Document text
0 of 3 Premium Clicks used this month SUBSCRIBE Print + Online Subscriber Activation | Register x Forgot Password | Need an Account? e-edition | subscribe | newsletter | deals Classifieds Jobs Autos Real Estate FEATURED » NEWS NOW Medford couple among the victims in Alaska plane crash ... Families rattled by lack of information on Alaska plane crash ... Weather Service issues lightning, heat warnings for Southern Oregon ... Medford couple among the victims in Alaska plane crash ... Families rattled by lack of information on Alaska plane crash ... Weather Service issues lightning, heat warnings for Southern Oregon ... Mortgage insurance: Your questions answered Comment By Laura Firszt Networx MailTribune.com By Laura Firszt Networx Posted Nov. 19, 2014 at 8:49 AM By Laura Firszt Networx Posted Nov. 19, 2014 at 8:49 AM » Social News Owning your own home used to require a substantial down payment: at least 20 percent. These days, you can obtain a home loan even if you have less than that amount in hand. However, your lender is likely to demand that you purchase mortgage insurance. This is his (or her) guarantee that the mortgage will still be taken care of, in the event that you are not able to make the payments. Here's how mortgage insurance works. What is mortgage insurance? Mortgage insurance is often called private mortgage insurance or lender's mortgage insurance to distinguish it from mortgage life insurance, which is initiated by the homebuyer. PMI is a policy required by the lender when you wish to buy a new, resale, or custom-built home with a smaller-than-usual down payment — less than 20 percent of the home's selling price or its appraised value. This type of insurance will protect the lending institution in case of default. PMI is not applicable to home loans guaranteed by the Federal Housing Administration, the Department of Housing and Urban Development, or the Veterans Administration, which have their own form of mortgage insurance. What is the advantage to you, the potential homebuyer? In contrast to the traditional 20 percent down payment, these days some lenders are offering home loans to potential purchasers with as little as 5 percent down. This makes it easier for you to qualify for a mortgage and to purchase a home earlier than you would otherwise be able to. However, you will have the expense of monthly PMI premiums, in addition to your mortgage payments. How is LTV calculated? LTV stands for loan-to-value ratio. It is calculated as a percentage, according to this formula: 100 percent minus the percentage of your down payment equals LTV. In other words, if you make a down payment of 15 percent, your LTV will equal 100 minus 15, or 85 percent. How much will you pay? Your PMI premium will vary depending on your specific circumstances. The insurer will take a number of factors into account, including the amount of the loan, the loan-to-value ratio, your credit score, and your intended use of the home (as a primary residence, investment, etc). Generally, you can expect to pay $30 to $70 monthly for every $100,000 that you borrow. This amount will be included as part of your regular mortgage payment. As of 2007, mortgage insurance premiums, as well as actual mortgage payments, are tax deductible. Are you obligated to take out private mortgage insurance? If you have less than 20 percent cash to put down on the purchase of your home and you do not qualify for an FHA, HUD, or VA mortgage, the answer is yes, your mortgage lender will most likely obligate you to take out PMI. When will you stop paying mortgage insurance? When you close on your home loan, the lending institution representative is required to inform you as to the date when your LTV will decrease to 80 percent — presuming, of course, that you make timely payments. According to the Homeowners Protection Act of 1998, you may request cancellation of the private mortgage insurance at this point, subject to certain conditions. However, termination of mortgage insurance is not legally required until the LTV has been reduced to 78 percent. In either case, you must be up to date on your mortgage payments in order to qualify. Laura Firszt writes for networx.com. By Laura Firszt Networx MailTribune.com By Laura Firszt Networx Posted Nov. 19, 2014 at 8:49 AM » Comment or view comments Reader Reaction » STAY INFORMED Email NewsLetter Sign Up Today Sign up for our newsletter and have the top headlines from your community delivered right to your inbox. Southern Oregon Directory Featured Businesses Loading... Business Name address Location, ST | website.com Find Southern Oregon Attractions Bars Restaurants Beauty Salons Entertainment Doctors Medical Specialists Contractors Education Lawn Services Lawyers Shopping Travel Tanning Used Cars Wedding Services ▼ Add your business here + Events Calendar Connect with MailTribune.com Facebook Twitter RSS Back to top Reader Services Reader Services Home Subscriptions Subscriber controls Contact us Submissions Photos Events Letters to the editor Corrections Announcements Obituaries Story ideas Since you asked Alerts Email Alerts RSS Feeds Text Alerts Advertise Media Kit Home Products and services Ad rates Advertising contacts Propel Marketing Mail Tribune Daily Tidings The Nickel Shop Our Valley Blogs Mobile Site Stay Informed Email newsletter Sign Up Today Sign up for our newsletter and have the top headlines from your community delivered right to your inbox. Your privacy is important, read our privacy policy. © Copyright 2015 Local Media Group, Inc. All Rights Reserved. Privacy Policy | Terms of Service | Local Media Group Publications Original content available for non-commercial use under a Creative Commons license, except where noted. MailTribune.com | P.O. Box 1108, Medford, OR 97501