Monthly Archives: November 2014
Private mortgage insurance, or PMI, is a major consideration for mortgage applicants. PMI has a bad reputation among buyers. It can add hundreds of dollars to your mortgage each month, while adding little perceived value. But a closer look reveals why lenders require PMI in certain cases, how it benefits the buyer, and strategies you can take to avoid it.
Why lenders require PMI
Private mortgage insurance is exactly what it says: it’s a special type of insurance policy that protects the mortgage company in case the buyer can’t make their payments. Whether it’s a medical crisis or a job loss, issues arise all the time that cause owners to default on their homes. What role does PMI play for buyers? It allows them to purchase homes when they have less than the requisite 20% for a down payment.
What does PMI cost?
The cost varies based on a number of factors. But one source estimates that PMI costs approximately $30 – $70 per $100,000 borrowed. On a $500,000 home, you might expect to pay as much as $350 per month in private mortgage insurance costs. It’s important to understand that the costs differ and speak to your lender about your specific situation. Better credit scores and larger down payments typically qualify for better premiums.
FHA Loans, VA Loans, and PMI
If you’re a veteran or you’re going for an FHA loan, you won’t be required to purchase private mortgage insurance. Instead, you’re required to purchase government insurance. FHA loans have an upfront fee and then monthly premiums. VA loan insurance is typically paid as an up-front fee, with no ongoing premiums.
The best strategy for avoiding the need for PMI is saving up enough money to put a 20% down payment. If you’re unable to accomplish this, talk to your lender to see if you qualify for programs that might lower or eliminate the PMI requirement from your loan.
On private loans, your PMI requirements will “fall off” the loan once your loan to value ratio hits 80%. The longer that you pay on your mortgage, the more equity that you build. Once you’ve reached 20% equity in your home (or, stated differently, paid off 20% of the principal of your mortgage) your PMI policy will usually be canceled. It’s important to read the fine print on your mortgage and your policy to confirm this.
Paying PMI sometimes enables buyers to purchase homes when they don’t have a full 20% down payment saved up. Waiting longer while you save or looking at alternative lending programs may help buyers avoid this cost. If you’re interested in learning more about loan options for your situation, contact Sydnee Johnson today to arrange for a personalized consultation and learn more about how private mortgage insurance may affect your specific situation.
Buyers occasionally will ask if it’s ever better to wait to take a mortgage. As a lender, the priority is on helping you obtain successful financing to make the property of your dreams a reality. There are a number of different steps that lenders can take to ease the path, from first-time homebuyer programs to veteran’s loans to second chance mortgages. But occasionally there are buyers whose unique situations suggest that waiting even just a few months can put them in a substantially better position to buy.
Dealing with a recent bankruptcy or foreclosure:
It’s still possible to get a loan under the right circumstances if you’ve recently experienced a bankruptcy or foreclosure. However, three things are essential. One is that enough time has elapsed that you’ve had a chance to comply with any conditions of those transactions. The second is that you’ve taken steps to reestablish your credit with smaller purchases, such as car loans, student loans, or credit cards. Each month that you pay your bills on time helps build and reestablish a stronger credit history. Typically, it’s advisable to let at least one year transpire between these types of events and applying for a mortgage. When in doubt, contact a lender to discuss your unique situation.
Addressing credit report issues that can be fixed:
If your credit score is lower than you’d like and it’s due to issues that can be fixed, consider taking those steps before applying for a mortgage. For example, are there errors on your report? Is your score being dragged down by a small bill that slipped through the cracks and landed in collections? Disputing errors and paying off debts can have a big impact on your credit score (and thus, your interest rate) in a short period of time.
Saving a down payment:
In today’s market, having a down payment is a substantial advantage when applying for financing. In most cases, it’s helpful to have at least five percent of the total purchase price. The closer you are to twenty percent, the stronger case you make as a serious buyer. If saving for a few more months or waiting for an end of year bonus or raise will strengthen your financial position, consider planning accordingly.
Anticipating major financial changes:
Sometimes buyers are facing major financial or life changes, such as a divorce or job loss. While these circumstances can’t always be anticipated, sometimes they’re planned for well in advance. If you’re going to be a substantially different financial position that what you’re in today, it may be better to wait until lenders can get a better sense of your true financial picture.
Are you trying to determine whether now is the right time to buy a home or not in Las Vegas? Contact Sydnee Johnson today to arrange for a personalized consultation and discuss whether in your specific circumstances it’s better to wait to take a mortgage. You may be delighted to find out that you’re in a good buying position today!
Today’s top Las Vegas lenders are making it easier to buy a home in the city. The relationships that lenders have – with real estate agents, with processors, and with funders – can make the difference between a rejected application and one that closes smoothly. Recently I received this wonderful note from one of the real estate agents that I work with:
What an amazing team! Sydnee and Jennifer were true professionals in every sense of the word on a transaction that was rejected by another lender. Not only did they manage to process, obtain underwriting approval, draw documents and fund this transaction in 12 business days…they successfully worked with my client to keep them calm and engaged after being strung along by another lender for over a month. And the benefits didn’t stop there…the clients locked in at a rate .25% lower than the previous lender and ZERO lender fees! At the closing table, the clients expressed how grateful they were for Sydnee and Jennifer and Premier Mortgage Lending. They were all smiles!
The lessons here are important for real estate agents working on more challenging financing situations or buyers that have faced a rejection. Don’t give up!
Packaging is essential
Particularly for customers with challenging credit histories, the way that you document and package your application is essential. The right lender will look at your larger financial picture, and help match you to programs and products that increase your chances of approval. Whether your application needs a personal letter with a narrative explaining what occurred to bring your credit scores down and how you’ve gotten back on track or extra documentation to show that you’re solvent despite being self-employed, your lender should customize your application the first time around to help you successfully obtain financing if at all possible.
Communication and customer service matter
Many buyers have an experience with lenders that doesn’t prioritize customer service. While you are asking a bank or institution for a loan, they in turn are getting your business. All communications should be timely, clear, and professional. If you have concerns, your lender should work with you to keep the lines open and resolve those issues. Any delays should be promptly addressed and the path to resolution made clear. Choose a lender that will make you feel appreciated, even if you’ve had a bad experience before or feel like you’re in a weak position with your application.
If you need help obtaining financing to buy a home, contact us at Sydnee Johnson Las Vegas home Loans today. Arrange for a personalized consultation and learn what funding options may be available to you through a customer focused Las Vegas lender.
There’s a rising trend among Las Vegas homeowners to refinance their mortgages or remortgage homes that are already paid off. These decisions are due in large part to the improving economy and the overall interest rates which remain low. The reasons why people are making these decisions are diverse, but often defy expectations. Homeowners don’t always refinance in order to get a lower interest rate on an existing mortgage or to pay off their mortgage faster. Here’s a look at whether refinancing your mortgage can help you achieve other financial goals.
Keeping up with today’s level of bills can be challenging. High interest rates on credit cards, unexpected medical and repair bills, and the day to day costs of living pile up. Suddenly, many families find every spare cent they have going toward debt reduction. But in some cases, refinancing your mortgage allows you to consolidate your bills into one payment that’s easier to track and significantly lower than separate payments. Lower payments allow these homeowners to pay off total debt more quickly, save for emergencies, and focus on other goals like paying for college and saving for retirement.
Eliminate a home equity loan or a second mortgage:
Perhaps you took out a home equity loan to enable you to complete a home construction project. Many equity loans or lines of credit have variable rates. Whether you’re locked into a higher rate or simply want to consolidate payments each month for easier management, refinancing your primary mortgage can allow you to eliminate a home equity loan. In a related scenario, today’s low rates are making it possible to consolidate a first and second mortgage into one
Buy another property:
At first glance, it’s often inconceivable that homeowners with a paid off mortgage would remortgage their primary property. But some often do. One of the most common reasons is the buy a second property. Often buyers are hoping to move quickly on a property that’s harder to obtain financing for. Remortgaging your primary house can be one way to fund an investment property, a cross-country move, or a vacation home.
Address family issues:
Unexpected situations can arise that impact your living situation. Frequently this involves divorce. Often, one partner wishes to retain the home but needs help doing so. They might want a lower monthly payment or to extract equity from the home in order to buy out their partner. Addressing family issues is a common factor that drives owners to consider a refinance.
Are you a homeowner in the greater Las Vegas area that’s contemplating refinancing your mortgage? Contact Sydnee Johnson today to arrange for a personalized consultation and to discuss if now is the right time for you to refinance.