Key Factors Regarding Private Morgage Insurers

The Federal Housing Administration, which insures lenders for losses incurred should a borrower not make his payments as promised, is pulling in its horns in an effort to remain solvent in the face of a rising number of delinquencies and foreclosures. At the same time, though, some of the half a dozen private companies that provide lenders with similar protection against defaults are quietly reentering the market, a market they all but vacated when the housing sector tanked.

2 Companies who have adjusted their guidelines in an attempt to re-enter the market are Genworth Mortgage Insurance in Raleigh, NC and MGIC of Madison,WI.

Beginning this month, down payment requirements on FHA-insured loans have been increased. Although borrowers with credit scores of 580 or above will still be able to make the traditional 3.5% down payment, those with lower scores will need 10% down. In addition, the upfront mortgage insurance premium has been raised from 1.75% to 2.25%. The premium can be financed as part of the mortgage. But the change nevertheless adds $1,000 to what otherwise would be a $200,000 loan. The resurge of interest by private mortgage insurers signify their belief that the housing market has reached some semblance of stability.

Genworth has rewritten its underwriting guidelines so that it will now back 5% down payment loans to borrowers anywhere in the country. Previously, such mortgages were not available to borrowers in so-called "declining markets," which in Genworth's case were California, Arizona, Nevada, Michigan and Florida. MGIC, the nation's largest private mortgage insurer, also has tweaked its guidelines. The changes aren't broad, company representative Katie Monfre says, but they are meaningful. Among other things, it has removed some markets from its restricted list and reduced the minimum FICO score required for a loan with a 5% down payment to 660.

Another company, Radian Guaranty in Philadelphia went away from the declining-markets concept altogether "at least a year ago," says President Teresa Bryce. Instead, it now backs 95% loans anywhere as long as trusted lenders with low delinquency rates underwrite them.

Yes, the FHA requires as little as 3.5% down, but you now need a FICO score of 580 or better to qualify. But private insurers will go as low as 3% on so-called affordable housing loans offered through state housing finance agencies.

Here's how the two line up on a $200,000 mortgage at 5.5% with three down-payment scenarios based on Genworth's pricing model:At 5% down, the principal and interest on an FHA-insured loan of $190,000 would be $1,103 a month. Add in the $79 monthly charge for insurance, and the payout would be $1,182. Rolled into the loan amount as paid as part of your monthly payment, private insurance is $46 more.But with 10% down, the numbers favor PMI: $1,120 a month for an FHA loan, $1,115 for private insurance paid monthly and $1,043 a month when the coverage is paid at closing.At 15% down, the FHA payment is $1,474 versus $1,436 for private coverage paid monthly and $1,394 if paid all at once.Private mortgage insurers bring other benefits to the table, too. Through Genworth, for example, Flagstar Bank in Troy, Mich., is offering job loss protection at no extra cost to borrowers who were laid off involuntarily. The insurance will cover the borrower's house payment, including taxes and insurance, for up to $2,000 a month for six months.And Radian will advance up to $15,000 to lenders to be applied to troubled borrowers' accounts to facilitate a mortgage-retention workout plan and ultimately reinstate the loan. Better yet, the money does not have to be paid back.

Note:
These are excerpts from the original article written by Lew Sichelman, published in the Los Angeles Times on April 25, 2010.

http://articles.latimes.com/2010/apr/25/business/la-fi-0425-lew-20100425

Is Your Home Still A Good Long Term Investment? Yes!

One of your primary reasons for owning a home is the investment – Money. You accumulate equity in your home; you save in taxes by owning a home and why pay more money to rent when you can pay less to own your property?

Equity is the value of your home. The amount of your loan minus the amount you have already paid toward the home is your equity. Now of course there are other determinations that go into this number like any upgrades to the home, the neighborhood, and any liens on your home.

“You accumulate equity in your home; you save in taxes by owning a home and why pay more money to rent when you can pay less to own your property”Your home is still the best long-term investment you will ever make. Over the years home prices have skyrocketed and plummeted and will continue to do so. But property is always valuable no matter what. The key to a home’s value is location, upkeep, upgrades, amenities and appeal; each of those items will play a part in your profits. Look at today’s economic mess; we’re sitting in a buyer’s market and even with plummeting prices and a sad stock market homes are still a value to someone.

People are enticed to buy new homes and not just new but bigger and better homes. Fifty years ago homes were less than 1000 square feet and the family all shared one bathroom. Today most homes have 2.5 bathrooms, more square footage, more closet space, more windows, upgraded landscaping, double garages, cathedral ceilings and gourmet kitchens with islands. No matter what, homes remain steadfast and there will always be buyers. But like everything with value, it all depends on what you’re offering. This is why upkeep and upgrades remain an important trend.

Your home will always be a good investment and think of the return on your investment in the long run; one of the best benefits to a homeowner is the tax deductions. Homeowners are allowed to deduct up to one million dollars on their primary and second home. And if you have a home equity loan you can deduct part of the interest payments on that mortgage.

Property taxes and interest payments on your mortgage are all deductible on your federal and state tax returns. For many people who do not have any itemized deductions, this provides some relief from paying all of their income to the government. Who doesn’t want to pay less in taxes? And to sweeten the deal the government now offers you other avenues to deduct some upgrades to your home. Become eco-friendly and purchase items that save on energy and wasted water use and you’ll become eligible for other tax incentives.

Home ownership was always looked at as accomplishment and achieving the American Dream; today it has become that and much more; an ideal way to make a sound investment with plenty of loopholes to decrease your tax obligations. Throughout the declines and painful uncertainty will come stability and home sweet home investment will gain ground once again.

Transitioning from Renter to Homeowner

We make a lot of assumptions about why people don’t rush to buy a home; credit issues, financial issues or perhaps uninformed of the process into homeownership; but it becomes more than just the benefits of becoming a homeowner.

Many people have been raised in a renter’s culture and have never thought of owning a home. Homeownership is a big step for a lot of people; families must learn how to live in a diverse neighborhood, and deal with taxes, insurance and other aspects of home ownership that was never contemplated before. The mere responsibilities of homeownership make many renters shutter at the thought.

“You mean I’m responsible for my own maintenance?”
“I have several monthly bills other than just rent?”

Sure, there are many advantages to owning a home but there are also sacrifices. In the end it really will balance out because you’ll get a nice tax break. Owning a home means you get new tax breaks that weren’t available to you before. For many new homeowners’ it’s the first time they’ve ever received a tax refund worth a few thousand dollars, all because they own a new home.

So here are some things to consider; there are many advantages to buying a home versus renting year after year.

Have you ever considered that you’re just paying someone else’s mortgage payment and providing your landlord with tax benefits that you could be receiving? Your landlord owns the building you live in and is most likely paying a mortgage payment to the bank.

So the landlord collects rent from each tenant and then makes a payment to his/her bank. Let’s say the landlord’s mortgage payment to the bank is $4,000 a month. That is a large payment and it could be more or less than that; however let’s say you live in a building with 10+ tenants times everyone paying $1,000 in rent. The landlord is still making a profit each month…AND, the landlord is able to deduct expenses and interest off of his/her taxes.

So you see the big picture here; you’re helping your landlord make a BIG profit each month.

Did you know that for the same amount you’re paying in rent you could afford to buy a home? It’s probably cheaper to buy a new home versus what you’re currently paying in rent.

While maintaining a home does indeed have a cost factor associated with it, it should not be an obstacle to becoming a home owner. You can always purchase a “maintenance insurance policy”. This type of insurance policy covers small repair problems for plumbing, heating, electrical and more.

Understanding the benefits, obstacles and issues each of us faces as first time home buyers will help us eliminate those obstacles and overcome the fear in transitioning from renter to homeowner.

A Look At What Today's Homebuyers Prefer

Often builders rely on data from surveys provided by companies such as Avid Ratings Company (www.avidratings.com) to keep up to date on would-be buyers preferences. The overall consensus is that lot of current homeowners plan to be more practical next time around. "People are willing to live in less square footage, but it has to be livable" according to Carol Lavender, President of Lavender Design Group (www.lavenderdesign.com), based out of San Antonio, TX. Avid's survey also concluded that there has been a "huge transition" toward "green" features like high-efficiency appliances, windows and insulation. Here are some of the findings provided by Avid Chief Executive Paul Cardis, from a recent study of more than 22,000 owners who purchased in the last 9 years:

1. Community clubhouses are not a big deal anymore
2. Health clubs that people end up using very little can be eliminated
3. Swimming pools, golf courses and dog parks are no longer a great desire
4. Children's playgrounds and walking paths are essential
5. Large kitchens with islands are still strong must-have
6. Formal dining rooms, upstairs laundry rooms and home theaters aren't necessities
7. First time buyers, vacation-home buyers and custom-home buyers rank 2 car garages, home offices and main floor master bedrooms high on their list of wants
8. Oversized showers with overhead shower heads and seating was preferred over a master bath with a whirlpool tub

Note:

The information provided in this blog came from an article written by Lew Sichelman published in LA Times Business Section

Foreclosure & Loan Mods Aren't Your Only Option

So, what re-course do homeowners have? SHORT SALE! SHORT SALE! SHORT SALE! Find an experienced, diligent realtor in your area and call them for a consultation. In a short sale the bank accepts less than what's owed on the property rather than going through the foreclosure process. The best part is that a short sale doesn't effect your credit report for 7 years like a foreclosure. So, you can move on and get a fresh start.

There are some restrictions. You must have a valid hardship such as; job loss, financial difficulty, earning less money, illness, divorce, death, job transfer for consideration.

Banks don't want to be in the business of selling real estate, so they don't want your property back!

As of the month of April, the Treasury Department started a new program to make the short sale process even more painless. Some of the key aspects of the program are:

1. Lenders are required to answer a request for a short sale within 10 business days of receiving the purchase offer.

2. Homeowners also get $1500 in cash as a "relocation incentive" to cover moving costs, deducted from the sale price.

3. Mortgage lenders, in turn, receive $1000 to help cover and speed up the process of the sale.


Now let's compare the other options out there:

Loan modifications are a horrific, lengthy process and you may not even qualify.

Foreclosures stay on your credit report for 7 years and actually it's permanently recorded with the county records where it's filed.