Avoiding Pmi Private Mortgage Insurance

Avoiding Pmi Private Mortgage Insurance



Avoiding PMI - Private Mortgage Insurance
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.




You Might Also Like:




No comments:

Powered by Blogger.