Tehama Country Real Estate

Tehama Country Real Estate – 3 EXPLAINING PRIVATE MORTGAGE INSURANCE (PMI) rivate mortgage insurance, also known as PMI, is an additional fee tacked on to a lender's loan document. The PMI was established by the Home- owner's Protection Act of 1998 to act as a watchdog for the borrower and set forth some guidelines for the lender. For most home loan borrowers, the PMI annual payment is a welcome fee to add some peace of mind to the borrowing process and allow home buyers with min- imal cash flow to get the loan product of their choice. P Who Needs Private Mortgage Insur- ance? Not every borrower will benefit from paying the PMI attached to their loan, nor is every borrower required to purchase it. The ideal PMI candidate will have put down 20 percent or less on the down pay- ment of the prop- erty and will be carrying a loan balance of at least 80 percent on the mortgage. The lender offers the PMI to safeguard against a borrow- er that may default within a short period of time. The PMI pro- tects the lender so that the institution is more likely to lend to buyers with a limited cash flow and down payment. The PMI is a win-win for the banks and the buyer as each party gets what they want from the sale of the property. Benefits of Buying Private Mortgage Insurance Buyers who wish to purchase a home with the bare minimum down payment may do so with confidence when they are protected by a PMI policy. Real Estate Spotlight By Alex Mason Who Does Not Benefit from PMI Cov- erage? A borrower who has applied a real estate down payment higher than 20 per- cent and will be carrying a loan balance of less than 80 percent may waive the PMI coverage. According to the Home Owner's Protec- tion Act of 1998, the date of PMI termina- tion may be determined between both lender and borrower. Aborrower who has made timely mortgage payments for set period of time and wishes to cancel the PMI policy may do so by a written request to the lender. Providing there is sufficient equity in the home, a borrower who wishes to termi- nate the PMI poli- cy will keep care- ful records of their payment history and sub- mit a termination request to the lender. cent of the purchase price. Terms and con- ditions include that the borrower has not been 30 days or more late with a mortgage payment within a one-year period of the loan. requires the bor- rower to be noti- fied by the lender when a high risk loan balance has been lowered to seventy-eight per- The HPAof 1998 Home Values and Appreciation The Department of Housing and Urban Development, or HUD, provides low-cost housing with an average of only four per- cent required as the down payment. The lender who insures the policy with a PMI premium is covered and the home buyer can purchase immediately without wait- ing to save a whopping twenty percent down on the home. PMI may be applied to any type of house or condo and is a wise investment to get the home buying process underway. Finally, a home buyer may escape the PMI requirement if the value of the home has increased. An official appraisal is required to verify the current market value and if the appreciation increases the equity, the PMI may be canceled. PMI premiums average just $1,200 per year and are manageable for most home buyers to get the mortgage insurance they need for the purchase. Paying your PMI premium for a short time will allow you to get into your new home with a 20 percent or less down pay- ment. Alex Mason is a former real estate agent and mortgagebroker living in Los Angeles.

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