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).

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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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