What You Need to Know About Mortgage Insurance

Are you planning to purchase a home with a small down payment? While the current economic crisis has caused many banks to insist upon larger down payments than they have been demanding in the recent past, it is still possible to obtain a mortgage loan with a down payment of less than 20% of purchase price of the home. When doing so, however, you will most likely be required to obtain mortgage insurance in order to help reduce the risks associated with low down payment mortgages. This is not a new phenomenon, however, as lenders have long required this insurance to be purchased by those who are unable to provide at least a 20% down payment. Nonetheless, there are a many things you should know about this insurance in order to make certain you aren’t paying for coverage that you do not need.

Understanding Your Rights
Before you purchase mortgage insurance, it is important to understand your rights. First, the lender is legally required to tell you how much of your mortgage loan needs to be paid down before you can cancel the insurance coverage. Keep in mind, however, that you will be required to continue carrying the insurance for the lifetime of your loan if you obtain an FHA loan.

For non-FHA loans, you will generally be able to cancel the coverage once the loan has been paid down to 80% of the home's appraisal value. In addition, once the balance on the loan drops to 78%, the lender is required to cancel the insurance on your behalf. The lender is also required to provide you with an annual statement showing how much you owe on your loan as well as who you can call in order to cancel the mortgage insurance.

The High Risk Borrower Exception
It is important to note that it is possible for a mortgage lender to require you to carry mortgage insurance for a longer period of time if you are considered a high-risk borrower. In this case, the lender may be able to require you to maintain the coverage until you have paid the loan down to 50% of the home's value. If you have missed a mortgage payment, you may be placed into this high risk category and will have to pay the insurance for a longer period of time. Therefore, you should take care to pay your mortgage on time each month.

Dropping Mortgage Insurance Earlier
If you want to put an end to your mortgage insurance payments sooner, there are several steps you can take. One option is to have your home appraised again at a later date, as some lenders will allow you to use the new appraisal value when determining whether or not you have reached the 80% threshold. With the current drop in property prices, however, most homeowners will not benefit from this tactic at this time.

Prepaying your loan by just $50 per month can also help you reduce your balance more quickly so you can drop your mortgage insurance. Or, you may want to make some changes on your home in order to increase its value, which can significantly change your loan-to-value ratio.

Remember, mortgage insurance is not in place in order to protect you. Rather, it keeps your lender protected if you default on your loan. Therefore, the sooner you can stop making these payments, the better it is for your personal financial situation.




About the Author:
Shannon Kietzman is a well known author and trusted resource. Shannon regularly writes for http://www.byownermls.com/, a For Sale By Owner MLS service, the leading real estate search engine of homes for sale by owner (FSBO). For more information, please visit http://www.byownermls.com/.

Tying Up Lose Ends Before Attending the Closing for Your New Home

If you are purchasing a home from a private seller, you will still need to go through many of the same processes as a person who is purchasing a home with the help of a Realtor. Just as with any home purchase, you will need to complete a great deal of paperwork in order to close on the deal. While your lender and other applicable parties are getting the paperwork together in preparation for your closing, there are several things you might want to get taken care of. Namely, you may want to get the home inspected and to get your homeowner's insurance policy in place. But, what exactly is a home inspection and what types of insurance do you have to select from?

Understanding Home Inspections

When you hire someone to complete a home inspection, that person is responsible for determining the mechanical and structural condition of your home. This includes looking at many aspects of your home, including the condition of all of the following:

Air Condition
Electrical Wiring
Heating
Plumbing
Roof

By completing a thorough inspection, you can learn about any items that may need to be repaired before the sale is finalized. Therefore, it is best to have the home inspection completed after you have agreed on a selling price with the seller but before you have actually signed a contract or put down a deposit. Although home inspections typically cost anywhere from $250 to $500, it is money well spent because it can help you avoid purchasing a home that is nothing but a money pit.

Choosing the Best Homeowner's Insurance

When it comes to your homeowner's insurance, you can choose between two basic types of coverage. The first, which is referred to as a replacement cost policy will replace any damaged items for the amount it would cost you to replace the item today. The other type of policy, which is called a cash value policy, will pay you the amount of money the damaged item would be valued at today. Therefore, if you have a television that is 15 years old, you likely will receive nothing from a cash value policy if the television were to be damaged or stolen. If you had a replacement cost policy, on the other hand, you would receive a payment for the amount it would cost you to purchase a new television.

If you are purchasing an older home and your belongings are also older, you might want to consider obtaining a replacement cost policy. Just keep in mind that this type of policy is more expensive than the cash value policy. Therefore, you should evaluate the value of your home and its belongings carefully before deciding on the type of policy you wish to have.

It is important for you to have your home inspection completed and your home owner's insurance in place before you come to the closing. This way, you can feel confident you are getting the best deal possible and your lending institution will be comfortable with moving forward with the transaction.



About the Author:
Shannon Kietzman is a well known author and trusted resource. Shannon regularly writes for http://www.byownermls.com/, a For Sale By Owner MLS service, the leading real estate search engine of homes for sale by owner (FSBO). For more information, please visit http://www.byownermls.com/.

Selling and Buying with a Short Sale

During these times of economic troubles, you may have heard the term "short sale" mentioned on the news or possibly within real estate circles. But, do you know what the term means? If not, it is important for you to do your research and to learn more about short sales, as you can be affected by this type of sale whether you are the buyer or the seller.

Facing a Harsh Dilemma

A short sale is a specific type of real estate transaction that involves completing a purchase that is less than what is owed on the property. For example, a homeowner may purchase a home for $350,000 and take out a loan for $300,000 for its purchase. As a result of the economic problems the world is facing, however, the homeowner may not be able to continue making mortgage payments on the home. Even worse, the value of the home may have fallen to just $220,000, which means the homeowner owes more on the home than it is currently worth. Obviously, it will be impossible for the homeowner to sell the home at a price that will help him pay off what is still owed on the property. This is where the short sale comes in.

Going for the Short Sale

In a situation where the homeowner owes more on the home than he can recoup through its sale, the bank or mortgage lender may agree to discount the balance due. This way, the homeowner can get out from under the loan without having to file bankruptcy and the lender can cut its losses rather than trying to collect the full amount due.

Of course, getting a short sale to go through can be a very time consuming and difficult process. After all, banks are not in the business of forgiving loans on a regular basis. At the same time, agreeing to a short sale can potentially be the best business decision for the lender.

If you are trying to sell a home and you owe more on it than it is worth or if you are trying to purchase a home at its decreased value but the owner still owes too much on the home, you can discuss the possibility of a short sale with the lender's loss mitigation department.

It is important to note that completing a short sale can be very time consuming and the lender has the right to approve or disapprove of the sale. In addition, the entire balance due after the sale is complete may not be forgiven. Rather, if you are the seller, you may still be responsible for a portion of the remaining balance. Therefore, it is important to discuss all of your options with your lender and to come up with the plan that is best for everyone involved.


About the Author:
Shannon Kietzman is a well known author and trusted resource. Shannon regularly writes for http://www.byownermls.com/, a For Sale By Owner MLS service, the leading real estate search engine of homes for sale by owner (FSBO). For more information, please visit http://www.byownermls.com/.

Avoiding Common Homeowner Scams

As a homeowner, there are many scams that you need to watch out for. This is particularly true when your home is for sale and you are trying to sell it on your own, as scam artists will often look upon this as an opportunity for taking advantage of the situation. With the current state of our economy, getting taken advantage of by scam artists is an even graver concern. Therefore, you should keep your eye out for these common scams affecting homeowners.

Scam #1: The Remodeling Scam
When trying to sell your home, you want to make it look as attractive as possible to your potential buyers. Therefore, a scammer who sees a "For Sale by Owner" sign in your yard may approach you and offer to do work on your home to prepare it for sale. Keep in mind that you should never hire a contractor that comes to you, particularly if he says the prices being offered are only good for a short period of time. Reputable contractors don't go door-to-door or cut prices for no apparent reason.

Scam #2: The Thieving Contractor
Even when you seek out a contractor, it is always possible that he is a scam artist who will not get the job done. Therefore, you should be certain to check all of the contractor's references and higher only one that you know to be reputable. In addition, you should never give a contractor more than one-third of the cost of the job before he or she gets started.

Scam #3: The Loan
Some scammers will also pose as contractors and will offer to arrange financing on your behalf. Then, the contractor will bring paperwork for you to sign before the job can get started. Unfortunately, this paperwork is actually a home equity loan with high fees and a high interest rate. Even worse, now that the contractor has your money, he no longer bothers to show up for the job.

Scam #4: The Deed Stealer
When a scammer sees a "For Sale by Owner" sign in your yard, he or she may also assume that you are experiencing financial troubles and are trying to get rid of the home before it is foreclosed upon. In this case, the scammer will call you and pretend to be a lender who is willing to help you obtain new financing. In order to complete the deal, the supposed lender will ask you to temporarily sign your deed over so the house isn't foreclosed upon while you complete the deal. Of course, once the scammer has your deed, he or she is free to borrow against your home or to even sell it out from beneath you.

Unfortunately, there are many scam artists out there that will stop at nothing to take advantage of innocent homeowners. By being smart about your decisions and actions, however, you can avoid being taken advantage of and you can keep your finances and your home safe.

About the Author:
Shannon Kietzman is a well known author and trusted resource. Shannon regularly writes for http://www.byownermls.com/, a For Sale By Owner MLS service, the leading real estate search engine of homes for sale by owner (FSBO). For more information, please visit http://www.byownermls.com/.

For Sale By Owner Trends - October 2008

For Sale By Owner Real Estate Trends

Most Popular*

Top Cities 1. Houston, TX 2. Louisville, KY 3. Chicago, IL 4. Philadelphia, PA 5. Tampa, FL 6. San Antonio, TX 7. Greenville, SC 8. Virginia Beach, VA 9. Naples, FL 10. Huntsville, AL Top States 1. Florida 2. Texas 3. New York 4. North Carolina 5. Georgia 6. Pennsylvania 7. Tennessee 8. Illinois 9. Alabama 10. Kentucky Most Viewed Properties 1. Log Cabin - $195,800 - Cuba, NY 2. Log Cabin - $219,000 - Towanda, PA 3. Duplex/Triplex - $329,900 - Philadelphia, PA 4. Duplex/Triplex - $220,000 - Louisville, KY 5. Duplex/Triplex - $128,000 - Denton, TX 6. Single Family - $377,000 - Wilmington, DE 7. Single Family - $350,000 - Venice, FL 8. Mobile Home - $14,900 - Fort Myers, FL 9. Condo/Townhome - $224,900 - Houston, TX 10. Condo/Townhome - $369,000 - Wildwood, NJ *Based on property views on ByOwnerMLS.com in October 2008.

About the Author:

Greg Sullivan is the President of www.ByOwnerMLS.com, a For Sale By Owner MLS service, the leading real estate search engine of homes for sale by owner (FSBO). For more information, please visit www.byownermls.com.