09
Feb
By First Rate Financial Group
Mortgage

An Overview Of Private Mortgage Insurance

An Overview Of Private Mortgage InsuranceWhen you are going through the process of looking for a new home, you are probably focused on the sticker price of that home. Even though it is important to think about your down payment, your monthly mortgage payment, and the total amount of the loan, there are other expenses that you might need to cover as well. If you do not put down enough money, there is a chance that the lender could ask you to pay for something called private mortgage insurance. What is private mortgage insurance and how much do you have to pay? There are several important points that you should keep in mind.

Why You Might Purchase PMI

Private mortgage insurance is something that the lender may ask you to purchase as a way to reduce their risk. If you do not make a sizable down payment, then the lender is responsible for funding most of the cost of your home. If you end up defaulting on the cost of that loan, the lender will lose a major amount of money. With PMI, the lender will be able to get his or her money back in the event that you default. Even though the exact cost of PMI will vary, you should expect to pay somewhere between 0.5 percent and 2 percent of the loan. You might be able to ask the lender to check with multiple options to find the least expensive policy possible for you. Once the PMI policy is instituted, this is something that you will have to pay on top of your monthly mortgage payment.

Avoiding PMI Payments

Importantly, there are ways that you can avoid PMI. You might be able to avoid this insurance policy altogether if you are able to increase the size of your down payment. If you cannot do that, the PMI policy will usually be canceled when you reach a certain threshold in equity. This is something that you should negotiate with the lender before you sign on the dotted line. In some cases, the PMI policy as waved when you reach 10 percent of the loan amount paid back. Even though you should check with a professional accountant, PMI is likely tax-deductible, similar to mortgage insurance.

 

08
Feb
By First Rate Financial Group
Financial Reports

What’s Ahead For Mortgage Rates This Week – February 8, 2021

What's Ahead For Mortgage Rates This Week - February 8, 2021Last week’s economic news included Commerce Department readings on construction spending, labor sector reporting on public and private-sector job growth, and the national unemployment rate. Weekly reports on mortgage rates and jobless claims were also released.

Construction Spending Driven by Housing Sector in December

The Commerce Department reported a one percent gain in construction spending in December to a seasonally-adjusted annual pace of $1.49 trillion. Residential construction drove spending for the seventh consecutive month with a 3.10 percent gain in spending. Construction for public projects rose by 0.50 percent; private-sector spending on non-residential construction fell by -1.70 percent.

Demand for housing remained high as supplies of previously-owned homes ran below average and homebuyers turned to new housing developments. Flight to less congested metro areas continued to drive demand for single-family homes. Builders cited rising materials costs and land and labor shortages as ongoing challenges to building affordable homes.

Mortgage Rates Hold Steady as Job Growth Improves

Freddie Mac reported little change in average mortgage rates last week. The average rate for 30-year fixed-rate mortgages was unchanged at 2.73 percent. Rates for 15-year fixed-rate mortgages averaged 2.21 percent and one basis point higher. The average rate for 5/1 adjustable rate mortgages was two basis points lower at 2.78 percent. Discount points averaged 0.70 percent for 30-year fixed-rate mortgages and 0.60 percent for 15-year fixed-rate mortgages. Points for 5/1 adjustable rate mortgages averaged 0.30 percent.

Public and private-sector job growth improved in January. ADP reported 174,000 private-sector jobs as compared to a negative reading of -78,000 jobs in December. Analysts forecasted 48,000 private-sector jobs added in January.

The federal government’s Non-Farm Payrolls report showed 49,000 public and private-sector jobs added, which fell short of the expected 50,000 jobs added, but the job growth reading was good news when compared to December’s reading of -227,000 jobs lost.  In related news, the national unemployment rate fell to 6.30 percent as compared to December’s reading of 6.70 percent 

Fewer Jobless Claims Filed

779,000 initial jobless claims were filed last week as compared to the prior week’s reading of 812,000 first-time claims filed. Continuing jobless claims also fell with 4.59 million ongoing claims reported; 4.79 million continuing claims were filed during the prior week.

What’s Ahead

This week’s scheduled economic reporting includes readings on inflation and consumer sentiment. Weekly readings on mortgage rates and jobless claims will also be released

05
Feb
By First Rate Financial Group
Home Mortgage Tips

Do You Need Mortgage Insurance Even if It’s Not Required by Your Lender? Let’s Take a Look

Do You Need Mortgage Insurance Even if It's Not Required by Your Lender? Let's Take a LookFinding a proper mortgage loan and understanding the processing procedures behind the loan is the basis of good research. The down payment on a mortgage loan is typically significant when dealing with mortgage insurance.

Most loan applications with less than 20% down payment are required to include mortgage insurance with the loan. However, mortgage insurance may still be required even if it’s not typically required by your lender.

Underwriting Requirements

Most home mortgage applications undergo a strict set of standards for approval. These standards are known as underwriting and make up the bulk of time spent on a mortgage application. Unique situations in employment or credit history may require an additional down payment percentage to avoid PMI or private mortgage insurance.

Most underwriting requirements require adequate information on the borrower’s credit and employment history for complete application. Self-employed individuals or those with alternative forms of credit may need a few additional hoops to jump through when dealing with mortgage insurance requirements.

Lender-paid Mortgage Insurance

Lender-paid mortgage insurance is a popular option with potential homeowners that seek to avoid the cost of a PMI or FHA-backed insurance on a home loan. Most lenders incorporate payment of private mortgage insurance in exchange for a slightly higher interest rate.

This is one example of the points system on a mortgage application that eliminates the cost of PMI. The increase in interest rate may or may not warrant the need for a lender-paid mortgage insurance arrangement.

What’s Involved With Risk Assessment?

Strict lending requirements and banking policy now limit the number of mortgages with zero down payment options. Conventional mortgages and FHA both require private mortgage insurance if it is less than 20% down payment. However, FHA loans can be more flexible with the initial down payment requirements with adequate credit. FHA mortgage costs are now for the life of the loan. Lenders will look at mortgage insurance as risk protection.

The risk protection process may or may not require mortgage insurance in your home loan. For example, VA and USDA loans do not usually require mortgage insurance if the borrower’s credit and employment history are adequate.

Conventional loans have a reduction in risk once there is at least 20% equity in the home compared to the principal of the mortgage. Don’t hesitate to contact your trusted mortgage professional about potentially dropping mortgage insurance in the future to reduce overall loan costs.