates well, can design on budget and has an upstanding reputation.

Below are a few key questions to ask when deciding whom to hire.

Do You Have A Specific Design Style?

When interviewing architects, be sure to ask each one if they have a specific aesthetic and if you can see a portfolio of his or her work. While most are adaptable, they usually all have design themes that recur in their projects.

Whether you want a minimalist structure or LEED certified construction, you'll want to know they have the experience.

What Is Your Fee?

You'll need to inquire whether they charge a flat fee for their designs or a percentage of the total building cost. Most architects charge a percentage of the overall cost of your home, usually ranging from 5-20 percent.

This is important to know because it means that for every floorboard installed, you'll need to add on the architect's additional percentage.

Do You Provide Project Management Services?

There are many services that architects should include within their contract, such as checking the contractor's work, making adjustments as the construction moves forward and obtaining lien waivers.

Get a list of what each architect you interview includes in his or her fee. Additional charges can add up and might play a part in who you choose.

Interviewing architects and finding the right professional can make all the difference when it comes to building exactly what you want. One you work well with can make the construction experience extremely pleasant, while a negative relationship can leave you hating your new home.

Read This Before Signing Your Reverse Mortgage

There are many reasons people take out reverse mortgages. However, this option is usually considered by cash-strapped seniors who own their homes and are looking to ease the burden of their golden years.

The beauty of reverse mortgages is that you'll receive money as long as you are current on property taxes and homeowners insurance.

While this seems like an appealing opportunity, it's a decision that should not be made lightly. Not only is the reverse mortgage complicated in itself, but homeowners make all sorts of mistakes when they're too quick to sign the dotted line. So if you're considering one, be wary of the common pitfalls below.

Buying Into A Scam

With reverse mortgages becoming a more common option for those over 62, mischievous opportunists are searching for ways to solicit seniors in need of help. Scammers will take advantage by charging high fees, funneling off parts of payments, creating fake loans or committing identity theft. Ensure you use a lender approved by the Federal Housing Association.

Confusing Your Payment Options

Reverse mortgages come in many forms. You can get the amount in one lump sum. Tenure payments are another option that give you a certain amount each month until you die or move out. There are also term payments, lines of credit, and modified tenure and term payments. You need to take the time to research your options and decide which one will be best for you in the long run.

Compromising Government Assistance

There are several government assistance programs that set asset limits on your monthly spending. These programs provide aid for low-income and disabled individuals. If any assistance programs financially support you, then be sure to consult their advisers before determining your reverse mortgage plan.

Disregarding Other Options

Reverse mortgages are extremely expensive and many people see them as their only option. However, there are other alternatives. Consider taking out a personal loan, downsizing or even taking on roommates. The Golden Girls always seemed to have fun.

A reverse mortgage could be just the thing to give you the extra cash flow you need and ease your mind. However, make sure you're consulting a trusted home financing specialist, reading the fine print and have carefully considered all your options.

What's Ahead For Mortgage Rates This Week - September 9, 2013

Last week was relatively calm due to the Labor Day Holiday on Monday providing little mortgage and housing related news. However, there were several positive indicators for overall economic conditions.

Construction spending rose by 0.60 percent in July and surpassed economists' expectations of 0.30 percent and June's zero percent growth. While this may seem a small increase, any indication that construction spending is increasing could indicate that residential construction is ramping up.

This would be good news for home buyers, who've been facing a shortage of available homes in many areas of the U.S.

The Fed Released Its Latest Beige Book Report

Federal Reserve districts reported rising consumer spending in most districts, modest expansion in manufacturing and moderate residential real estate sales. Higher mortgage rates may have dampened home buyer enthusiasm, but an ongoing shortage of available homes is also likely to have contributed to slower sales.

Mortgage rates will likely rise if the Fed tapers its $85 billion monthly purchase of mortgage-backed securities and Treasury bonds as demand for bonds is expected to decrease. When bond prices fall, mortgage rates usually rise.

ADP released its report on private sector jobs added for August; 176,000 jobs were added against expectations of 185,000 jobs added and July's 198,000 jobs added. The three-month rolling average of private sector jobs added shows steady job growth as jobs added rose from 140,000 in May to 188,000 jobs for August.

Freddie Mac's Primary Mortgage Market Survey reported that the average rate for a 30-year fixed rate mortgage rose by six basis points to 4.57 percent with discount points unchanged at 9.70 percent. 

The average rate for a 15-year fixed rate mortgage rose by five basis points to 3.59 percent with discount points unchanged at 0.70 percent. The average rate for a 5/1 adjustable rate mortgage rose by four basis points to 3.28 percent with discount points unchanged at 0.50 percent.

According to the Bureau of Labor Statistics Non-Farm Payrolls Report for August, 169,000 jobs were created, which fell shy of expectations of 173,000 new jobs. Expectations were based on the original number of 162,000 jobs created in July, but July's number was revised downward to 104,000 jobs created.

The unemployment report for August was 7.30 percent, down 0.10 percent from July's reading of 7.40 percent.

The combination of higher mortgage rates, persistently high unemployment and fewer jobs created could signal the Fed to postpone its plan to start reducing its monthly securities purchases.

What's Coming Up

This week's scheduled mortgage and housing news is relatively flat, but Freddie Mac's Primary Mortgage Market Survey will provide the last indication of mortgage rates' direction before the FOMC meeting on September 18.

The Fed will also likely be watching the Weekly Jobs report and the University of Michigan's Consumer Sentiment Index as part of its decision-making process on whether to taper or maintain current QE securities purchases.