Tag - Mortagage Loan

Private Mortgage Insurance

Most lenders recommend that when buying a home, a 20 percent down payment is recommended. Down payments can be as low as 3 percent in some cases, but a low down payment will result in the need for private mortgage insurance (PMI). This type of insurance may be required to pay for if you get a conventional home loan.

Lenders require PMI as a part of a conventional loan to protect themselves in case your home is foreclosed upon. The insurance protects the lender for some of the shortfall if a home is foreclosed upon and sold for less than the outstanding part of the mortgage. It is usually required if you refinance a mortgage with less than 20 percent equity. PMI can help you qualify for a mortgage if you do not have enough cash for a 20 percent down payment. Although PMI can protect the lender, it is an added expense to the borrower. Once you reach 20 percent equity in your home through paying your loan balance down over time or through rising home values, you can contact your lender and ask them to remove the PMI from your mortgage. A few ways to avoid paying PMI are:

  • Put 20 percent down if it is at all possible. The higher the down payment, the better the terms of the mortgage repayment plan.
  • Loans that are backed by the US Dept. of Veterans Affairs or the US Dept. of Agriculture do not require PMI. FHA loans come with two types of PMI premiums that are paid in the beginning as well as annually.
  • Even if you must get PMI, you can always cancel it later. If you are already paying the premium, keep track of the loan balance and the home prices in your area. Once the balance reaches 80 percent of the home’s value, you can request that the lender drop the mortgage insurance premiums.

The average annual PMI premium ranges from .55 percent to 2.25 percent of the original loan amount per year. Your credit and loan-to-value ratio impacts the premium you will be charged. As an example, if the home price is $300,000 and PMI is 1 percent, you will pay $3,000 a year or an additional $250 monthly. PMI premiums can be paid monthly as an additional charge added onto your monthly mortgage payment. There may be an up-front payment as some lenders require PMI to be paid in full at closing. Other lenders require both. It is important to consider all your options before agreeing to a loan with PMI. Remember that if you increase your down payment to 20 percent, you can avoid PMI. You may have to spend more time saving for the down payment, but you will lower your monthly payments in the long run.

At Superior Mortgage Company, Inc., we understand that buying or refinancing a home is a huge decision for most people. Our knowledge and expertise in residential and commercial loans make it possible for us to provide the best products and services available. If you are purchasing, refinancing or in need of a home equity loan, and regardless of credit problems, we can help you. Contact the company that has all the answers to your questions and can give you the information you need to make the best decision. Call us at 845-883-8200.

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Buying a Second Home

If you are lucky enough to be considering the purchase of a second home, there are a few ways to fund your new property. When making an important decision that will change your life, you must consider the benefits and costs. It should make financial sense to buy a second home. Although there are costs up front, a second home is a substantial addition to your real estate portfolio and retirement plan. It is vital to work with an experienced and knowledgeable lender, such as Superior MCI, to weigh all your options. You may not need to take out a loan on the second home if you take advantage of the following options to make a down payment or pay cash for a second home.

  • Many homeowners use a cash-out refinance on their primary home. Because home values are rising across the US, many homeowners have built up substantial equity in their primary or rental residence in the last few years. They can tap into this equity using a cash-out refinance. An example of this would be a homeowner who owes $100,000 on her mortgage. His home, however, is currently valued at $200,000 due to appreciation. The homeowner could take out some of the equity by refinancing into a bigger loan and getting the difference in cash. Consequently, the homeowner would be able to have access to a bigger down payment on the second home. Borrowers who have good credit can borrow up to 80 percent of their home’s current value with a conforming loan. FHA loans allow 85 percent cash-out refinancing and if the homeowner is a veteran, he could access 100 percent of their equity in a cash-out VA loan. With today’s low mortgage rates, cash-out refinancing may be a good way to take advantage of your home’s equity to get a second home. It’s important to be sure that you can afford a larger monthly payment on your primary home and to remember that there are additional financial obligations with a second home.
  • A home equity line of credit (HELOC) on your primary residence is a popular funding source for second home buyers. If you have sufficient equity in your home, you can take out a line of credit and buy the second home or use the funds as a down payment. In this case, you would not need to refinance your current mortgage. A HELOC could be the best way to go if you have recently refinanced and have a very low rate. Opening a line of credit does not affect your first mortgage. In some cases, you can tap into 100 percent of your home’s value. Generally, borrowers need good to excellent credit. If you are approved, you can use the cash for any reason. The interest rate is based on the prime rate, which is currently very low, making the rate lower than you would pay on a traditional mortgage. Without a new mortgage, you avoid closing costs.
  • You can also get a loan for a second home via conventional financing. Depending on your credit and other factors, current down payments can be as low as 10%.

At Superior Mortgage Company, Inc., we specialize in residential and commercial loans and provide the best products and services available. Whether you are purchasing, refinancing or in need of a home equity loan, and regardless of any credit problems, we can help you. Contact the company that can answer all your questions. Call us at 845-883-8200.

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The Pros and Cons of Reverse Mortgages

A reverse mortgage converts the equity in your home into cash. Depending upon your particular situation, you can receive a large sum all at once, establish a line of credit to draw on, or receive payments in monthly installments. Paying the loan back would proceed the same as with any other type of loan. If you choose to receive monthly installments, you are able to collect those for the remainder of your life as long as you continue to live in your home. However, there are pros and cons to getting a reverse mortgage. Some of the benefits of these types of loans are:

  • You can remain in your home.
  • You can pay off the existing mortgages on your home.
  • No monthly mortgage payments are necessary as long as your home is your primary residence, you pay the required property taxes and homeowner’s insurance and keep the home according to Federal Housing Administration requirements. If you fail to meet these requirements, you may trigger a loan default that could result in foreclosure.
  • You receive payments on flexible terms, including monthly payments, a lump sum distribution, a credit line for emergencies or any combination of these terms.
  • A reverse mortgage cannot go ‘upside down’ so your heirs will never be liable for more than the home is sold for.
  • Your heirs will inherit the house and keep the remaining equity after the balance of the reverse mortgage is paid off.
  • Loan proceeds are not taxed as income.
  • Your interest rate may be lower than traditional mortgages or home equity loans.

Some reverse mortgage cons include:

  • Fees on a reverse mortgage are the same as a traditional FHA mortgage but are higher than a conventional mortgage. The largest costs are the FHA mortgage insurance and the loan origination fee.
  • The balance of the loan gets larger over time and the value of the inheritance can decrease over time.
  • Reverse mortgages usually don’t affect your eligibility for Medicare, Social Security benefits and other entitlement programs. However, need-based government benefits such as Medicaid and SSI may be affected by a reverse mortgage loan.
  • The program is not easily understood by many individuals. This is where Superior Mortgage Company comes in. We will explain every aspect of your loan and will tell you everything you need to know.

At Superior Mortgage Company, Inc., we specialize in residential and commercial loans and provide the best products and services available. We will be happy to speak with you and answer any questions you may have. Whether you want to purchase, refinance or take advantage of a home equity loan, we can help. Contact us at 845-883-8200.

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The Top Mortgage Loan Issues of 2019

The mortgage industry has been subjected to continuous regulatory changes for the past decade. Some of the top issues this year are:

  • Ability-to-Repay: The ability to repay/Qualified Mortgage rules have changed residential mortgage underwriting for every institution. These regulations have been thoroughly reviewed and lenders should expect that the review will lead to proposals to improve the current laws. It is anticipated that there will be a focus on improving legal certainty and new ways to replace the “GSE QM” provision, which is a safe harbor for most mortgage lending in residential markets.
  • HMDA Reforms: Legislative amendments to HMDA (Home Mortgage Disclosure Act) were regulated in 2015 and are effective for reporting 2018 mortgage data. Lenders should expect stronger public and governmental scrutiny of data and should focus on fair lending exposure. There will also be a new focus on data that is publicly released. There will be Congressional and regulatory debates on HMDA reporting requirements this year as well.
  • Fair Lending: During 2019, there will be increased focus on affordable housing, fair lending and redlining. Regulators are again looking at standards as a result of the recent Supreme Court ruling that reevaluates impact laws and guidelines under the Fair Housing Act as well as the current standards under the Equal Credit Opportunity Act. HUD will issue proposed revisions to the Fair Housing regulations before the summer of 2019.
  • Mortgage Servicing Regulations: The CFPB (Consumer Financial Protection Board) issued new servicing regulations, along with amendments and revisions that went into effect in 2018. There will be an assessment of major portions of these regulations by the end of 2019.
  • Digital Developments and Fintech: The digital transformation that has occurred in all financial services continues to happen. This means that everything mentioned above must be looked at through the perspective of “Fintech.” Congress and regulators will pay increasing attention to the issues and opportunities coming from digital advances, including the effects of digitized lending on credit accessibility, data standardization in mortgage servicing, the use of artificial intelligence, fair lending considerations, online remote notarization and the acceptance of e-notes.

Superior Mortgage Company is dedicated to expanding their expertise in the mortgage industry by keeping abreast of every change, revision or new regulatory provision as soon as they happen. We believe that an informed client is the best client and to that end, we make sure that you fully understand the information provided to you. At Superior Mortgage Company, Inc., we specialize in residential and commercial loans and provide the best products and services available. Whether you are purchasing, refinancing or in need of a home equity loan, and regardless of any credit problems, we can help you. Contact the company that can answer all your questions. Call us at 845-883-8200.

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