Mortgage insurance is a type of insurance that compensates lenders for their losses in the case of a default on a mortgage loan. In short, it serves as a safety net in case borrowers are unable to pay back their debts to those whom they owe money. Mortgage insurance plans can be public or private, which depends on the insurer.
American home purchasers will find private mortgage insurance to be necessary in many cases when purchases are not backed by the U.S. Government. When the purchaser places a down payment or equity position that is less than one-fifth of the actual value of the said property to be purchased, a private mortgage insurance is almost always required. Rates of these private mortgage insurance plans can range anywhere from 0.32% to 1.20% of the principal balance per year based on the percentage of the loan insured, loan-to value, a fixed or variable interest rate structure, and credit score. These rates are often paid in a single lump sum, annually, monthly, or in any combination of these. Most often private mortgage insurance is payed off in 12 monthly installments, which would be included as part of the mortgage payment.
If one wants avoid paying private mortgage insurance altogether, there are ways to do so. One of the simplest and also easiest methods of avoiding private mortgage insurance is to provide a down payment that is equal to or greater than 20% of the property value. Another, more complicated method is to get a piggyback mortgage. If the purchaser can qualify for this, a second mortgage loan or home equity would be taken out. This second income source would fill the gap between what the would-be landowner can pay and the minimum 20% needed to avoid private mortgage insurance. However, it seems like it is just another headache and another loan to worry about. The last and probably least appealing option is a lender-paid mortgage insurance plan. With this method, the cost of the private mortgage insurance is included in the mortgage interest rate for the entirety of the loan. The most unsavory part of this, though, is that the purchaser may actually end up paying more in interest because of this plan throughout the life of the loan. Ultimately, it seems that the most cost-effective and least stressful method to go about purchasing property is to give a 20% or greater down payment, and thereby be able to avoid private mortgage insurance and its unsavory alternatives altogether.
Purchasing a home is a major commitment. The home you choose is the home you will live in for many consecutive years. Some people even purchase homes and live in them for generations and generations, handing down the deed from parent to child, sometimes for over a hundred years before someone sells it and breaks the chain. With the typically ever-expanding value of land and homes, long term land speculation is generally a profitable endeavor. Professionals in the industry recommend not considering any home purchase unless you fully intend on being comfortable living in that home for a minimum of five years.
Even if you’re not planning a multi-generational real-estate investment, a simple condo purchase for a newly-married couple can still be a major source of stress. It really doesn’t have to be, if you can keep a few important considerations at the forefront of your mind. One such consideration is to decide whether to go it alone or if it is best to include a spouse or partner with you on the deed. This is no easy choice but an excellent way to start sorting out what is best for your situation. Be upfront about each choice’s advantages and disadvantages. If not married, determine who will be earning what and who will be paying for what. This makes the future chances of living in a harmonious home increase, and accounts for the potential disadvantages found when one partner has worse credit than the other.
Another crucial consideration to make is as to whether you honestly think the home is a good value. An extremely common mistake of first-time home buyers is to sign for a property that is too expensive. If however, you’ve got the income to afford an expensive place, still think conservatively. Your job may seem safe now, but imagine what would happen if you were unemployed. Deciding the proper value or price to spend on a home is going to have much to do with the financial situation you are in and also what type of fiscal guidance you have received. The more detailed your parameters are and the more willing you are to be patient, the more value you will get out of the home purchase when you finally make a decision.
Financial literacy is critical to your quality of life. In simple terms, it is financial literacy involves being savvy about money in very practical ways, such as when and why to use credit and when to not use credit or whether it makes more sense for you to buy a house or rent an apartment.
In the long run, people with an ordinary income and good financial literacy can outperform people with extraordinary incomes, but poor financial literacy. As they say: It’s not what you make, it’s what you keep. People with high levels of financial literacy are good at living within their means, saving for retirement and investing. In contrast, people with a high income who are not financially literate can readily go through all their money, end up deeply in debt and ultimately wind up bankrupt, with nothing to show for their years of high income.
So, no matter how much money you make, you should always be looking to improve your financial literacy. Whether you have a minimum wage job or a six figure income, knowing how to manage your money matters at least as much, if not more, than how much you make.
One good way to start improving your financial literacy is to track your spending. An old fashioned method for doing so is to carry a small notebook and pen with you and write down every single transaction at point of service. Do not wait until later and then try to remember it. It is shockingly difficult to remember every single thing we spent in a day.
Another good practice is to start reading more about money. Whether you are reading books about money or news articles, simply reading more about any money related topic will start improving your financial literacy.
You should also set goals. People who set financial goals outperform those who do not do so. Then read materials relevant to your goals. You will more readily remember reading materials that are relevant to your life. So, if your goal is to buy a house, you can start reading about mortgages, saving for a down payment, how your credit score is determined and so forth. All of these details will be relevant to buying a house.
If you can establish a good income and combine it with financial literacy, you can do almost anything you want in life. Remember: Knowledge is power.
So you’ve finally found the house of your dreams, and you’re excited. You sit down with the lender, who is so friendly that you are thoroughly convinced that all is well, when they hang up the telephone only to inform you that you have been denied for your loan. Before you become angry with your lender, you should first understand that it isn’t personal. In fact, it is estimated that about half of all mortgage applicants are now being denied because of stricter credit standards. However, just because you’ve been turned down for a loan doesn’t mean your dream is over, simply dust yourself off, consider these tips, and try again.
Understand Why You Were Rejected
Federal law dictates that applicants that submit a formal application are entitled to a formal rejection that spells out the reasons you were rejected. Generally, there are several main reasons why an applicant is turned down including credit worthiness, debt load, work history or the loan amount you are asking for is too high compared to the appraised value of your home.
Apply at a Different Rate
There are different types of loans available at various rates, depending on your credentials. If you don’t qualify at the current rate, you may be able to qualify for a loan at a higher rate, however, the higher the loan rate, the higher your monthly payment will be. You could also try lowering the amount you are asking for to get a better rate.
Seek Out Other Lenders
Not all lenders play by the same rules. Where one lender may reject a loan, another may approve it. For example, a small, local bank may be more forgiving than a larger institution, because they are more knowledgeable about home values in that area. Credit unions may also be more forgiving, however, they only offer loans to consumers who qualify for their membership.
Find a Fix
If credit is the reason you were denied for a loan, you will be issued an adverse-action notice naming the credit report agency that provided the data for the lender. You will also receive a free credit report. When a borrower is close to the qualifying mark, they may be able to pay down a balance and reach the qualifying mark. At that point, they may be able to reapply and receive a fast approval.
If your loan was denied due to loan-to-value, meaning the property’s appraisal was too low to back the amount of the loan, sometimes is may be as simple as reapplying with a different lender. Appraisal values vary from lender to lender, so where one appraiser hired by one lender may value a property at $100,000, another appraiser, hired by a different lender, may value the same property at $150,000, which means you may be able to qualify.
Both real estate agents and mortgage brokers can make a lucrative income, but in order to be truly successful there are some traits that you must possess.
One of the biggest things that puts real estate agents ahead of the pack is being able to connect with their clients and really make them feel comfortable. In fact, people skills are incredibly important to both of these positions. Mortgage brokers have to able to negotiate effectively with their clients and lenders and reach an agreement that is satisfactory to their clients. There is a thin line that needs to be able to be walked in order to get this done, and there are certain people that are better at this type of thing than others.
In order to become a real estate agent, a person must study and obtain a real estate license, which allows them to work for a company and sell properties to clients. This typically involves taking a course and then passing a test, and the same is true if you would like to become a mortgage broker. Both careers have a minimum requirement of a high school education, so if you have completed high school and are willing to take the courses and pass the licensing test, you can become either a real estate agent or a mortgage broker fairly quickly.
Developing a career in real estate or mortgage brokering is not very difficult to get into, but if you want to truly be successful, you have to possess a certain type of personality. Being outgoing and knowing how to read people, as well as provide them with what they are looking for is something that a person has to possess. If you don’t generally get along with people, in other words a “people person”, chances are that you aren’t going to have a great career as either a mortgage broker or a real estate agent. On the other hand, if you love to deal with people and are great at solving problems, as well as meeting the needs of others, there is a very good chance that you will thrive in this type of career.
Another thing people must have is a strong drive. If you are extremely driven to make sales and will go above and beyond for your clients, you can probably make a very good living as a real estate agent or a mortgage broker.
Are you interested in starting a career as a mortgage loan broker? If you are willing to help people and businesses attain loans in a banking industry this is a great career path for you. Whether it’s working for a bank, or for yourself, you will be the one responsible for getting loans to those in need for personal or business reasons. Being a mortgage loan broker can be a rewarding career both intellectually, emotionally and financially.
Similar to loan officers, a mortgage loan broker acts as an intermediary between the lenders and buyers. Legally, one is considered a financial institution whether working for a bank or working independently. One might help a prospective home buyer get their loan, and work between banks and people to find the right fit. As a mortgage loan broker, you hold the power in finding the right loan for the business or individual.
In order to become a mortgage loan broker, you must have a high school diploma or GED equivalent. Though you only need this basic schooling, any classes taken in a post-secondary school related are helpful in your journey. You will then want to attend a pre-licensure course through the National Mortgage Licensure System. This twenty-hour class will prepare you for your license. Once completed you will then study your guide and information obtained through course work so you are able to pass the exam. The SAFE Mortgage Originator Test is your ticket to a successful new career. Throughout the course of your career, you may have additional classroom learning to ensure you are up to date on all of the rules and regulations regarding loans and the likes.
The wonderful thing about this career is that you may complete this process in such a short amount of time, giving you more time to jumpstart your first position. By completing your coursework and obtaining a license, you have created a new life for yourself. You may work for a bank or yourself, where you will be able to help people and businesses get loans which will allow something beneficial to them. The median salary for a mortgage loan officer is approximately around fifty-five thousand dollars- quite a generous salary for a small amount of schooling. If you are looking for a rewarding career in lending services and financial assistance, a mortgage loan officer is a great option for you!
When it comes to buying a home, it can be a bit harder than before. For one thing, you have to be able to take out a mortgage in order to have a home. However, in order to be able to find the right deal for you, you need to know the difference between a mortgage broker and a loan officer.
A mortgage broker is defined as an intermediary who acts on behalf of businesses as well as individuals. The purpose of a mortgage broker is to find a direct lender that will work with the individual in setting up a plan to buy the house and pay off the loan.
Loan Officers on the other hand work for banks. One of their main objectives is to recommend applications for approval. A loan officer typically specializes in mortgage loans as well as consumer, and commercial loans.
If you are thinking of buying a home, then you must know that a mortgage broker will only direct you to people that could help you. If you want to actually get a loan, then you should look for a loan officer. However, mortgage brokers may direct you to a loan officer.
Mortgage brokers are very helpful when it comes to buying a home because they have knowledge on many different loan officers. Therefore, they can recommend a good one to you. This takes care of most of the work you have to do in finding a loan officer that is trustworthy. Another major difference between a loan officer and a mortgage broker lies in the licensing. A mortgage broker has to be registered with the state. He also has to be careful so that he doesn’t fall to fraud accusations for the loan. One license that the Mortgage broker is required to have is the Nationwide Mortgage Licensing System and Registry. The loan officer only has to be registered. There is no need for a license.
Another difference between a mortgage broker and a loan officer is that the mortgage broker will make more money for every loan than the loan officer. However, the loan officer has a referral network that helps him sell more loans. When trying to sell a home, the mortgage broker and the loan officer often work together in order to make sure the home is sold to someone who is eligible. Also, it is important that every aspect of the process is legal.
Things around us change all the time. The mortgage industry is one arena that is susceptible to frequent change. Trending now in this industry is all about commissions and should mortgage brokers, disclose commissions within the BC domain.
Regulators for the mortgage industry feel that brokers need to protect consumers connected to them by disclosing their commissions. Brokers everywhere feel this move undermines the industry’s confidence in the consumer.
Regulators believe that consumers need to know how much an agent makes on each consumer’s deal. Regulators are pushing for open inquires on each consumer deal the broker processes. In other words, brokers need to inform individual consumers how much money they, the brokers, make on the sale of property to the consumer involved.
Canada is vigilant of this new process related to disclosure of mortgage brokers and this is sparking an interest in Canada following suit for the sake of consumer protection.
It is further explained that those financial institutions work differently than mortgage brokers. Mortgage broker collects their fees from the banks and mortgage lenders taking on the consumer loan. As the regulations currently stand brokers must inform the consumer that they receive their payments from the bank, but the mortgage lender does not have to disclose how much the lender pays them.
Mortgage loan officers at financial institutions are currently not required to disclose the fees received from individual consumer mortgage loans. These mortgage sales professionals work on commission.
Regulators feel that mortgage brokers are taking consumers to the bankers who pay the most in returned fees, rather than finding the most suitable loan for the individual consumers. It is for this reason that regulators feel fee amounts need disclosing.
If this process were open to consumers regarding fees received for services to the consumer this would only confuse the consumer and damage the brokerage industry. Disclosure of receiving fees for mortgage loans could send a message to the customer that mortgage brokers receive higher fees than mortgage processors receive at financial institutions. Mortgage broker companies feel this is unfair.