It is a well-known fact that one can take out an insurance policy for almost anything—weddings, body parts, alien abduction, comedy routines, so on and so forth. Insuring a property is more conventional, but many consumers are perturbed by the additional cost, which adds to the already considerable financial pressure of purchasing a home.
There are a few types of insurance generally associated with homeownership, the first being mortgage insurance. “MI” serves to protect lenders in cases where there’s an increased likelihood of the borrower defaulting. Borrowers that put down 20%, then, are essentially required to pay for the risk they pose to their lender. Until a borrower’s loan-to-value ratio drops below the 80% mark, they will continue to pay for that risk. Conventional loans with a loan-to-value ratio over 80% require the borrower to hold private mortgage insurance, which can be arranged by the lender, while those who take out FHA loans will also sort out their mortgage insurance through the FHA.
Mortgage protection insurance is slightly different, as it provides coverage in circumstances where borrowers aren’t able to make mortgage payments due to illness or loss of a job. However, such policies don’t insure against falling home prices or other mishaps that may decrease the value of the property. Their purpose is to serve the lender, not the borrower.
Often confused with MI or mortgage protection insurance, homeowners insurance protects the interests of the borrower. This is the policy that covers falling trees, fires, buffalo stampedes, et cetera and has no immediate connection with the financing process. Technically, homeowners insurance isn’t strictly necessary for those properties outright. Most people don’t, however, and lenders, considering that they often own a good portion of the property thanks to that substantial loan, require borrowers to take out homeowners policies.
JUST ANNOUNCED -
According to KHC:
Effective today, KHC is lowering the minimum credit score requirement on government loans from 640 to 620, and from 680 to 660 on conventional loans. All guides have been updated to reflect this change on KHC's website, under lenders.
The Kentucky Housing Corporation offers Down Payment Closing Cost Assistance, Home Buyer Tax Credit, Housing Counseling and Education and other loan programs that help eligible homebuyers in the state of Kentucky purchase a home.
American Mortgage has been the #1 lender for Kentucky Housing Corporation since 2002. We have assisted more homebuyers with these programs than any other company.
If you would like more information on these programs click the contact us button or the apply now button.
Sometimes borrowers ask, “Why don’t your rates match the ones I see online?” It is easy to quote rates out there, but every borrower should remember that their loan is different, and that often the advertised, or publicized, rates are slightly higher due to a number of factors.
First, the rates in Freddie Mac’s survey (which come out every week) include average discount points paid for the mortgage. But not everyone is willing to pay points: a point is 1% of the mortgage amount, charged as prepaid interest. Many borrowers do not want to pay points, and loan officers agree because unless you’re going to live in your home for a very long time, paying points often doesn’t make sense.
The second reason that your rate might be different than a rate you hear on the radio or see online is that your characteristics mean price adjustments. For example, a credit score on the low side will prevent you from getting the lowest rates. Low levels of home equity will also mean a pricier mortgage rate. Focusing on LTV, for example, at least a 20% equity cushion (80% LTV) in your home for a refinance, or down payment for a purchase, will help obtain a better rate for a borrower. And if a borrower wants a jumbo mortgage, you will want 25% or 30% down for the best rates.
Property type also influences rates: in the current environment, liens on condos usually carry a slightly higher rate unless you want to put more money down. And if your mortgage is for a vacation home or investment property, you can also expect to pay a higher rate. And lastly, some lenders have so many loans in process that they will intentionally make their rates slightly higher in order to slow down new business. Your loan officer can help answer questions on the best rate and price combination.
When you start the process of applying for a mortgage, you may feel as though you're giving every single bit of personal and private information to your mortgage lender. Just why does your lender need to know all of those things? Are your personal financials and credit history really necessary just to get a quote?
As you approach a loan officer to apply for a loan, you should be prepared to deliver quite a bit of personal information. Taking a closer look at how the loan industry works will help you understand why this is necessary.
Increased Scrutiny Means Increased Details
In the early 2000s, lenders were known for having loose underwriting for mortgages. Many people were given mortgages that they really were not qualified to have, and this led to the financial crisis of 2008 and the following real estate slump. Now, lenders are facing tighter scrutiny from the Consumer Financial Protection Bureau, and this has triggered increased requirements when borrowers approach lenders in pursuit of a loan. In order to get a mortgage, you are going to have to give up a lot of details and prove that you are credit worthy.
Why a Credit Pull Is Vital
Borrowers who suspect they may have credit problems or who are private in nature may wish to wait to have their credit checked until they're certain they've chosen the right lender and loan. Also, some borrowers don't want to approve the credit check because they don't want to have a credit pull on their history. However, your chosen lender can't offer loan terms without pulling your credit, and if you want to have more than one quote, each lender you apply to is going to have to pull your credit. These credit pulls do have a temporary impact on your credit report, but as long as you don't have an excessive number of inquiries for different types of loans, this shouldn't create a problem.
A Full Financial Picture
Your credit score is just part of the picture that your lender will need. Your lender's also going to need to know your financial situation. This includes your income, investments and other debts. This, combined with your credit rating, will show the lender whether or not you are a safe risk. Once the lender has all of this information, they can provide you with a loan that fits your financial profiles. If there are problems, the lender can also help you know what to do to improve your credit and financial profile. If you're denied, the lender will tell you why, and you can take measures to change your situation and improve your chances of being approved for the next loan.
So yes, when you apply for a loan, you will need to offer up quite a bit of personal and financial information. It's simply part of the process. To limit the number of credit pulls and disclosure you are required to make, shop for lenders first and narrow down your choices to a couple, then apply, but don't be afraid to give up your information, because without it, you can't get a loan.
If you want to start an argument, announce to a crowd that the economy is recovering: half will agree with you, half won’t. Certainly the recent downturn has impacted many, leading to short sales, foreclosures, and bankruptcies. And plenty of people are asking about buying a property that was involved in a bankruptcy. To answer that, the key issue is what type of bankruptcy was filed, and how long will it take to close?
Since most such sales come with no representations, warranties or indemnifications, attorneys representing buyers should make due diligence their number one priority. Section 363 of the U.S. Bankruptcy Code allows parties involved in a Chapter 11 or Chapter 7 (most common for consumers) proceeding to dispose of real property in order to help pay off their debts through a highly structured process aimed at getting the most out of each asset while retaining the least liability.
As such, properties are sold "free and clear" from all liens and encumbrances, but it's not uncommon to later discover hidden issues, experts say, and the buying process itself can present various other hurdles. The buyer should conduct exhaustive due diligence. The trustee or debtor-in-possession rarely has access to all of the materials a buyer would typically need to see before making a decision to purchase property; sometimes a debtor has destroyed the documentation prior to the bankruptcy, or not kept it in good enough shape.
A buyer should take advantage of the property being “Free and Clear”. Although the transfer of the property comes with no representations or warranties, it also comes with no liens or encumbrances. A buyer should enlist a knowledgeable lender and real estate professional, and be prepared to move quickly in what could be a competitive bidding environment.
The main goal under any filing in bankruptcy is to give one, who is burdened with debt, a fresh start. A debtor files a petition with the court, along with a schedule of assets and creditors; a trustee is appointed to administer the sale of nonexempt property. The primary role of the trustee is to pay the secured and sometimes unsecured creditors, from the proceeds of the sale of property, and this may take up to 45-60 days to wind its way through courts – but could very well be worth it to the buyer!
Content on this site is for informational purposes only. It is not to be construed as legal, financial, personal or other advice. Information and opinions offered are those of independent sources and may not be endorsed by American Mortgage Service Company and/or AmericanMortgage.com. We make no representations as to the suitability or validity of information in a blog on this site. We are not liable for any errors or content of blogs or for any losses, injuries or damages arising from its display or use. There is no obligation to update information provided in a blog on this site.