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For many homebuyers, private mortgage insurance may not be the most celebrated form of insurance, but,
for some, it’s an absolute must. For those individuals who wouldn’t typically be able to afford a large 20
percent down payment, it’s a “foot in the door,” allowing for homeownership with as little as a 0-5 percent
down payment.

How much does it cost?
The average costs of mortgage insurance premiums vary, but typically they fall between one-half and one
percent of the loan amount, depending on the size of the down payment and loan specifics. On a $200,000
loan with a $10,000 down payment, you might expect to pay somewhere around $85 a month, or about
$1000 a year, in addition to your mortgage payment. Unlike your mortgage interest, these premiums are not
always tax deductible.1 Mortgage insurance is one of the few types of insurance products that doesn’t
underwrite it’s premiums based on individual default risk, rather the size of the borrower’s mortgage and the
amount of money put down determine the mortgage insurance quote. So, two individuals—regardless of
credit—with the same mortgage amount and down payment can expect to pay about the same PMI
premium.

Private Mortgage Insurance and Mortgage Protection Insurance
Private mortgage insurance and mortgage protection insurance are often confused.
Though they sound similar, they’re two totally different types of insurance products.
Mortgage protection insurance is essentially a life insurance policy designed to pay
off your mortgage in the event of your death. Whereas, private mortgage insurance
protects your lender, allowing you to finance a home with a smaller down-payment.
These two products should never be construed as substitutes for each other.

Canceling or Terminating PMI
So, you don’t like the idea of making those extra mortgage insurance payments?
Here are a few ways to eliminate mortgage insurance altogether:

Appraisal
If the value of your home has risen in recent years you may be able to terminate
your mortgage insurance. Once the equity in your home falls below the 80
percent  loan-to-value-ratio required by your  lender,  you can eliminate your
private mortgage insurance. You would, of course, have to present your lender
with a valid home appraisal before final termination. The costs associated with
getting an appraisal may or may not be worthwhile, depending on your unique
mortgage situation.

Remodel
It’s the same principal as above. By making home improvements, you’re
increasing the market value of your house, getting you that much closer to the
all-important 80 percent “LTV” level.

Pay down your mortgage
Paying down your mortgage may also be a viable option. Making even small
additional payments each month can make a big difference over time. Once
you get that loan-to-value-ratio below 80 percent, you’ll no longer be required to
make PMI payments.

Piggyback loan
Utilizing a piggyback loan such as a “80/20 loan” will allow you to avoid private mortgage
insurance. And by doing so, you typically avoid any “out of pocket” down payment, with the added         
benefit of a tax deduction. By piggybacking a second mortgage onto your first mortgage, you’re
achieving the desired 80% “LTV” on the first mortgage, and avoiding the PMI. The downside with
these types of mortgage vehicles is that the second mortgage usually comes at a substantially higher
interest rate, making PMI savings negligible. However, by utilizing a 80/10/10 type loan with the last  
10 percent going towards the down payment, you’ll often pay less than a straight loan with mortgage
insurance.

Automatic termination
Thanks to The Homeowner’s Protection Act (HPA) of 1998, you have the right to request private
mortgage insurance cancellation when you reach a 20 percent equity in your mortgage. What’s more,
lenders are required to automatically cancel PMI coverage when a 78 percent loan to value is reached.
Some exceptions to these provisions, such as liens on property or not keeping up with payments, may
require further PMI coverage.

1 Recent legislation has passed making PMI insurance tax deductible, much like mortgage interest and property
taxes. There are some restrictions, such as the property must be your primary residence, your adjusted gross
income must be $100k or less for full deduction (partial deductions up to $109K), and the origination of your
mortgage must have occurred on or after January 1, 2007. Lawmakers have extended this private mortgage
insurance tax deduction through 2010. Please consult a tax advisor regarding your specific situation.

Dorothy, the main character of the movie, The Wizard of Oz, once exclaimed, “There’s no place like home!” Even in a world much different than the one that existed when The Wizard of Oz was filmed, that old adage still holds true. If you’ve lived in a home even for a short amount of time, it’s probably filled with memories that will always be with you. Your walls are filled with pride and covered in photographs which document life’s many accomplishments. All of these memories, the good and the bad, come together to form your home. The place you’ve lived, and maybe even raised a family in, has given you a lot over the years, and with reverse mortgages, it can give you even more.

As many Americans plan for retirement and turn to alternative sources of post work income, one that may come to mind is a reverse mortgage. The concept of a reverse mortgage is rather simple: someone pays you, based on the value of your home. There are many options available as to how you wish to receive this money. You may choose to take monthly payments, take a lump sum, or receive a line of credit.  

When you purchased your home you probably had to make mortgage payments. As you did, you gradually decreased the amount of debt owed and gradually increased the amount of equity in your home. Reverse mortgages are the opposite. As time goes by, you gradually receive more and more money from the lending company. Thus, your debt increases and your equity decreases.

The purpose of a reverse mortgage is to have an added source of income, especially if you plan on selling your home near the end of your life or after you die. It allows you to receive the equity from your home and enjoy it in retirement.

The amount you receive in the reverse mortgage is based on the value of your home, current interest rates, and your current age. Once you’ve received the amount your home has been determined to be worth, less any fees charged by the lender, you then owe that amount to the lender.

You can pay that back any way you wish, but in many cases, the idea is to sell your home and repay the debt. Often, this is done by an estate after a person passes away and still has debt. As long as you’re permanently living in your home, you don’t have to pay the lender back.

Reverse mortgages do have a lot of details and can get complicated, which is why it’s best to ask a financial professional for advice before looking into them much further. While they may have a lot of technical details, they don’t have many requirements. In general, you must be 62 years of age or older, and own your own home. Those are the two basic requirements of a reverse mortgage.

Beyond that, there are a few other basic things to keep in mind.

Reverse mortgages do have upfront costs, just like a regular mortgage. They also have monthly service fees. However, all of the money you receive from the lender is tax-free. To get a better estimate of how much a reverse mortgage would pay you, it’s wise to meet with a financial professional.

Unfortunately, reverse mortgages aren’t for everyone. Reverse mortgages can provide a valuable resource to individuals when the circumstances are right, but there are many considerations to be taken before choosing one, including: fees, restrictions, estate planning considerations, need for income, other assets, health considerations, insurance coverage, and so on.  

Often times a reverse mortgage is a last resort for income for many individuals and many individuals decide that reverse mortgages aren’t for them. And in some situations, for instance, if you want the house to stay in your family for many generations, then it may not be for you.

There truly is no place like home and the reverse mortgage reminds us of that. It’s one of the few places on earth that can be filled with so many memories. So if a reverse mortgage sounds right for you, contact a financial professional today and discuss your options for proving the old adage right, “there’s no place like home.”

Purchasing your first home is a considerable undertaking. There is so much to consider and prepare for. Finding an appropriate home may be challenging, but there’s much more to examine. You’ve got to come up with a down payment, get qualified for a home loan, consider closing costs, and much more. For the first time home buyer this may seem daunting, so we’ve put together some tips to provide you with every advantage when it comes to buying your first home.

How Much Home?
The first things you need to consider before pursuing your first home purchase is what you’ll be able to afford. You need to find out what your total monthly housing expenses will be.  A mortgage calculator is a great way to determine what you can afford on a monthly basis. But you’ll want to consider the additional costs associated with home ownership. You’ll need to include property taxes, home insurance, and miscellaneous closing costs. These can add considerably to your monthly outlay.

Property taxes can be determined by checking with your local government, as these vary greatly from state to state. Getting a home insurance quote is a simple way to determine those costs, and save as well. Closing costs vary, but they can often be negotiated with your lender. Be sure to account for Private Mortgage Insurance if you plan on making a down payment less than the standard 20 percent. The important thing here is to get an idea of what your total expenses will be. Most experts will recommend that your total monthly housing costs not exceed 28 percent of your gross income.

First Time Home Buyer Loans
When shopping for a home loan you’ll want to consider the government funded first time home owner programs. These often offer lower interest rates and lower down payment requirements, when compared with conventional mortgage loans.

Fannie Mae and Freddie Mac
Both government-sponsored organizations, Fannie Mae and Freddie Mac offer first time home buyer mortgage programs. They don’t lend directly to the public; rather they guarantee the underlying mortgage loans through approved lenders. Without these organizations, many first time home owners would be out of luck.

Fannie and Freddie are especially popular for their first time home buyer low down payment programs. These loans can be had for as little as a 3 percent down. Though in Fannie Mae’s case, a larger down payment of 5% allows for loan approval on smaller salaries. Loan limits have temporarily increased to as high as $729,000 in high-cost areas from $417,000.

FHA & HUD
The Federal Housing Administration (FHA) insures loans for certain approved lenders. There are a number of programs, but they typically offer low down payment loans, lower closing costs, and easier credit qualifying when compared to traditional mortgages. Much like Fannie Mae they do have their limits, however. You can check the current limits based on your area by going to the FHA limit page.

If you have credit issues a FHA loan may be just what you’re looking for. Amazingly, you may be approved for a FHA home loan even if you’ve had major financial issues in the past.

• Lower credit scores qualify when compared to conventional mortgages.
• Bankruptcy or foreclosure isn’t a cause for discrimination with the FHA.

You may qualify with either, assuming you’ve maintained good credit for two to three years after the occurrence.

Housing and Urban Development (HUD) offers many programs and grants. First time home buyer grants and programs can be found on HUD’s website by searching your region. Before applying for a particular program make sure you qualify and understand the guidelines. Some states may require repayment upon future sale of the home, for example.

If you have a good credit rating and income you may qualify for a more attractive conventional type loan. Be sure to do your homework and compare all your options. An Adjustable Rate Mortgage (ARM) for example, may offer lower monthly payments initially, but there are certain risks that need to be considered. Unfortunately, for some, the recent housing downturn is currently exposing these risks.

Home buyers who are applying for home loans are best served to do so with a good credit rating, and first time home buyers are no exception. Borrowers with higher credit scores pose less risk to lenders, and are rewarded with lower interest rate loans as a result. Your credit score will have a considerable impact on how much you’ll have to pay. Checking your credit report for issues or mistakes is a prudent step in the home buying process. Credit repair can only be completed if you’re aware of any issues on your credit report. You can check and address any issues rather easily by getting a free credit report online.

First Time Home Buyer Tax Credit
The newly passed Housing and Economic Recovery Act of 2008 was signed into law by President Bush on July 30, 2008. One of the underlying items within the act is a temporary $7,500 tax credit for first time home buyers. This may sound like an exciting opportunity for some, though it is not free of restriction. A few things to consider when determining whether the first time home buyer tax credit is right for you:

Eligibility

Effective Dates

Income Restrictions

Payback Provisions

Penalty Free IRA Withdrawal
Thanks to the Taxpayer Relief Act of 1997 you can withdrawal Individual Retirement Account (IRA) funds penalty free when used for a first time home purchase/expenses. Typically, early IRA withdrawal will incur a penalty of 10 percent when withdrawn prior to age 59 ½. First time home Buyers can forego these penalties when buying their first home. You can withdrawal up to $10,000 without penalty. This $10,000 limit is a lifetime limit, and can only be used once. It’s important to keep in mind that you will be required to pay taxes on traditional IRA withdrawals. Due to the tax-free nature of Roth IRA’s, withdrawals from these accounts are free from tax and penalty.  Early withdrawal rules for the Roth IRA differ from their traditional counterparts in that the Roth account must be held for 5 years.

You don’t necessarily have to be buying your first home to take advantage of the penalty free withdrawal. The IRS defines first time home buyers as those who haven’t owned a principle residence in the past 2 years. Moreover, this can be utilized for you, your spouse, your children, your grandchildren or even your parents.

It’s all Worth It
Becoming a first time home buyer may seem a bit intimidating these days. Utilizing the tools available to you along with some strategic planning can help you get there.  It’s all worth it, of course, as there’s nothing like being a first time home owner.

If you are wondering when the right time to refinance is, read further and find out more about home mortgage refinance.

A home mortgage refinance may just be the best financial decision you can make. However, refinancing is not for everyone. It is mostly a matter of right timing. This result to the unending question for homeowners everywhere: when is it exactly right to refinance?

There are many guidelines which can determine whether now the best time to get a home mortgage refinance is. However, despite all these guidelines, what actually determines “right timing” is dependent on your own financial situation. There are a number of signs which are indicative of ideal refinancing conditions. Here are some of them:

Refinancing to cut costs. When interest rates are dropping, it may be good to take on a new mortgage. The rule of thumb states that a difference of at least 2% should be followed for a home mortgage refinance to be worth it. Refinancing will result to either lower payments you need to pay monthly, or a shorter loan term to repay the entire money you owe. Either of these can save you money in the long term. However, take note that interest rates should never be the sole determining factor to influence your decision. Make sure you consider closing costs, fees and charges and find out if you will be end up paying more in the long run.

Home mortgage refinance for better loan terms. Many homeowners decide to refinance in order to get out of their current loan. If you have a pending balloon loan payment due soon but do not have the means to pay for it, or if you have an adjustable rate mortgage which is increasing, you may resort to refinancing to spare yourself of an even bigger trouble. You can choose to revert to a fixed rate mortgage to minimize risks.

The decision to take on a home mortgage refinance should also depend on how long you intend to stay in your home. If you expect to sell your home soon, refinancing may not make sense at all. Also, if you are already halfway through your existing loan, you will barely save anything with a new mortgage loan. However, if you plan to stay in your home for at least the next five years, you will probably have enough time to recoup the refinancing costs you have incurred and actually save you money.

Ultimately, finding the right time to refinance is mainly a matter of proper calculation and estimation based on your individual circumstances and parameters. It should depend on how long you will stay in your home, your financial goals, the current interest rates and good deals offered by lenders.

This is not to say that ideal conditions assure you of a risk-free decision. Refinancing does take some risk as all financial decisions do. However, as in all risks, you can minimize losses if you do your own research and make a wise assessment of how your home mortgage refinance will lead you to. Refinancing is indeed more than just a matter of timing.