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Proof of homeowners insurance needed at mortage closing

December 3rd, 2010

Mortgage lenders usually require that you come to closing with a homeowners insurance policy that is paid up for the first year. The insurance policy protects you in case the property is damaged by fire, high wind or other natural disasters. Use the following guide when shopping for a homeowners insurance policy for your new home.

  • Don’t confuse homeowners insurance with mortgage insurance (MI), often referred to as private mortgage insurance (PMI). Homeowners insurance is to cover damage to your home. MI is a fee that you pay to protect the mortgage lender in the event that you default on a home loan. Most mortgage loans require MI if the down payment is less than 20 percent.
  • Homeowners insurance does not cover all disasters. For instance, floods generally are not covered by standard homeowners policies. You won’t need to purchase a flood policy unless you live in a designated flood zone. If you need a flood insurance, the first year’s premium must be paid at closing.
  • Compare several homeowners policies to find the right coverage. Ask people you know for recommendations and whether or not they have ever filed a claim with their insurer.
  • Find out about discounts that may be offered by insurers. Burglar alarms and smoke detectors are among the things that may qualify you for a discount on your policy.
  • Insuring your home, car, boat, etc. with the same insurer may get you a lower premium. Even if you hadn’t planned to get a new auto policy, it may be a good idea to get quotes before choosing a homeowners plan. If you already have a homeowners policy your current insurance firm may reward you for being a long-time customer if you use it for the new policy.
  • Your credit score matters. Many insurance companies pull credit reports as part of the underwriting process. Not only can poor credit keep you from qualifying for the best mortgage rates, but it also can force you to pay higher insurance premiums.
  • Ask for replacement cost coverage instead of actual cash value coverage. If you have to file a claim, replacement cost coverage means you’ll be reimbursed the full amount that it costs to replace your home, subject to policy limits.

Get all the facts before signing up for any insurance policy. Ask for the highest deductible that you can afford to keep the premiums down.

Home offices, outdoor living spaces popular with new home buyers

October 1st, 2010

What are people looking for these days in newly built homes? According to the American Institute of Architects (AIA), some of the most requested spaces are home offices and outdoor living spaces. There also is growing interest in home features, products, and systems that promote greater energy efficiency and accessibility throughout the home.

Remodeling instead of getting mortgage to move

The AIA’s Home Design Trends Survey for the second quarter of 2010 found, not surprisingly, that homes at the lower end of the price spectrum are doing better than higher-end homes. Remodeling projects continue to gain steam while second homes and vacations homes continue to be the weakest sector of activity. Activity has picked up for kitchen and bath remodels. With housing values still struggling it makes sense for many families to stay put and do renovations than try to get a mortgage to move.

Fewer requests for luxury rooms

The struggling economy has taken a toll on home projects, including the way in which people want to use their homes. It’s tougher to get a mortgage loan these days and people need to make their dollars stretch further. More people are requesting mud rooms, reflecting a need for additional storage space.

Meanwhile, as some people are downsizing their homes, some previously popular luxury rooms are no longer in as great of demand; among them are media rooms/home theaters, exercise/fitness rooms, hobby/game rooms, home workshops, kid’s wings/guest rooms, interior kennels, and interior greenhouses.

Energy efficiency

Many architects surveyed said they were seeing more demand for projects that have immediate savings implications, such as insulation projects. According to the AIA:

Systems with the greatest increase in interest include energy management systems, solar panels/collectors/photovoltaics, and geothermal heating and cooling heat pumps. While it is fair to assume that the actual levels of adoption for solar panels and heat pumps still remains quite low, residential architects are indicating that saturation rates could well begin to increase as interest continues to grow. At the other extreme, systems and technologies where interest has not yet caught on, or where it has begun to wane, include electric docking stations for cars, automated lighting controls, and security systems.

Mortgage loans for new construction

If you are gettin a home loan to purchase new construction, make your dollars stretch to get the most bang for your buck. At some point you may be looking to sell, so it’s a good idea to build a home with features that will appeal to as many potential buyers as possible. You can begin searching for a new home loan here.

Getting a Mortgage Means Shopping for Homeowners Insurance

March 26th, 2010

If you’re in the process of getting a home loan, you may have begun shopping around for homeowners insurance. When comparing policies keep the following tips in mind to help keep your cost down.

Mortgage Related Expenses

Don’t wait until the last minute to get a homeowners policy. Your monthly mortgage costs are going to include not only principle and interest payments, but also insurance and property taxes.

Use a Mortgage Payment Calculator

Mortgage lenders set aside insurance and tax payments in an escrow account until it’s time to pay your insurer and local government. Use a mortgage payment calculator that lets you include the costs of insurance and taxes so you can figure out exactly how much you are going to pay each month.

Pay a Higher Deductible

The higher your deductible the lower your monthly premium. Deductibles usually start at $250, but by increasing the amount to $500 you could save up to 12% on your premiums, according to MSN. Raise it to $1,000 and you could save up to 24%.

Look for Other Discounts

Another way to reduce the amount you pay for insurance is to buy homeowners and auto policies from the same company. Ask your insurer about discounts for being a long-time customer, having an alarm system, or installing smoke detectors.

Replacement Cost

Get insured for the replacement cost on your home. That’s the amount it would actually cost to rebuild the home in your area. Actual cash value coverage only covers the cost to replace your home minus depreciation. 

Mortgage Refincing and Insurance

If you are doing a mortgage refinance, don’t automatically assume that it makes sense to keep your current homeowners insurance policy. Review the policy and get quotes from other insurers. Ask your insurance company if you qualify for discounts and let them know that you plan to take your business elsewhere if it can’t give you a more competitive price.

Switching Policies

Do not cancel your existing insurance policy until you actually have a new one in place. Be prepared to come to the closing with proof that you’ve prepaid up to a year’s worth of premiums for your insurance policy.  

Even if you aren’t getting a new home loan or doing a mortgage refinance it can pay to review an existing homeowners policy. You don’t have to wait until it’s time for the policy to be renewed to look for ways to lower the cost.

Fannie Mae Offers Assistance to Homebuyers Closing on Mortgages

January 29th, 2010

Fannie Mae is offering buyers of its foreclosed homes help with mortgage closing costs.

Mortgage Closing Costs or Appliances

Homebuyers who purchase a HomePath property owned by Fannie Mae will receive 3.5% of the final sales price toward closing costs on a home loan or appliances. Homebuyers also can choose to apply the incentive to a mix of closing costs on a mortgage loan and appliances.

To receive assistance you must purchase a property listed on HomePath.com before May 1, 2010.  Offers must be accepted on or after Jan. 28, 2010.

The HomePath Web site has photos of available homes and detailed property descriptons. Only properties purchased as your principal residence qualify for the program.

Reducing Inventory of Homes

 ”Attracting qualified buyers to the market and reducing the inventory of vacant homes is critical to stabilizing neighborhoods and helping the market recover. Many families are taking advantage of the federal homebuyer tax credit to buy a new home so this is a great time for Fannie Mae to offer some additional help,” Terry Edwards, Executive Vice President of Credit Portfolio Management, said in a statement.

Fannie Mae sold 89,691 foreclosed homes in the third quarter of 2009, according to the Washington Post

Talk with Fannie Mae Listing Broker

People who are interested in getting a mortgage and with assistance from Fannie Mae should discuss their options with a Fannie Mae listing broker. Mortgage lenders can restrict how the 3.5% incentive can be used.

Fannie Mae Mortgage Help

Fannie Mae also offers financing on some homes. The agency offers mortgage loans with low down payments even if you don’t have the best credit. The home loans don’t require mortgage insurance or appraisal fees. The HomePath Renovation Mortgage is available to purchase and renovate homes.

The down payment for both types of mortgages must be at least 3% and can be funded by your savings, a gift, grant, or loan from a nonprofit, state, or local government, or employer.

Homebuyer Tax Credit

Homebuyers also can claim the First-Time Homebuyer Credit for homes purchased through April 30, 2010. They must close on home loans by June 30, to be eligible for the tax credit, according to the Internal Revenue Service

First-time homebuyers are eligible for a tax credit up to $8,000. Existing home owners who have lived in their house for five consecutive years out of the past eight are eligible for a tax credit of up to $6,500.

Stricter Rules for FHA Mortgage Loans

January 23rd, 2010

Expect to pay more money to borrow a mortgage loan insured by the Federal Housing Administration  (FHA). Policy changes at the agency are designed to help the FHA better manage its risk as the housing market recovers.

“Striking the right balance between managing the FHA’s risk, continuing to provide access to under-served communities, and supporting the nation’s economic recovery is critically important,” FHA Commissioner David Stevens said in a statement.

Here’s what you can expect if you apply for an FHA mortgage.

Mortgage Insurance Premiums Rise

The FHA is raising the mortgage insurance premium (MIP) to help build up capital reserves and help spur private lending. The upfront MIP is rising to 2.25% from 1.75%. The FHA intends to shift some of the premium increase to the annual MIP from the upfront MIP so it can have less impact on borrowers.

Mortgage Loans and FICO Scores

 The policy changes now require borrowers to have a FICO score of at 580 to qualify for the 3.5% down payment on a FHA home loan. Anyone who has a FICO score below 580 must make a down payment of at least 10%. The new credit score requirement goes into effect this summer.

Less Help from Sellers

The revised guidelines decrease the amount of help you can get from the seller when buying a home. The FHA is reducing concessions by sellers to 3% from 6%. Concessions include things such as sellers helping with closing costs. This change conforms to industry standards.

More Enforcement on Mortgage Lenders

The FHA also says it plans to report performance rankings on mortgage lenders as a complement to Neighborhood Watch data. The move is aimed at making mortgage lenders more accountable.

Troubled Mortgage Loans

As the economy has struggled more borrowers have turned to FHA mortgages because they require smaller down payments than other loans. About 30% of new home loans are insured by the FHA. Now, the FHA finds itself burdened with a slew of troubled loans.

The FHA says it is still committed to proving mortgages to first-time homebuyers. But the tougher lending requirements mean some people may not qualify for  mortgage loans.

“It will slow the growth in demand.  Any time you put up roadblocks, fewer people will qualify,” Joel Naroff, of Naroff Economic Advisors, told USA Today. “This is just the beginning of clearer and more specific requirements so we don’t get into the mess we got into again. In the short term, it will have an effect, but it won’t be a huge effect.”

Obama Expected to Sign Legislation for Tax Credit Extension

November 6th, 2009

Congress voted this week to extend the tax credit for first-time home buyers, and President Barack Obama is expected to sign legislation today. Here’s what you need to know if you’re hunting for a home loan.

The original tax credit program is set to expire on Nov. 30.  But under the extended program, home buyers will have until April 30, 2010, to sign a purchase agreement. They must close on mortgage loans by June 30.

Tax Credit for More Home Buyers

The tax credit is for first-time home buyers who have not owned a home in the previous three years. The tax credit worth up to $8,000 can be deducted on federal income tax returns. New home buyers are still eligible for that amount under the program.

However, the expanded program is supposed to allow people who have lived in their home for at least five years to receive a tax credit of up to $6,500 when purchasing another home. So if you’ve been looking for a mortgage for a new house, this may be an incentive to get moving on selling your current home.

Higher Income Eligibility

The legislation for the extended program allows people with higher incomes to qualify for the tax credit, according to an article in the Chicago Sun-Times. The credit phases out for individuals who earn above $125,000, up from $75,000. For joint filers the credit phases out if they earn more than $225,000, up from $150,000.

Current Mortgage Rates Are Low

With mortgage rates still so low, buying a home now may be more affordable than waiting until the housing market recovers more. Still, you may experience some tradeoffs for moving now. First, you may not be able to sell your current home at the price you hope to get. It’s a buyer’s market, so you may need to make some concessions or offer some incentives to get your property sold.

Second, if you plan to get a home loan to buy another house, you only have a limited time to close on it to qualify for the credit. If you don’t close by the deadline, you lose out on the tax credit even if you had been counting on it to help with the costs of buying a new home.

Mortgage Quotes

Find mortgage quotes from several lenders to get an idea of how large of a mortgage you can get. Run the numbers carefully to decide if you really want to move at this time. Just because the government is offering a tax credit for home buyers doesn’t mean that purchasing a home is the right choice for you.

How Appraisals Affect Mortgage Loans

October 30th, 2009

So you’re ready to get a home loan or refinance and want to know how large of a mortgage you can get. That depends on several factors, including the home appraisal. The following guide shows how an appraisal affects the amount of your mortgage loan.

What Is an Appraisal?

An appraisal gives an estimate of what a home is worth. When you apply for a home loan the mortgage lender usually orders up an appraisal and chooses the company to do it. The cost of the appraisal is included in your closing costs, and you are entitled to a copy of the appraisal.

If you already have a mortgage and are thinking of refinancing, you can get your own appraisal to get an idea of what your home is worth. But your mortgage lender is under no obligation to use that report.

Declining Home Values

The appraiser does a comparitive market analysis of recent home sales in your area. He or she also looks at the condition of your property and how much it would cost to rebuild it.

Because so many people have seen their home values plummet during this recession, it can be tough for them to get a large enough appraisal to qualify for a mortgage refinance or new home loan. In many cases homeowners are “upside down” on their loans, or owe more on a mortgage than their house is currently worth. If that happens, you may be denied a mortgage loan.

If the house appraises for less than you expected, you may be asked to make a larger down payment. If you’re buying a home the mortgage lender may even ask you to go back to the seller to renegotiate the sale price. 

Reasons Appraisal May Be Low

There are various reasons an appraisal may come in lower than your expected, including:

  •  Your neighborhood may have a lot of foreclosures, which could affect your home value
  • The underwriter could have evaluated the home incorrectly
  • The seller may have overpriced the house
  • The appraiser may not have much experience

You can always appeal an appraisal, but there is no guarantee of it getting changed. If your mortgage lender won’t budge, you may be unable to refinance or obtain the mortgage loan you need to buy a home.

Should You Pay Points on a Mortgage Loan?

September 23rd, 2009

Current mortgage rates have declined to an average of about 5% for a 30-year mortgage, pushing some homeowners to refinance or apply for a new home loan. If you have a good credit score you’ll likely qualify for the best mortgage rates. But even if you don’t have that great of a score you can pay points on a loan to lower your mortgage costs.

What Are Points?

Each point equals 1% of the amount of your mortgage. So for a $250,000 mortgage  a point would be equal to $2,500. Depending upon the loan, you could choose to pay several points. How many points you pay usually depends upon things like how much of a down payment you have. Read the rest of this entry »

Getting a Mortgage? Don’t Miss out on the First-Time Homebuyer Tax Credit

September 8th, 2009

You still have time to take advantage of the first-time homebuyer tax credit of up to $,8000. To receive the credit you must close on a home mortgage by midnight of November 30. If you’re planning to buy a home before the end of the year, here is what you need to know to keep from missing out on the federal tax credit.

Closing on a Mortgage Loan

The tax credit is for 10% (up to $8,000) of the purchase price of a home that costs $80,000 or more. You can only use the credit toward the purchase of a principal residence, so vacation homes and investment property don’t qualify. However, you can file for the credit if you owned a principal residence outside the U.S. during the previous three years. Read the rest of this entry »

Federal Reserve Proposes Truth in Lending Changes

July 24th, 2009

One reason so many homeowners ended up way in over their heads with mortgage loans as the housing market went bust is because they didn’t understand what they were getting into in the first place. In an effort to improve disclosures to consumers about mortgage loans and home-equity lines of credit (HELOC), the Federal Reserve has proposed some significant changes to Regulation Z, or Truth in Lending Act (TILA).

Comparing Mortgages

The proposed changes are aimed at helping consumers compare mortgage products. ”Consumers need the proper tools to determine whether a particular mortgage loan is appropriate for their circumstances,” Federal Reserve Chairman Ben S. Bernanke said in a statement. “It is often said that a home is a family’s most important asset, and it is the Federal Reserve’s responsibility to see that borrowers receive the information they need to protect that asset.” Read the rest of this entry »