Most homebuyers know they’re required to take out title insurance, but but many remain uncertain about why this is so – or even what title insurance is. While that might seem like a moot point considering most mortgage lenders select title insurance for home buyers, you can’t write it off as just another fee to pay at closing because understanding how title insurance works and what leeway you have in selecting it could save you a lot of money.
Turn on the TV, pick up the newspaper, and you’ll soon see the latest mortgage come-ons. Teaser rates, introductory one-time offers and exhortations to “Act Now!” can overwhelm you, so let’s cut through all the lingo and simplify things into two general camps: the mortgages known as standard fare, and the more complicated products that merit closer scrutiny.
What is mortgage insurance?
Mortgage insurance is a product purchased by the home buyer designed to protect the lender from the risk involved in funding the mortgage. Private mortgage insurance essentially protects the lender in the event of a borrower defaulting on a loan and being unable to repay the debt. The insurance covers the difference between the fair market value of the home and the actual price a lender may be able to sell the property for, in case of a default on the loan. Basically, it allows lenders to recover their investment, even if the property’s worth is not enough to pay off the loan balance.
While there are several types of mortgage insurance, the types that everybody complains about are private mortgage insurance (PMI) on conventional loans and Mortgage Insurance Premiums (MIP) on Federal Housing Administration (FHA) loans. That’s because homeowners paying for mortgage insurance have to pay a hefty premium for an insurance policy, and it covers the lender, not them.
Turn on late-night cable television and try not to come across a commercial with aging celebrities extolling the virtues of a reverse mortgage – I dare you.
They’re everywhere these days, as a host of lenders try to convince seniors to turn the equity in their homes into cash, while staying in their residences for the duration. It’s an appealing proposition, but complaints over high fees, the skittishness of the foreclosure-scarred housing market and an exodus from the market by a few of the bigger names in the business have many would-be customers questioning those late-night pitchmen.
If it’s time to send the kid off to college, build that mother-in-law suite you never thought you’d need or renovate the kitchen, you might need to leverage the equity in your home and explore a second mortgage, a home equity loan or a home equity line of credit (HELOC).
OK, first things first: the terminology of financing tied to a mortgage can be more than a little confusing, so let’s clear that up.
FHA Streamline Refinance Guidelines
Since the financial crisis, the Federal Housing Administration’s Streamline refinance program has grown to be one of its most popular offerings. With no closing costs or credit verification requirements, a Streamline refinance represents one of the cheapest and fastest ways for consumers to improve the terms of their home loan. Keep in mind, however, that the program is only open to homeowners with an existing FHA mortgage.
In the past few years, the rates of default on student loans have continued to tick upward, as many current or former students have entered the job market and found themselves unable to make their monthly payments.
Many loan holders understand the risks of defaulting, but feel unable to do anything about their problems due to their financial situations. The good news is lenders, private and public, are now offering many options that a student can use to stave off default. Most options fall into a few broad categories: consolidation, deferment, forbearance, forgiveness, cancellation, and discharge.
FHA Requirements Guide
Home ownership can be difficult to achieve in today’s market, but it remains an “American Dream” not an “Impossible Dream.” Though requirements have been tightened in the wake of the home mortgage crisis, FHA loans continue to offer a way for persons of modest means to purchase a home. This guide outlines the types of, as well as the necessary qualifications for, FHA loans.
Mortgage shoppers often are bewildered by the dizzying array of fees when comparing offers, and no fee gets more attention than mortgage points. They’re quite simple, really, once you break them down, so let’s demystify them once and for all.
Points are a fee that the originator of the mortgage loan charges that take the form of a given percentage of the actual mortgage loan amount. When you “buy points” you are actually paying to lower the loan’s interest rate. Every point costs 1% of the mortgage loan amount, and generally lowers the interest rate of the mortgage by 0.125% to 0.25%. To figure out what each point is worth, simply multiply the mortgage amount by .001.
One of the biggest choices any home buyer has when taking out their loan is deciding whether or not they want to get an FHA loan or a conventional loan offered by a private lender. Picking between the two options can be very tricky–depending on a buyer’s situation each has its own advantages and disadvantages. Since many borrowers will be able to qualify for both types of loans, most will need to get an idea of how the loans work before they make a decision either way.
