Monday, May 28, 2007

PMI vs PiggyBacking

Another financing option lures home buyers: PMI -
"Home buyers who can't come up with a 20-percent down payment -- and at today's real estate prices it can be a stretch -- must buy private mortgage insurance, or PMI, to guarantee that the lender will be reimbursed if the buyer defaults on the loan.

But in recent years, buyers have been circumventing the requirement by paying less than 20 percent down, borrowing 80 percent with a conventional 30-year first mortgage and borrowing the rest of the down payment...."
In class we do very little personal finance. This year as the semester wound down we tried to spend some "free" time on the topics. It was well received. PMI was one of the things we did cover.

1 comment:

Anonymous said...

A loss of a job, death in family, medical expenses and other life-altering situations can happen to anyone, causing us to
fall behind in our mortgage loan payments.

If we neglect paying our credit cards it hurts our credit rating; if we neglect our home loan payments the lender
will foreclose, and repossess our home. We are often embarrassed to talk about our money problems, but that approach doesn't solve anything.
Credit Repair could help you get back on track in the future

Put your pride on hold and get serious about avoiding foreclosure. Contact your lender as soon as you know your payments will be late.
Never ignore the lender's letters and do not assume you are in a hopeless situation. Lenders do not want to foreclose, and will usually work with you to get your account back on track.

Below are Solutions for Temporary Problems

1. Reinstatement When you are behind in your mortgage payments but can promise a lump sum to bring payments current by a specific date.

2. Motgage Forbearance. You are allowed to delay payments for a short period, with the understanding that another option will be used afterwards to bring the account current.
Lenders sometimes combine Forbearance with Reinstatement if you know you'll have the funds to bring your account current by a specific date.

3.A mortgage Repayment Plan If your account is past due, but you can now make payments, the lender may agree to let you catch up your home loan by adding a portion of the
past due amount to each current monthly payment until your account is current.

Solutions for Longer-Term Problems

1. Mortgage Modification If you can make your regular payment now, but cannot catch-up the past due amount, the lender may agree to modify your mortgage.
One solution is to add the mortgage behind amount into your existing loan, financing it over a long term.
Modification might also be possible if you no longer have the ability to make payments at the former level.
The lender might modify your mortgage to extend the length of your loan, or take other steps to reduce your payments.

2. Selling Your Home If catching up is not a possibility, the lender may agree to put foreclosure on hold, giving you some extra time to attempt to sell your home. can help by purchasing your home.

3. Deed in Lieu of Foreclosure The lender may allow you to give-back your property, in turn forgiving the debt.
This does negatively affect your credit record, but not as much as a foreclosure. The lender may require that you attempt to sell the house for a specific time
period before allowing this option; the option may not be possible if there are other liens against the home.

If these options aren't available and time is against you. Contact a realtor and have your house listed on MLS (mutly listing service) immediately.
It is better to sell your home and keep a mortgage foreclosure from affecting your credit rating so that you can qualify for a mortgage and buy a house again in the near future rather than
the far future.