Senior Home Buyers Allowed To Use Reverse Mortgage

Beginning Jan. 1, home buyers 62 and older will be able to buy a house using a reverse mortgage, as long as it's their primary residence.

Traditionally, people obtained reverse mortgages to take equity out of their existing homes to help them meet expenses, pay off the mortgage or pay the property taxes.

But staff members at the Federal Housing Administration noticed an increasing number of seniors selling their homes, buying new homes and then getting a reverse mortgage to pay off the new home, said Meg Burns, director, FHA office of single-family program development.

"They were going through two mortgage transactions and paying all those fees," she said. "Seniors need to keep their money in their pocket."
When the FHA staff members looked further, they found that the traditional reverse mortgage program designed to keep seniors in their home wasn't helping those who wanted to downsize, move to a house without stairs, move closer to their kids or move into active adult housing.

Burns said a program allowing a Home Equity Conversion Mortgage for purchase "came from us internally" as a way to accommodate that kind of consumer.

Fannie Mae launched a reverse mortgage program for purchase in 1997 called a Home Keeper for Home Purchase, but Burns said it was not used much because of borrowing limits.

With a reverse mortgage, the borrower takes the equity out of the home either as a lump sum, a line of credit, in a monthly payment or as a combination of these. The loan is repaid when the borrower sells the house or the last homeowner dies or moves out. The amount of the loan is based on the home's value and the youngest borrower's age.

A Cap On Fees
A new law that went into effect this fall imposed a $6,000 cap on origination fees, and that law applies to the HECM for purchase loan. Lenders can charge 2 percent of the first $200,000 of loan value plus 1 percent of any additional loan value. Consumers are still charged 2 percent for FHA insurance.

The FHA insurance protects both the borrower and the lender. If the bank should go under, consumers still will receive their reverse mortgage. And if the home's value drops below the original loan amount when the senior dies or moves out, the insurance protects the lender.

Consumers should expect to pay fees similar to a traditional reverse mortgage, with the additional fees relating to a purchase of a home such as recording fees and transfer taxes. Borrowers are still required to meet with a third-party, HUD-approved consumer counselor so they understand their options.

Those using a HECM loan for purchase must buy a one- to four-family house. The HECM for purchase may be used for new construction that has been completed and received a certificate of occupancy. Purchasers must move in within 60 days of closing.

"We talk to seniors. The folks we've talked to agree that it makes sense," Burns said. "I feel like this product is going to address a social issue for them."

Refinancing applications boost home-loan volume

WASHINGTON – The number of home-loan applications filed nationwide rose last week compared with a year ago, according to a report today from the Mortgage Bankers Association.

In the week ended Dec. 5, the trade group’s seasonally adjusted Market Composite Index – a measure of overall mortgage loan application volume – was 796.8 points (March 16, 1990 = 100 points). That represented a decline of 7.1 percent from the 857.7 points of the week ended Nov. 28 (after adjustment for the Thanksgiving-shortened work week), but an increase of 99.90 percent from the eight-year low of the week ended Nov. 15 (READ MORE) and a year-over-year increase of 2.2 percent.

The MBA survey, conducted weekly since 1990, covers about half of all U.S. retail home mortgage applications.

Its seasonally adjusted Purchase Index fell 17.4 percent week-over-week to 298.1 points, after rising 38.0 percent the week ended Nov. 28 and 5.3 percent the week before that. Applications to purchase a home using Federal Housing Authority (FHA) and other government-backed loans fell 21.3 percent last week while applications for non-government backed loans fell 15.5 percent, the MBA said.

The Refinance Index dipped 0.9 percent last week to 3,767.3 points, after surging 203.3 percent Thanksgiving week and falling 2.1 percent the week ended Nov. 21. Refinancing was the goal of nearly three-quarters of loan applications last week – 73.7 percent – up from 69.1 percent in the week ended Nov. 28 and 49.3 percent in the week ended Nov. 21, the MBA said.

The share of mortgage applicants who were seeking adjustable-rate mortgages (ARMs) – rather than conventional fixed-rate loans – fell to 1.1 percent last week from 1.4 percent Thanksgiving week and 3.0 percent of applications filed in the week ended Nov. 21.

The average contract interest rate for a 30-year, fixed-rate mortgage dipped to 5.45 percent last week from the previous week’s from 5.47 percent, while the contract interest rate on a 15-year, fixed-rate loan declined to 5.09 percent from the previous 5.13 percent. But the average contract rate on a one-year ARM rose to 6.76 percent from the preceding week’s 6.61-percent average.

Still, by historical standards, “mortgage applications for purchases remain subdued,” Anna Piretti, a senior economist at BNP Paribas in New York, told Bloomberg News. And, she added, “tighter credit standards suggest actual lending remains constrained, weighing on sales.”

The Mortgage Bankers Association is a trade group representing the real estate finance industry. Its 3,000 member companies include mortgage firms, commercial banks, thrifts, life insurance companies and others. Additional information, including the MBA’s Weekly Application Survey, is available at www.MortgageBankers.org.

Home Insurance

Insurance is a contract between the insured and an insurance company that protects against the risk of large and calamitous loss.

The importance of home insurance cannot be undermined. There are two primary reasons why home owners buy home insurance. Firstly, a home is the most important asset belonging to a home owner, and the need to protect it is imperative. Secondly, mortgage lenders require home owners to own insurance to protect the lender’s investment form damage or loss.

The major risks covered by home owner’s insurance are:

Damage or loss to the home and other structures included on the property

Damage or loss to personal property items in the home

Injury or harm to third parties who come to your home

The home insurance covers the person insured and the members of his home. Third parties who come to your home are also covered through the liability portion of the insurance policy for injuries. Additionally, you and your family members also have some liability protection to others even while you were away from your home.

There are two distinct types of insurance under home insurance - Title insurance and Homeowner's insurance. They protect against totally different types of risks.

Homeowner's insurance covers loss or damage to the home, structures on the property, personal contents of the home, as well as third-party liability.

Title insurance, on the other hand protects ownership interests in the real property. Title insurance is purchased to guarantee that the home owner has a good and marketable title to the property. When purchasing a home by means of a loan, lenders require you to obtain title insurance. That way they know that you have clear ownership of the real property and the home.

The title insurance company conducts a search to find out what liens, encumbrances and defects are present to the title as it stands in the hands of the seller before you can obtain the loan. Once the title insurance coverage is obtained, the Title Company guarantees that the buyer has marketable title to the property after the purchase. Any liens, encumbrances and other defects to the title that occur during your ownership of the property, however, are not covered by this insurance

William Brister - http://www.businessproguide.com - A guide to all your business needs. http://www.insuranceproguide.com - Everything you should know about insurance

Article Source: http://EzineArticles.com/?expert=William_Brister

Home Owners Insurance Covers More Than Just the Home

Let us look at a scenario for a minute. It has been snowing for three days straight and you have not had the time to shovel the sidewalk free from snow. The mail person tries to deliver a package to your front door and slips and falls in an ice patch on your front porch. There is a broken leg and medical bills through the roof. Who is going to pay for the medical bills associated with that broken leg? The homeowner if they do not have homeowners insurance.

Homeowners insurance and renters insurance cover more than the physical home and the homes belongings. This insurance is there in case something happens to a person on your property. While you may not be directly at fault for the injury, legally if the injury occurred on your lands due to a "negligence", all medical bills can fall into your lap.

Depending on the location of the home, the insurance rates will vary widely. Some areas, such as central North Carolina, carry very low homeowners and renters insurance rates. Other parts of the United States, like Key West, Florida, will carry rates far higher due to the increased risk of hurricane and flood damage.

It is important to speak with your insurance representative about the homeowners insurance policy and the medical coverage in the policy. When the homeowner is renting out the home, it is important for the renter to carry insurance on the home as well. This will provide double coverage in the case that something goes wrong and the homeowner is facing a huge stack of medical bills through no fault of their own.

Julia Vakulenko is a licensed broker associate with Tampa4U.com Realty. She has one of the hardest working Tampa Real Estate team in Florida specializing in Tampa Condos and also in2Va Team for Northern Virginia Real Estate.

Article Source: http://EzineArticles.com/?expert=Julia_Vakulenko

Getting The Protection That You Need With Loan Insurance

Loan insurance has always supposedly been designed to offer individual borrowers the peace of mind they need to feel safe n the knowledge that their debt is protected against ill health and unemployment. However, investigations into the payment protection insurance industry by the finance industry regulator Financial Services Authority have proved this not to be the case in the last year or so.

Instead of protecting the consumer, loan insurance was a cash cow for high street banks and lenders, providing them with a decent profit as a result of the strict terms and conditions that contain several exclusions. As a result of those very exclusions, many individuals were unable to claim on their loan insurance as and when they needed to. This may have resulted in their debts becoming even more severe and most certainly brought on financial difficulty through no fault of their own. As a result, in some cases, loan insurance represented very bad value indeed.

Some of the exclusions contained within the loan insurance small print should have been highlighted by sales representatives that sold the loan insurance to individuals in, but profits were apparently more important. This simply serves to highlight the fact that the general public needs to be more informed about loan insurance and what it can do for them.

It is most definitely up to the consumer to read the terms and conditions associated with the loan insurance that they are considering to make sure that they would qualify for a payout should they need to claim. This is absolutely necessary for peace of mind and also to escape the individuals that would dupe them for profits and results. Instead of being a statistic, consumers need to be pro active and help themselves because, as far as loan insurance is concerned, there are very organizations that will do it for them.

Simon Burgess is Managing Director of the award-winning British Insurance, a specialist provider of loan insurance, mortgage payment protection insurance and income protection insurance.

Article Source: http://EzineArticles.com/?expert=Simon_Lance_Burgess

Insurance to cover your Home Loan Payments

In this era of cut throat competition, where banks are introducing new schemes day after day, the insurance companies are not left behind. Private sector insurance companies have come up with innovative scheme where one can have a security of repayment of a loan if the borrower expires suddenly.

People do not prefer to take a home loan because of the risks associated with it. They are more worried about the uncertainties of life that holds them back from taking such a loan. Long loan tenure and repayment are among some of the top risks that come to the mind while opting for a housing loan.

As people are becoming more conscious about the uncertainties of life it make sense to pay a little extra and be secure of unexpected risks in the future. Introduction of schemes that protects a person against such risks is now becoming common.

Now-a-day the market is concentrated with several insurance products and innovation of home loan insurance schemes is the new attraction amongst the people. These schemes provide a wide range of choice for a person who wants to protect his home loan. Majority of these products currently available in the market are flexible enough and the premiums paid against them are eligible for tax exemption under the Income Tax Act.

Insurance schemes offered in the market have multiple options and a person can choose one that suits him the best. A variety of options can be combined together so that the policies can be modified to meet the specific requirement of a person. The premiums and returns differ according to the service provided under the policy

The insurance cover can be taken for entirely insurance purposes or for insurance and investment combined.

The policies that are based on entirely insurance purpose covers only the risk of non-payment due to a sudden demise of the borrower. Once the loan is repaid the insurance cover comes to an end and the borrower does not get anything. On the term's expiry, the borrower only gets the sum assured and the cover ceases without any maturity benefits. This is because term insurance plans are pure risk covers without any investment dimensions. Therefore, premiums under these plans are the lowest.
http://www.rupeetimes.com/news/home_loans/insurance_to_cover_your_home_loan_payments_1633.html

Credit crunch: Insurers refuse coverage of some home loans, in areas

WASHINGTON -- Just when consumers and the U.S. economy need banks to lend more freely, the mortgage industry is making it harder to borrow -- even for those with good credit.

Mortgage insurers, whose backing is required for borrowers who can't afford the traditional 20 percent down payment on a home, have already flagged nearly a quarter of the nation's ZIP codes where they refuse to insure some home loans.

That encompasses a wide variety of neighborhoods: McMansions in Scottsdale, Ariz.; luxury Miami condos; 1960 ranch houses in Flint, Mich.; and early 20th century kit homes in Metuchen, N.J. -- and houses in Utah's St. George.

The entire states of California, Florida, Arizona, Michigan, Ohio and Nevada -- which have seen the highest foreclosure rates and the worst price declines -- are blackballed on some mortgage insurers' lists. Twenty-two zip codes in the St. George area were included on lists this month from AIG United Guaranty and Radian Guaranty that flagged "declining markets."

Banks that have lost billions because of bad bets during the housing boom are now reverting to strict lending standards not seen in nearly 20 years, according to industry data and interviews with lenders.

For new homebuyers and those seeking to refinance, it can mean higher down payments and a higher bar for credit scores, among other requirements. The toughest restrictions are in markets where home prices are falling, though regions where property values are rising are not immune.

"We're in the midst of an epic, broad, sweeping change in the mortgage industry," said Chris Sipe, a loan officer with America East Mortgage in Frederick, Md.

The reluctance to extend credit comes despite a flurry of government initiatives, including steady interest rate cuts by the Federal Reserve, intended to make it easier for would-be borrowers and those facing interest-rate resets on their mortgages.

Lenders' growing leeriness threatens to dampen sellers' already soggy prospects for the spring homebuying season -- and that means more pain for the already battered housing sector and the broader economy.

In recent weeks, mortgage insurers have flagged more than 9,600 ZIP codes in at least 34 states where they won't insure certain types of home loans -- those for investment properties or second homes, those with riskier adjustable-rate or interest-only mortgages, or for buyers making down payments of less than 3 percent.

With banks and mortgage insurers pulling back, state and federal programs for first-time buyers and people with poor credit are attempting to fill the void.

Don Brekke, an equipment operator from Colorado Springs, Colo., tried to buy a bank-owned 1950s ranch home for $113,000. At first, he couldn't get a loan because the house was in a potentially declining market and lenders required a 10 percent down payment, more than he could afford.

Ultimately, he was able to qualify for a 100 percent loan from Colorado's state financing authority, and he plans to close in the coming days.

"It was a bunch of headaches -- going around and around to get this done," Brekke said.

The combination of sinking home prices and tighter lending standards has been a major aggravation for Ron Broussard, a 38-year- old sales representative for a home builder.

Broussard took advantage of soaring Southern California property prices three years ago to refinance a loan on a house he had owned since the late 1990s. Today he's still stuck with a $720,000 mortgage and has been renting it out since moving with his family to Texas a year ago. Once appraised for $1.1 million, Broussard's lender now says it's worth about $300,000 less.

He does not yet owe more than the property is worth, but Broussard worries that is a possibility.

"The way the market's going, you know, who knows?" he said.

Broussard has found little sympathy from his lender, Countrywide Financial Corp. While Broussard accepts responsibility for taking out a mortgage whose monthly payments are due to skyrocket once the unpaid principal exceeds the home's value by 15 percent, he feels betrayed by the lender's unwillingness to negotiate better terms.

The stinginess of banks is showing up in home loan statistics: The value of all new mortgages plummeted to $450 billion in the fourth quarter of 2007, down 38 percent from a year earlier, according to trade publication Inside Mortgage Finance.

Subprime loans, made to borrowers with poor credit, virtually disappeared from the market, plummeting 90 percent to $13.5 billion in the October-December quarter.

There is a silver lining: The Federal Reserve has repeatedly cut interest rates, helping borrowers whose mortgages were just about to reset to higher rates and people with student loans. Reflecting the Fed's efforts, rates on 30-year mortgages dropped below 6 percent this week for the first time in more than a month.

But the long-term impact of the Fed's move is far from certain, and the central bank's actions could end up feeding inflation and pushing up long-term rates.
http://findarticles.com

Tata Capital to enter home loans business

K.R.Srivats

New Delhi, Aug 1 Tata Capital Limited, a wholly-owned subsidiary of Tata Sons Limited, plans to enter the booming home loan market by March 2009, its Managing Director and CEO, Mr Praveen P Kadle, has said.

“Although we will be a late entrant in this market, we see good business opportunities in offering home loans. We hope to start this by March next year”, Mr Kadle said here.

Tata Capital, a non-banking finance company, had commenced its operations in 2007. This had marked the entry of Tata Group into a host of new financial services. Currently, the company was capitalised at about Rs 2,000 crore and offered suite of products across multiple financial domains—personal loans, car loans, distribution and broking, wealth management, SME Finance, capital markets, private equity and infrastructure finance.

PE Fund

Mr Kadle also said that Tata Capital would by end-September launch its first private equity fund targeted at opportunities in mid-sized companies. While the size of the fund was yet to be finalised, indications are that the initial fund size may be around $ 250 million. Plans are afoot to also launch a venture capital fund focusing on the technology space (information technology/telecom).

Currently, the balance sheet size of Tata Capital is around Rs 4,000 crore. On whether the company would look at inorganic growth, Mr Kadle noted that most of the opportunities here were expensive. “Indian valuations are expensive. Inorganic growth may not be attractive, but that does not mean we will not look at inorganic growth”, he said.
Insurance broking

Meanwhile, Tata Capital would soon foray into insurance broking. “A subsidiary of Tata Motors has got licence for insurance broking from IRDA. This company would eventually come under Tata Capital. We will also get into commodities broking soon”, Mr Kadle said.
http://www.thehindubusinessline.com/2008/08/02/stories/2008080252280600.htm

Home Insurance Guide - Secure Your Home With Home Insurance

Home insurance refers to an insurance policy that is a combination of personal insurance protections. Home insurance policy protect against certain accidents that can happen at the home. It is also known as homeowners insurance. Home is a largest investment for all thats why home insurance policy is essential to protect your home. Home insurance policies generally provide coverage against theft, fire, lightening, smoke, frozen pipes, ice and snow.

Cost of home insurance depends on the cost that is required to replace the house. It is a contract including all items that should be covered or not. Home insurance policy normally doesn’t include claims against earthquakes, floods, war or ‘Acts of God’. Sometimes homeowners can purchase special insurance that provide protection against flood and earthquake.

Home insurance policy is a contract that works for a limited period of time. Insured party has to pay an amount of premium to the insurer for each term. Sometimes insurer charges a lower premium. Another type of home insurance is perpetual insurance that is not fixed for a fixed term and can be acquired in some areas.

Buyers should read all contents of the policy at the time of purchase. They should maintain a list of personal property and review their insurance policy annually. They should read all terms & conditions before signing any type of contract.

About Author: The author owns a website on Home Insurance. Website provides information about home insurance, homeowners insurance, and some tips to buy home insurance policy at cheap rates. To get more information click: Homeowners Insurance

Article Source: http://EzineArticles.com/?expert=Gagandeep_Dhaliwal

Home Improvements Could Leave Prospective Sellers Under-Insured

With a sluggish housing market, homeowners thinking of upgrading or extending their homes to increase saleability should be careful not to become under-insured, warns Confused.com.

Cardiff (PRWEB) July 19, 2008 -- Homeowners turning to DIY and home improvements in order to give their property a boost need to be aware that neglecting to inform their home insurance provider of any additions to the house's build/value will mean that these additions will not be covered by their policy.

For example, an extension adding £20,000 of value to a property will go uninsured unless buildings insurance is upgraded to specifically cover it. Failure to cover the extension means that the homeowner could be liable for any repair bill should something go wrong. Therefore, anyone making such improvements should be mindful of keeping their buildings insurance policy up to date, as the rebuild cost will rise accordingly.

Confused.com Product Director Simon Lamble said: "Additions to the home such as conservatories or extensions are costly, and while they tend to increase the value of the property, this is money thrown away if home insurers are not informed and the improvement is subsequently, say, damaged in a fire."

"Likewise, if homeowners realise that they are staying put, and decide to indulge in a little luxury - such as upgrading their old TV to an expensive plasma or LCD screen - it's also sensible to check that these will be covered under their existing contents insurance. If their price exceeds the valuable items limit, remember to declare them separately."

Note also that some home insurance providers request to be informed when building contractors are working on a property. To this end, homeowners are advised to check their policies.

About Confused.com:

Confused.com is one of the UK's biggest and most popular price comparison services. Launched in 2002, it dominates the car insurance aggregator market with a massive 70% market share and generates over one million quotes per month. It has expanded its range of comparison products over the last couple of years to include home insurance, travel insurance, pet insurance, van insurance, motorbike insurance, breakdown cover and energy, as well as financial services products including credit cards, loans, mortgages and life insurance.

Confused.com has 62 motor insurance partners, and customers can save up to on average £208. It also has a panel of 43 for home insurance, and customers who use Confused.com for home insurance can expect to save up to £193.

Confused.com is not a supplier, insurance company or broker. It provides a free, objective and unbiased comparison service. By using cutting-edge technology, it has developed a series of intelligent web-based solutions that evaluate a number of risk factors to help customers with their decision-making, subsequently finding them great deals on a wide-range of insurance products, financial services, utilities and more. Confused.com's service is based on the most up-to-date information provided by UK suppliers and industry regulators.

Confused.com is owned by the Admiral Group plc. Admiral listed on the London Stock Exchange in September 2004. Confused.com is regulated by the FSA.
http://www.prweb.com/releases/2008/7/prweb1121704.htm

From May to May, home loan approvals down 44 per cent

The home loan market continues in its state of torpor, according to the latest survey from the Council of Mortgage Lenders (CML).

The CML has found that just 52,000 new home loans were approved in May. That represents a small rise of 4 per cent from the previous month, but it is still a whopping 44 per cent lower than the same month in 2007.

"Lending levels continue to be lower than last year and any recovery is still some way away," said the CML's director-general, Michael Coogan.

He added that the number of loans approved for house purchases could decline further over the coming months, with property prices falling in many parts of the country.

The number of people choosing to remortgage in May was down 14 per cent on the previous month and 22 per cent year on year – even though an estimated 116,000 homeowners a month are now coming off comparatively cheap fixed-rate deals and, in most cases, seeing their mortgage costs go up. Normally, this would provide a spur to remortgaging but, because of the credit crunch, large numbers of homeowners are finding it difficult to find a deal competitive enough to switch to. In other cases, they are simply being prevented from changing provider as a result of the tighter criteria now imposed by lenders.

http://www.independent.co.uk/money/mortgages/from-may-to-may-home-loan-approvals-down-44-per-cent-866269.html

Home Equity Loans Are Great Tools for 100% Home Financing

Are you considering buying a new home, but do not have the funds for the required down payment? Or maybe you save the money for the down-payment, but are not sure if you want to use it for another type of purchase? If either situation fits you, then 100% home equity loans, also called a zero down home financing, might be the solution for you.

The first step to understanding 100% financing is to be aware of something called Private Mortgage Insurance (PMI). According to All-Options, “PMI insures the lender against loss if the borrower defaults on the mortgage loan. PMI is usually required when the borrower’s down payment or equity is less than 20% of the loan value.” Although not every mortgage lender insists on mortgage insurance, those who adhere to the Fannie Mae and Freddie Mac loan approval guidelines will require it.

PMI is added into the cost of your mortgage, so your monthly payments are higher than if you had put 20% down on the loan. Therefore, many people who are looking for a no money down home loan and want to avoid PMI, turn to something called an 80-20 loan. An 80-20 home loan takes the cost of the home and divides it into two mortgages. The first mortgage is for 80% of the home’s value. Depending on the specific needs and wants of the borrower, the first mortgage can be a fixed rate, adjustable rate, or interest only loan. The second mortgage is for 20% of the cost of the home. This second mortgage, also called a “piggyback loan,” is usually a fixed mortgage or a home equity line of credit. With the two mortgages, you are financing 100% of the cost of your home AND avoiding the additional monthly cost of PMI.

Zero down home loans can be a great option for those who don’t have the ability, or the desire, to put down a large down payment. With an 80-20 mortgage, you are able to avoid PMI and the required 5% down payment that many conventional mortgage products require. Before you begin shopping for an 80-20 loan, it is important to know and understand your credit score, as many lenders require a strong credit history for this particular mortgage option.

Jennifer is an author who has produced many helpful home loan related articles: 100% Home Equity Loan Financing & Bad Credit Home Equity Loans. If you need more information for 80-20 home loan rates, or HELOC Refinancing, check out Second Mortgage to 125%.

Private Mortgage Insurance (PMI)

Homeowners' insurance: The mortgage connection

A home owners’ insurance is the cover for the house against natural calamities as well as liability. This covers the house and its contents but also other personal possessions which the house secures. The natural calamities include fires and winds. It covers thefts and vandalism as well. It is also called hazard insurance (http://www.mortgagefit.com/hazard-insurance.html)

It is not mandatory, like in the case of automobile insurance to have a homeowners’ insurance. But when one mortgages, the deed of trust or mortgage requires the collateral to be insured. This is because in the event of a default, the lender must not suffer. If in the time span the house gets damaged due to a wind or accident, the value on sale will decrease and thus the lender will not be able to get back the debt balance.

Why does the lender insist on a homeowner’s insurance?

Firstly, the lenders’ name or the mortgage company appears on the certificate of the insurance policy. The lender is categorized as a ‘loss payee’ or a mortgagee. This ensures that the lender is entitled to the insurance amount if the borrower defaults.

Secondly, the insurance premiums are paid little by little along with the monthly obligations or it is deposited in with impound or escrow account. In both cases the lender can earn the interest which is earned out of this amount. Moreover an escrow requires an amount much more than a single premium to fund the account.

The manner of payment of the insurance premiums differs from lender to lender. Some require that the insurance premiums be paid off in the first year after closing; while others will spread the same throughout the loan term.

What you should keep in mind before taking a homeowners’ insurance?

You should shop for an insurance agent extensively .You must go in for an insurance company which will make an honest evaluation of your home value.

This insurance is not only for a liability security it is important to the borrower as well especially if you aim for a refinance or a remortgage. The collateral remains the same .Thus you can still avail of a loan amount equal to the earlier mortgage amount if not more (due to appreciation).

http://www.ezinearticles.com

Credit crunch: Insurers refuse coverage of some home loans, in areas

WASHINGTON -- Just when consumers and the U.S. economy need banks to lend more freely, the mortgage industry is making it harder to borrow -- even for those with good credit.

Mortgage insurers, whose backing is required for borrowers who can't afford the traditional 20 percent down payment on a home, have already flagged nearly a quarter of the nation's ZIP codes where they refuse to insure some home loans.

That encompasses a wide variety of neighborhoods: McMansions in Scottsdale, Ariz.; luxury Miami condos; 1960 ranch houses in Flint, Mich.; and early 20th century kit homes in Metuchen, N.J. -- and houses in Utah's St. George.

The entire states of California, Florida, Arizona, Michigan, Ohio and Nevada -- which have seen the highest foreclosure rates and the worst price declines -- are blackballed on some mortgage insurers' lists. Twenty-two zip codes in the St. George area were included on lists this month from AIG United Guaranty and Radian Guaranty that flagged "declining markets."

Banks that have lost billions because of bad bets during the housing boom are now reverting to strict lending standards not seen in nearly 20 years, according to industry data and interviews with lenders.

For new homebuyers and those seeking to refinance, it can mean higher down payments and a higher bar for credit scores, among other requirements. The toughest restrictions are in markets where home prices are falling, though regions where property values are rising are not immune.

"We're in the midst of an epic, broad, sweeping change in the mortgage industry," said Chris Sipe, a loan officer with America East Mortgage in Frederick, Md.

The reluctance to extend credit comes despite a flurry of government initiatives, including steady interest rate cuts by the Federal Reserve, intended to make it easier for would-be borrowers and those facing interest-rate resets on their mortgages.

Lenders' growing leeriness threatens to dampen sellers' already soggy prospects for the spring homebuying season -- and that means more pain for the already battered housing sector and the broader economy.

In recent weeks, mortgage insurers have flagged more than 9,600 ZIP codes in at least 34 states where they won't insure certain types of home loans -- those for investment properties or second homes, those with riskier adjustable-rate or interest-only mortgages, or for buyers making down payments of less than 3 percent.

With banks and mortgage insurers pulling back, state and federal programs for first-time buyers and people with poor credit are attempting to fill the void.

Don Brekke, an equipment operator from Colorado Springs, Colo., tried to buy a bank-owned 1950s ranch home for $113,000. At first, he couldn't get a loan because the house was in a potentially declining market and lenders required a 10 percent down payment, more than he could afford.

Ultimately, he was able to qualify for a 100 percent loan from Colorado's state financing authority, and he plans to close in the coming days.

"It was a bunch of headaches -- going around and around to get this done," Brekke said.

The combination of sinking home prices and tighter lending standards has been a major aggravation for Ron Broussard, a 38-year- old sales representative for a home builder.

Broussard took advantage of soaring Southern California property prices three years ago to refinance a loan on a house he had owned since the late 1990s. Today he's still stuck with a $720,000 mortgage and has been renting it out since moving with his family to Texas a year ago. Once appraised for $1.1 million, Broussard's lender now says it's worth about $300,000 less.

He does not yet owe more than the property is worth, but Broussard worries that is a possibility.

"The way the market's going, you know, who knows?" he said.

Broussard has found little sympathy from his lender, Countrywide Financial Corp. While Broussard accepts responsibility for taking out a mortgage whose monthly payments are due to skyrocket once the unpaid principal exceeds the home's value by 15 percent, he feels betrayed by the lender's unwillingness to negotiate better terms.

The stinginess of banks is showing up in home loan statistics: The value of all new mortgages plummeted to $450 billion in the fourth quarter of 2007, down 38 percent from a year earlier, according to trade publication Inside Mortgage Finance.

Subprime loans, made to borrowers with poor credit, virtually disappeared from the market, plummeting 90 percent to $13.5 billion in the October-December quarter.

There is a silver lining: The Federal Reserve has repeatedly cut interest rates, helping borrowers whose mortgages were just about to reset to higher rates and people with student loans. Reflecting the Fed's efforts, rates on 30-year mortgages dropped below 6 percent this week for the first time in more than a month.

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Home Owner Insurance Is A Necessary Buy

There's little doubt that home owner insurance can be pricey, but going without it can cost a home owner a lot more than a thousand or several thousand a year in premiums. It should be considered as vital a purchase for a home as electric, furniture and a new roof when it's needed.

Why is this? The reasons to make sure your house insurance is current and stays that way are, in fact, quite many. They include:

* Mortgage agreement: Most mortgage companies will not finance a home loan unless there is insurance on the property. Going without home insurance can result in a default of the loan terms. This means the home owner can find themselves without a home. The expense might be an "extra" you don't want to pay for, but avoiding it just should not be considered an option.

* Property protection: A good policy covers your home in the event of some major emergencies. Consider the recent hurricanes in the Gulf Coast area and the importance of insurance should be more than evident. Covering such things as fire, storms, earthquakes and more, a good home owner insurance policy simply protects your investment in your home. In essence, this means it protects your life, too. Remember, most policies don't cover floods though, so if you need this type of home owner insurance, you'll need to check into a separate policy.

* Personal liability protection: A home owners insurance policy can also protect you if someone becomes injured while visiting your property. A slip and fall, a trip, a dog bite, a falling roof shingle and so on can all result in litigation. When an insurance policy is present, these things are covered. This takes the headache and nightmare off of you while the insurance company handles the issue.

* A place to stay: Most include clauses that give you a place to stay if major damage is being repaired on your home. In the event of a fire, tornado or so on, you might have to move out while repairs are made. Rather than having to pay a mortgage and rent, too, a home owners insurance policy frees up your bank account to simply handle the mortgage.

* Replacement of personal items: When major emergencies happen, oftentimes a lot of personal items are lost. Most home owner policies will pay for such things as furniture, electronics, clothing and so on. The replacement costs can be outrageous, but a good home owner insurance policy will handle them for you.

Going without home owner insurance is like getting a glass of water without the glass. It doesn't make sense. Even though the expense can be high, especially in risky coastal areas, the price of the policy will be worth every penny if something bad does happen.

Whether you own your home outright or a bank is involved, making sure home owner insurance is current is a very smart thing to do. You never know when tragedy will strike and having coverage is like having money in the bank.

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Understanding Home Insurance

In today's generation home insurance has created a mark among all other forms of insurance. Homeowner's insurance policy provides insurance to personal possessions including the house garage and other structures of property against certain risk factors like theft or fire.

Typical Homeowners insurance policy has two main sections.

Section 1 includes the property of the insured and Section 2 includes the personal liability coverage that needs to be insured.

At times, lender might require homeowner's insurance as part of requirement in obtaining a mortgage. While buying home insurance policy one has to keep certain important things in mind. One needs the best level of protection as well as the provisions for valuables like jewelry, computer equipment, kitchen appliances and other possessions. In order to have adequate home insurance coverage one must check with agent or home insurance company beforehand to be sure of the adequate coverage instead of relying on the coverage mandated by the bank or mortgage company. Those levels are for protecting the house only and eventually skip the protection of possessions.

While applying for home insurance the insurance company needs to know about your present occupation, employment history, marital status, date of birth and social security number. The insurer needs to check the credit criminal and insurance history. Insurance claims of past is also checked by the home insurance company. The decision to chose a specific type of homeowner's policy, deductible and how to pay for the coverage depends upon the homeowner.

There is exception to destructions like flood, earthquake and poor maintenance of house. Home insurance is needed and most lending institutions will require the homeowners to acquire a certain amount of coverage before issuing a loan to purchase property. The lender has a vested interest in property and wants to ensure financial compensation in the event of disaster. Homeowners may suffer a default of loan if they fail to carry the level of coverage needed by lender.

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Understanding Loan Insurance Policies

A loan insurance policy is also known as loan payment protection insurance or ASU insurance (which is accident sickness and unemployment insurance) and it can, providing your circumstances are right, provide you with a monthly tax free sum of money with which to continue meeting your loan or credit card repayments if you find yourself unable to work due to accident, long term sickness or unforeseen unemployment.

For a fixed monthly premium you can take out loan insurance policies to cover against the possibility that you might lose your income and be struggling to make your monthly loan or credit card repayments. A policy would begin to kick in and pay out once you had been out of work usually for 30 days or more and would continue to pay out for a period of up to 12 months - with some providers’ policies, up to 24 months.

This will give you adequate time to get back on your feet or find work.

The best way to purchase loan insurance is to buy it independently rather than alongside the loan when you take out the loan. While purchasing the cover alongside the loan is the easiest way to take the cover it is also the dearest, as high street banks and lenders charge notoriously high premiums for the cover in order to make big profits. However, there is another possibility when it comes to taking the cover and that is to go to a standalone provider. They will more often than not offer the cheapest premiums for loan insurance policies.

Loan cover can be taken out just to guard against accident and sickness only, unemployment only or to cover accident, sickness and unemployment. You have to make this clear at the outset when it comes to buying the loan insurance to ensure that you get the protection you need.

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Home Mortgage Insurance - Piggyback Loans Putting Mortgage Insurers in the Trough

Because home prices have made twenty percent down payments impossible for legions of first time home buyers, a dual-loan concept has evolved for home financing that has made home mortgage insurance companies very unhappy. Also known as ‘private mortgage insurance (PMI), this policy is required of every home buyer who is taking out a mortgage of more than eighty percent of the home purchase price. The policy protects the lender against default, while the borrower pays the mortgage insurance premium. The policy is required until the mortgage is paid down to seventy eight percent of the home’s appraised value.

Home mortgage insurance can be expensive: as high as $1,500 per year on a $200,000 home. Divide that by twelve and you have the addition to your monthly mortgage insurance premium. In order to get around PMI, lenders have been offering dual loan packages with a mortgage of eighty percent of the purchase price and a second loan, called a piggyback loan that covers whatever portion of the 20% down payment that the borrower cannot meet. Thus an 80-15-5 loan package is an eighty percent mortgage, a fifteen percent piggyback loan and a five percent down payment.

While the additional loan will be at a higher rate than the mortgage, the interest on that loan is deductible whereas the premium on mortgage insurance is not. As a result, it is often cheaper to opt for the piggyback loan than mortgage insurance. According to one estimate, forty percent of all home purchases with down payments of less than twenty percent now opt to avoid home mortgage insurance.

Even though the borrower is paying closing costs on two loans, avoiding home mortgage insurance is still a better deal in the short run. Whether or not it’s a better deal in the long run depends on several variables. If the buyer is going to be in the home for a long period of time, he may be better off with the larger mortgage at a fixed rate and paying the mortgage insurance premium until he has sufficient equity. Eventually, the cost of the insurance premium will cancel out.

That process could take several years however, and if a buyer is not going to be in the house for an extended period the choice of dual loans and dual interest deductions may be a better bet – particularly if the principal mortgage is an ARM. Home mortgage insurance companies have responded by hurling insults at all things “piggyback” and by introducing products such as mortgage insurance premiums that are folded into the loan interest rate by raising it a quarter point or some similar amount.

With this design the lender pays the mortgage insurance premium. Because it’s folded into the mortgage premium, the policy premium may be deductible as interest. The policy can’t be cancelled in this model, however; in order to remove it from the mortgage you have to refinance. Home mortgage insurance companies have been lobbying Congress aggressively to provide deductible status for their product.

Home Equity Refinance

Home equity refinance can come in handy when your main objective is to pay off your credit card debt or you want to remodel your home. The best part about home equity refinance is that you get the much-needed cash very quickly and that too without any problem. This is not the case with traditional refinance where you need to fill lots of application forms and go through various procedures.

No closing costs-

Another good thing about home equity refinance is that you don't need to pay any sort of closing costs for the loan. However, there are few financial institutions that will charge you few dollars for processing the loan but it is still quite low as compared to other loans.

Private mortgage insurance-

Don't opt for private mortgage insurance because not only it is useless but also quite costly in nature. You have to pay private mortgage insurance if you borrow against your home for more than 80 per cent of the value. You can avoid private mortgage insurance by going for a home equity loan, where you can borrow up to 100 per cent of the equity you possess.

Low interest rates-

Equity loan market is quite competitive in nature. Because of this, there is not much of a surprise that you can clinch the best equity loan deal with low interest rate by shopping around and comparing lenders. Local financial institutions are the brilliant source for these kinds of loans. In some cases, big national lending companies can also help you immensely.

Home Insurance

Insurance is a contract between the insured and an insurance company that protects against the risk of large and calamitous loss.

The importance of home insurance cannot be undermined. There are two primary reasons why home owners buy home insurance. Firstly, a home is the most important asset belonging to a home owner, and the need to protect it is imperative. Secondly, mortgage lenders require home owners to own insurance to protect the lender’s investment form damage or loss.

The major risks covered by home owner’s insurance are:

Damage or loss to the home and other structures included on the property
Damage or loss to personal property items in the home
Injury or harm to third parties who come to your home
The home insurance covers the person insured and the members of his home. Third parties who come to your home are also covered through the liability portion of the insurance policy for injuries. Additionally, you and your family members also have some liability protection to others even while you were away from your home.

There are two distinct types of insurance under home insurance - Title insurance and Homeowner's insurance. They protect against totally different types of risks.

Homeowner's insurance covers loss or damage to the home, structures on the property, personal contents of the home, as well as third-party liability.

Title insurance, on the other hand protects ownership interests in the real property. Title insurance is purchased to guarantee that the home owner has a good and marketable title to the property. When purchasing a home by means of a loan, lenders require you to obtain title insurance. That way they know that you have clear ownership of the real property and the home.

FHA Home Mortgage Loans: Understanding The Benefits of FHA Mortgages for Purchase or Refinance

We all try to find the best deal when shopping for a mortgage. And, you’ve probably hear of the FHA loan. FHA stand for Federal Housing Administration, and with built-in mortgage insurance, an FHA loan could help homeowners save hundreds of dollars a year.

The law requires any loan for more than 80% of a home’s fair market value or FMV to carry Private Mortgage Insurance. In fact, Private mortgage insurance costs homeowners insurance premiums ranging from $250 to $1200 per year. And, the insurance is not tax deductible.

FHA Today.com shows “The Federal Housing Administration (FHA), a wholly owned government corporation, was established under the National Housing Act of 1934 to improve housing standards and conditions. Its goal was to provide an adequate home financing system through insurance of mortgages, and to stabilize the mortgage market.”

The FHA program basically has three types of loans:

1. BASIC FHA requires 3% down payment and allows refinances up to 97% loan to value.

2. Disaster Victim Program requires no down-payment and allows 100% financing of the home.

3. Rehab-Loan Program allows borrowing above the purchase price to make home improvements.

Hopefully, you aren’t the victim of a disaster. “It is not a program reserved only for first time home buyers.” Shows FHAToday.Com. “You can buy your third or fourth home with an FHA loan. The only stipulation is that you may only have one FHA loan at a time.”

An FHA home loan is like having mortgage insurance for free. All of the interest is tax deductible according to the IRS.

For the homeowner looking to pull equity out of their home. The basic FHA program allows a home equity refinance of up to 97% of the home’s FMV. That means, homeowners are allowed to pull 17% more equity out of their home, without worrying about the extra costs of PMI. And, an FHA loan could prevent homeowners from having to carry two additional loans to pull more equity. Carrying fewer loans could mean lower interest rates and lower Combined Loan to Value Ratio. With fewer loans ands a lower CLTV, an FHA home loan could save homeowners the extra cash they need.