private mortgage insurance https://www.wisebread.com/taxonomy/term/21942/all en-US 9 Warning Signs You Can't Afford That New House https://www.wisebread.com/9-warning-signs-you-cant-afford-that-new-house <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/9-warning-signs-you-cant-afford-that-new-house" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/imagecache/250w/blog-images/invest_in_real_estate.jpg" alt="Invest in real estate" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Buying a home is one of the most important decisions that you will ever make. A new home can provide a solid foundation for yourself and your family, and it also plays a big role in your financial health.</p> <p>Ideally, a home will help you build net worth and achieve a level of financial freedom. But if you buy a larger home than you can afford, it can become a major burden and source of stress.</p> <p>How do you know if you can't afford a house? Here are some key signs:</p> <h2>1. It's outside your budget</h2> <p>This may seem obvious, but you'd be stunned at how often homebuyers set a budget and allow themselves to go beyond it. A budget exists for a reason! Going beyond the budget means you are stretching yourself past where you previously felt financially comfortable.</p> <p>To determine your budget, calculate your current income and expenses on a monthly basis. Add in some cushion in case your expenses rise, but don't assume your income will go up. Factor in how much you'd like to actually save and invest each month. When looking at mortgage payments, any figure higher than this will place a strain on your finances and put you at risk of not being able to make ends meet. (See also: <a href="http://www.wisebread.com/how-to-make-ends-meet-when-youre-house-poor?ref=seealso" target="_blank">How to Make Ends Meet When You're House Poor</a>)</p> <h2>2. You're making assumptions about future income and expenses</h2> <p>I've heard people say, &quot;We're getting a larger and more expensive house because we'll probably make more money in the future.&quot; This thinking is foolish and possibly disastrous. You or your spouse may never get that raise you were counting on. You may lose your job entirely. And that baby on the way? Well, you just found out you are having twins.</p> <p>It's impossible to predict your future income and expenses with any real accuracy. So when budgeting for a home, take a conservative approach based on your current income, and assume that expenses will rise if you plan to start or expand your family. Taking a conservative approach will give you wiggle room to save money, invest, and eventually pay off that house completely.</p> <h2>3. You're unable to put 20 percent down</h2> <p>There are some key advantages to putting a sizable down payment on a home. For one thing, the more you put down, the less you'll have to borrow, so you'll start off with a larger piece of equity in the home. Putting more money down also likely means a lower interest rate, and less in interest payments overall. In addition, if you don't place 20 percent down, most lenders will require you to purchase private mortgage insurance (PMI), thus adding to the cost of your loan.</p> <p>If you weren't able to save 20 percent for a down payment, ask yourself why you think you'd comfortably make the mortgage payments now. Rather than jump into buying, consider saving more for a larger down payment. Your future self will thank you. (See also: <a href="http://www.wisebread.com/4-easy-ways-to-start-saving-for-a-down-payment-on-a-home?ref=seealso" target="_blank">4 Easy Ways to Start Saving for a Down Payment on a Home</a>)</p> <h2>4. Your interest rate is high</h2> <p>Interest rates are still quite low by historical standards, but you can end up with higher rates if banks think you are a risky borrower. If you have high debt, a low credit score, or both, you may end up with a higher-than-average interest rate, and that likely means your monthly mortgage payment will be higher.</p> <p>If your interest rate seems high, it's time to take a step back and examine why. It could be that your finances aren't in good shape, or you could be trying to buy a house that's too costly.</p> <h2>5. Your decision is heavily guided by emotion</h2> <p>It has the perfect yard. It's on a perfect street at the end of a cul-de-sac, and the school district is great. It's even got a breakfast nook. It's expensive, but it's your dream home.</p> <p>Your dream home could become a nightmare if you allow your emotions to be your only guide. Buying a home is ultimately a financial decision, though we often turn it into an emotional one. The finished basement, the two-car garage, and the granite countertops aren't going to seem so special when you have trouble making the monthly payments.</p> <p>It's perfectly fine to have certain criteria in mind when searching for a home. But affordability should be a big part of that criteria.</p> <h2>6. You have unusual mortgage terms</h2> <p>There are many different mortgage products out there. The most common type of mortgage is one in which you place a certain amount of money down, and obtain a loan with a fixed interest rate, paying it back over an agreed upon term (usually 15 or 30 years).</p> <p>But sometimes, you may not qualify for a fixed-rate mortgage. When this happens, banks will often offer different kinds of loans. These can include adjustable rate mortgages, in which interest rates may start low but increase at a later date. Or they may be negative amortization loans, in which the amount owed actually grows larger over time instead of shrinking.</p> <p>These different kind of loan products were popular about 15 years ago, but were a large driver of the collapse of the housing bubble because they allowed people to purchase homes they ultimately could not afford.</p> <p>If you are buying a home with a nontraditional mortgage &mdash; or if you don't understand the mortgage terms to begin with &mdash; you may be taking on more house than you can handle.</p> <h2>7. You are nearing the maximum mortgage that you qualify for</h2> <p>When you are applying for a mortgage, banks will often tell you that you've been approved for a mortgage up to a certain amount. It's important to remember that this is the maximum amount that you can borrow, not a guideline of what you <em>should</em> spend. In fact, the actual amount you borrow should never be close to that maximum.</p> <p>Banks are more conservative now than in the past, but still are likely to approve you for a loan that is larger than what you can comfortably afford. Don't get too excited about what the bank says. Just set your own budget and stick to it.</p> <h2>8. Your payments exceed 30 percent of your monthly income</h2> <p>For nearly 50 years, the U.S. government has suggested that renters and homeowners pay no more than 30 percent of their income in housing costs. This is not a requirement or law, but it is a helpful guideline for determining if you may be overburdened by a mortgage or rent payment.</p> <p>For people with average incomes, 30 percent is a good target to stay under, because anything higher begins to strain your ability to meet other expenses and save for the future.</p> <p>If you have a high income, you may be able to afford to spend more than this. But for most of us, 30 percent is a good rule of thumb. If you find that buying a home would put you over this threshold, consider looking for a cheaper house.</p> <h2>9. Your debt-to-income ratio is approaching 43 percent</h2> <p>In addition to the 30 percent guideline, the federal government also looks at another figure to determine your worthiness for a loan. When banks examine whether to approve you for a loan, they will add up all of your debt (including credit cards, auto loans, etc.) and compare it to your income. If that ratio is more than 43 percent, you may not be approved for the loan. And if you are close to that threshold, you are truly living on the edge financially.</p> <p>If you find that your debt-to-income ratio is on the high side, consider backing away from buying a home immediately. Take time to pay off your other debts and boost your income, if you can. By entering the home buying process with a lower debt-to-income ratio, you'll be less likely to find yourself in a house you can't handle financially.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F9-warning-signs-you-cant-afford-that-new-house&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F9%2520Warning%2520Signs%2520You%2520Can%2527t%2520Afford%2520That%2520New%2520House.jpg&amp;description=9%20Warning%20Signs%20You%20Can't%20Afford%20That%20New%20House"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/u5180/9%20Warning%20Signs%20You%20Can%27t%20Afford%20That%20New%20House.jpg" alt="9 Warning Signs You Can't Afford That New House" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="https://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="https://www.wisebread.com/9-warning-signs-you-cant-afford-that-new-house">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/5-money-moves-that-will-ruin-your-mortgage-application">5 Money Moves That Will Ruin Your Mortgage Application</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/do-you-really-need-a-20-percent-down-payment-for-a-house">Do You Really Need a 20 Percent Down Payment for a House?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/its-now-easier-to-get-a-home-loan-even-if-you-have-student-loan-debt-should-you">It&#039;s Now Easier to Get a Home Loan Even If You Have Student Loan Debt — Should You?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/5-reasons-you-shouldnt-buy-a-house-yet">5 Reasons You Shouldn&#039;t Buy a House (Yet)</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/5-times-buying-a-home-with-cash-is-bad-for-your-budget">5 Times Buying a Home With Cash Is Bad for Your Budget</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing debt to income ratio down payments home buying house poor mortgages private mortgage insurance Mon, 12 Feb 2018 10:00:06 +0000 Tim Lemke 2085303 at https://www.wisebread.com 6 Money Moves to Make After Buying Your First House https://www.wisebread.com/6-money-moves-to-make-after-buying-your-first-house <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-money-moves-to-make-after-buying-your-first-house" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/imagecache/250w/blog-images/happy_woman_holding_keys_to_her_new_house.jpg" alt="Happy woman holding keys to her new house" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You bought your first home. This is an exciting conclusion to what was likely a long and winding road. As you are unpacking your boxes, settling in, and decorating your new digs, there are some smart money moves you should make immediately to keep the good times rolling.</p> <h2>1. Adjust your last will and testament</h2> <p>Now that you have a new home, you need to update your will. In this time of excitement, updating a will might feel like putting a damper on the fun, but it's critically important. You need to be responsible for protecting the future of your loved ones and your home. (See also: <a href="http://www.wisebread.com/dont-make-these-5-common-mistakes-when-writing-a-will?ref=seealso" target="_blank">Don't Make These 5 Common Mistakes When Writing a Will</a>)</p> <h2>2. Get rid of PMI as fast as you can</h2> <p><a href="http://www.wisebread.com/what-is-private-mortgage-insurance-anyway?ref=internal" target="_blank">Private mortgage insurance</a> (PMI) is a necessary fee for most people who buy a home with less than a 20 percent down payment. This can be a significant expense, sometimes costing thousands of dollars each year. Do whatever you can to get to that 20 percent equity mark so that you can drop the PMI payments.</p> <h2>3. Make a plan to pay a little extra every month</h2> <p>At the beginning of a mortgage, you are mostly paying interest and very little principal with every monthly payment. That ratio of interest to principal will decrease eventually, but it will take a few years.</p> <p>To more quickly pay down your mortgage, set aside a little extra every month for your mortgage payment. Why? Anything you pay above your monthly payment goes directly against the principal. (Just be sure those extra payments are going to principal; check with your mortgage lender.) The faster you reduce your principal, the faster you will pay off your home. A lower principal will also make it easier to refinance the mortgage down the line if you choose to do that in the future. (See also: <a href="http://www.wisebread.com/whats-faster-for-mortgage-payoff-100-month-extra-or-1-payment-year-extra?ref=seealso" target="_blank">What's Faster for Mortgage Payoff: $100/Month Extra or 1 Payment/Year Extra?</a>)</p> <h2>4. Replenish your emergency funds</h2> <p>Many people use a substantial part of their cash savings, if not all of it, when they buy their first home. It&rsquo;s crucial that you begin to <a href="http://www.wisebread.com/6-fast-ways-to-restock-an-emergency-fund-after-an-emergency?ref=internal" target="_blank">rebuild this emergency fund</a> as soon as you can.</p> <p>An emergency fund is necessary if you lose your job for any reason, have unexpected bills, or if you need to do emergency repairs on your home. Experts in the consumer finance field have varying opinions when it comes to how much to set aside in an emergency fund, but many suggest having three to six month's worth of expenses saved. Some more conservative advisers even suggest saving up enough to cover one year of expenses. Consider your lifestyle and personal risk profile to find the best target amount for you.</p> <h2>5. Reconsider your life insurance policy</h2> <p>Now that you have this beautiful new home, you will need to make sure the mortgage can be covered by your life insurance. You don&rsquo;t want your heirs to struggle to figure out what to do in the event that an unforeseen circumstance occurs.</p> <p>How much insurance do you need? Generally, the guideline for life insurance is 10 times your annual income plus any large debts like a home mortgage. Talk to your insurance company and/or financial adviser to get their perspective, and make any necessary adjustments. (See also: <a href="http://www.wisebread.com/5-reasons-why-life-insurance-isnt-just-for-old-people?ref=seealso" target="_blank">5 Reasons Why Life Insurance Isn't Just for Old People</a>)</p> <h2>6. Change your locks and install deadbolts</h2> <p>Safety is a huge part of homeownership, and it has financial implications. As soon as you have the keys in your hand, contact a locksmith to get all of the locks on your doors and windows changed, and install deadbolts on doors where you currently don&rsquo;t have them. The previous owners likely gave copies of their keys to neighbors, friends, family members, the dog walker, or people who did work on the home. You don&rsquo;t want those people to have access to what is now <em>your </em>house. You may also want to consider a home security system.</p> <p>All of these safety measures may provide a financial deduction on your homeowners insurance. Contact your insurance company to find out if you qualify for a reduction in your rate. (See also: <a href="http://www.wisebread.com/7-times-to-update-your-homeowners-insurance?ref=seealso" target="_blank">7 Times to Update Your Homeowners Insurance</a>)</p> <p>There is a desire to rest on our laurels after completing the purchase of a home. You should definitely bask in the glow of new homeownership, but this is also a time to remain financially vigilant. Remember that when it comes to your personal finances, remaining responsible and forward-thinking is the key to lasting success.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F6-money-moves-to-make-after-buying-your-first-house&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F6%2520Money%2520Moves%2520to%2520Make%2520After%2520Buying%2520Your%2520First%2520House.jpg&amp;description=6%20Money%20Moves%20to%20Make%20After%20Buying%20Your%20First%20House"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/u5180/6%20Money%20Moves%20to%20Make%20After%20Buying%20Your%20First%20House.jpg" alt="6 Money Moves to Make After Buying Your First House" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="https://www.wisebread.com/christa-avampato">Christa Avampato</a> of <a href="https://www.wisebread.com/6-money-moves-to-make-after-buying-your-first-house">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/5-best-neighborhood-features-for-new-families">5 Best Neighborhood Features for New Families</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/house-hunting-these-features-will-save-you-big-over-the-long-haul">House Hunting? These Features Will Save You Big Over the Long Haul</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/dont-buy-a-house-with-a-pool-until-you-can-answer-these-7-questions">Don&#039;t Buy a House With a Pool Until You Can Answer These 7 Questions</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/5-estate-planning-questions-everyone-should-ask">5 Estate Planning Questions Everyone Should Ask</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/6-times-you-need-to-update-your-will">6 Times You Need to Update Your Will</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing emergency fund estate planning first house homeowners insurance homeownership last will and testament life insurance new house private mortgage insurance safety Thu, 28 Sep 2017 08:01:06 +0000 Christa Avampato 2027477 at https://www.wisebread.com Do You Really Need a 20 Percent Down Payment for a House? https://www.wisebread.com/do-you-really-need-a-20-percent-down-payment-for-a-house <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/do-you-really-need-a-20-percent-down-payment-for-a-house" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/imagecache/250w/blog-images/iStock-640228744.jpg" alt="Couple learning if they need 20 percent down on a house" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>The thought of coming up with a down payment is nerve-wracking for many would-be homebuyers. Some people think they absolutely must have at least 20 percent down to purchase a home. If they don't have anything close to this amount in savings, they give up on their dream of ownership.</p> <p>This doesn't have to be the case, however. Despite what you may have heard, a 20 percent down payment isn't written in stone. There are several other options you can consider. (See also: <a href="http://www.wisebread.com/5-ways-to-qualify-for-a-mortgage-with-a-small-downpayment?ref=seealso" target="_blank">5 Ways to Qualify for a Mortgage With a Small Down Payment</a>)</p> <h2>1. Get an FHA mortgage</h2> <p>FHA mortgages are insured by the Federal Housing Administration. A common misconception is that this loan is specifically for first-time homebuyers, but the truth is anyone can apply &mdash; even repeat borrowers. And the best part? FHA loans only require a down payment of 3.5 percent with a minimum credit score of 580. If your credit score is below 580, your lender will require a 10 percent down payment &mdash; still much less than the traditional 20 percent down. Just keep in mind that you'll have to go to an FHA-approved lender to qualify, and not all FHA-approved lenders will offer the same interest rate.</p> <p>There are some additional costs with an FHA loan. First, you'll pay an upfront premium of 1.75 percent of your total mortgage loan. Second, you'll pay mortgage insurance premiums, or MIP, for the life of the loan. With a conventional loan, mortgage insurance is temporary and the payments typically stop once you build your home equity to 20 percent. With an FHA loan, however, that's not the case. To drop mortgage insurance with these loans, you'll need to refinance once the property has sufficient equity. (See also: <a href="http://www.wisebread.com/is-an-fha-home-loan-right-for-you?ref=seealso" target="_blank">Is an FHA Home Loan Right for You?</a>)</p> <h2>2. Apply for a conventional home loan</h2> <p>Like FHA mortgages, conventional home loans allow you to purchase a property with less than a 20 percent down payment. Standard conventional loans require a minimum down payment of 5 percent, but some specialized conventional products allow down payments as low as 3 percent. Note that these programs typically have income restrictions and often only accommodate first-time homebuyers (including borrowers who haven't owned in the past three years).</p> <p>One example is the Fannie Mae and Freddie Mac-backed Conventional 97 purchase program. Again, some restrictions apply: Both repeat borrowers and new homeowners can purchase a home for 3 percent down, assuming they're using the program for a 30-year fixed-rate mortgage on a single-unit primary residence. The program is limited to loan sizes of $424,100 or less. You'll also need a credit score of at least 620 to qualify for any Fannie Mae-backed loan.</p> <h2>3. See if you're eligible for a USDA or VA loan</h2> <p>Zero-down mortgages became practically extinct after the housing crisis, but you can still find some programs offering 100 percent financing. For example, eligible veterans and active-duty military can apply for a VA-guaranteed home loan and purchase a property with no down payment and minimum closing costs.</p> <p>My husband and I qualified for this type of loan for our first home purchase. We had to jump through plenty of hoops to nail it down &mdash; the qualifications changed midway through our process, requiring us to redo all our applications. It was worth it in the end, however, considering we didn't have enough for a down payment.</p> <p>Another zero-down option is a USDA Rural Development Guaranteed Housing Loan, which is backed by the U.S. Department of Agriculture. To qualify for this loan, though, you must meet set income requirements and purchase a home in an eligible rural area.</p> <p>Neither USDA loans nor VA loans have mortgage insurance. Instead, they come with an upfront premium or funding fee, generally somewhere between 1.25 percent and 3.3 percent of the purchase price of the home.</p> <h2>What to consider when making a down payment</h2> <p>There are a few things you need to consider before deciding if a lower or higher down payment is the best choice for you.</p> <p>If you can afford to give the bank 20 percent down <em>and</em> maintain some cash in savings, a higher down payment is a smart move. You'll want to make sure a home purchase doesn't completely drain your savings, because additional, unforeseen costs will inevitably pop up. I can almost guarantee it, and <a href="http://www.wisebread.com/how-to-make-ends-meet-when-youre-house-poor" target="_blank">being house poor</a> isn't fun. If putting 20 percent down will wipe out all your cash reserves, a lower down payment is the safer choice. (See also: <a href="http://www.wisebread.com/4-easy-ways-to-start-saving-for-a-down-payment-on-a-home?ref=seealso" target="_blank">4 Easy Ways to Start Saving for a Down Payment on a Home</a>)</p> <p>Just be aware that putting less than 20 percent down means you'll then need to take out a bigger loan, which will result in a larger monthly mortgage payment. A smaller down payment can also result in a slightly higher interest rate. There are no hard or fast rules regarding how much your interest rate could increase. However, even a slight increase from 4 percent to 4.25 percent on a $200,000 30-year mortgage can result in paying an additional $30 per month.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="https://www.wisebread.com/mikey-rox">Mikey Rox</a> of <a href="https://www.wisebread.com/do-you-really-need-a-20-percent-down-payment-for-a-house">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-10"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/weak-credit-you-can-still-get-a-mortgage-despite-tough-lending-standards">Weak Credit? You Can Still Get a Mortgage Despite Tough Lending Standards</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/what-is-private-mortgage-insurance-anyway">What Is Private Mortgage Insurance, Anyway?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/6-common-homebuying-myths-debunked">6 Common Homebuying Myths, Debunked</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/9-warning-signs-you-cant-afford-that-new-house">9 Warning Signs You Can&#039;t Afford That New House</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/how-to-build-equity-in-your-home">How to Build Equity in Your Home</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing conventional loans down payments equity fha loan home loans mortgages pmi private mortgage insurance zero down mortgages Mon, 15 May 2017 08:00:07 +0000 Mikey Rox 1943628 at https://www.wisebread.com 8 Times You Need to Walk Away From Your Dream Home https://www.wisebread.com/8-times-you-need-to-walk-away-from-your-dream-home <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-times-you-need-to-walk-away-from-your-dream-home" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/imagecache/250w/blog-images/iStock-647168754.jpg" alt="Woman learning when to walk away from her dream home" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You think you've found the perfect house. But before you plunge into homeownership, you need to watch out for any warning signs this sale isn't meant to be. Ask yourself whether any of these things apply to you. If so, buying the home of your dreams may just have to wait.</p> <h2>1. You can't afford 20 percent down</h2> <p>The house may have everything you are looking for, but you need to make sure that the sale price isn't beyond your means. Ideally, you want to make a down payment of at least 20 percent. This may be a substantial amount of money, but without that down payment, your lender will likely ask you to pay for <a href="http://www.wisebread.com/what-is-private-mortgage-insurance-anyway?ref=internal" target="_blank">private mortgage insurance</a> &mdash; which can add hundreds of dollars a year to your homeownership costs.</p> <p>Moreover, the more you can put down up front, the smaller your monthly mortgage payments will be. If you are in the market for a home but can't hit that 20 percent mark, consider holding off on buying until you have a larger sum saved. (See also: <a href="http://www.wisebread.com/4-easy-ways-to-start-saving-for-a-down-payment-on-a-home?ref=seealso" target="_blank">4 Easy Ways to Start Saving for a Down Payment on a Home</a>)</p> <h2>2. Your mortgage payments would restrict your ability to save</h2> <p>Even if you have the ability to put 20 percent down on the house, you may find that the monthly mortgage payments are higher than you can reasonably afford. The U.S. government recommends spending no more than 30 percent of your gross monthly income on housing. That means if you earn $3,000 per month before taxes, you shouldn't spend more than $900 per month on your mortgage.</p> <p>You may get approved for a loan much bigger than you expected, but don't use this as an excuse to buy more house than you can afford. If your payments are too high, you will find it harder to live comfortably or save money for anything besides housing costs. If you have to go into additional debt in order to make house payments, then your &quot;dream home&quot; could become more of a financial nightmare. (See also: <a href="http://www.wisebread.com/how-to-make-ends-meet-when-youre-house-poor?ref=seealso" target="_blank">How to Make Ends Meet When You're House Poor</a>)</p> <h2>3. You didn't get a favorable interest rate</h2> <p>There are two key things that impact how much you'll end up paying for a house: the sale price, and the interest rate on the mortgage loan. Even if the sale price is within your predetermined budget, you may find your monthly payments to be onerous if the interest rate is too high. A modest difference in interest rate can mean thousands of dollars in extra costs over the lifetime of a loan.</p> <p>Your past financial history, debt load, and credit score impacts the interest rate that banks are willing to offer. The worse your credit, the higher the rate will be. If your credit score is low, you may be better off in the long run financially if you take time to pay off debt and make yourself more attractive to lenders. (See also: <a href="http://www.wisebread.com/5-ways-to-improve-your-credit-score-fast?ref=seealso" target="_blank">5 Ways to Improve Your Credit Score Fast</a>)</p> <h2>4. Your income situation may change for the worse</h2> <p>You may have found your dream home, but your ability to pay for that house may be based on income that's no longer a sure thing. Have you recently lost your job, or are you on the verge of a layoff? Were you counting on income from investments that have not performed as well as expected?</p> <p>If your income situation is unfavorable, consider waiting to buy a home. You don't want to exacerbate a difficult financial situation by taking on more expense than you can handle at that moment. (See also: <a href="http://www.wisebread.com/make-these-5-money-moves-before-applying-for-a-mortgage?ref=seealso" target="_blank">Make These 5 Money Moves Before Applying for a Mortgage</a>)</p> <h2>5. It's a money pit</h2> <p>You're not opposed to a fixer-upper, but this house has more needed repairs than you bargained for. You also learned that it's horribly inefficient when it comes to heating and cooling. On top of that, there are sizable homeowners association and community fees that you hadn't taken into account. All of this adds up to a house that busts through your budget, and it may be a good idea to walk away. (See also: <a href="http://www.wisebread.com/5-signs-the-house-you-want-to-buy-is-a-money-pit?ref=seealso" target="_blank">5 Signs the House You Want to Buy Is a Money Pit</a>)</p> <h2>6. There are signs that housing prices may drop</h2> <p>It's hard to predict where housing prices will go, but if the market is inflated, you may be better off waiting to see if prices come down. There are countless people who purchased homes during the housing bubble around 2005, only to see home prices drop precipitously. Many of these homeowners ended up underwater on their loans, and some even ended up losing their homes altogether.</p> <p>If you feel like the housing market is overheated and you are willing to be patient, you may save money on the purchase price if you wait for prices to drop. One big caveat to this is that it's also important to pay attention to interest rates. If interest rates are on the rise, it may be better to buy sooner rather than later.</p> <h2>7. The seller wants you to waive an inspection</h2> <p>During the housing boom more than a decade ago, competition for homes was so fierce that sellers often viewed a request for an inspection as a deal breaker. No matter how desperate you may be to land that perfect home, waiving an inspection is a risky proposition that could backfire on you. Without an inspection, you have no way of knowing if a home will be in dire need of repairs, now or down the road. (See also: <a href="http://www.wisebread.com/thinking-of-skipping-the-home-inspection-heres-what-it-will-cost-you?ref=seealso" target="_blank">Thinking of Skipping the Home Inspection? Here's What It Will Cost You</a>)</p> <h2>8. The seller wants you to waive a title search</h2> <p>A search of a home's title is a crucial aspect of the homebuying process. This is where a buyer may uncover things about the history of the home, including when it was built, who has owned it, and whether there are any tax liens. It's extraordinarily risky to waive this contingency, so if a seller insists upon it, consider it a red flag and run. (See also: <a href="http://www.wisebread.com/yes-you-need-home-title-insurance-heres-why?ref=seealso" target="_blank">Yes, You Need Home Title Insurance &mdash; Here's Why</a>)</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="https://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="https://www.wisebread.com/8-times-you-need-to-walk-away-from-your-dream-home">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/8-ways-to-reduce-mortgage-closing-costs">8 Ways to Reduce Mortgage Closing Costs</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/5-mortgage-details-you-should-know-before-you-sign">5 Mortgage Details You Should Know Before You Sign</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/why-i-didnt-pay-my-mortgage-off-in-full">Why I Didn&#039;t Pay My Mortgage Off In Full</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/how-to-protect-yourself-from-a-home-improvement-scam">How to Protect Yourself from a Home Improvement Scam</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/5-reasons-a-home-sale-could-fall-through">5 Reasons a Home Sale Could Fall Through</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing home buying home loans inspections interest rates mortgage private mortgage insurance red flags title search warning signs Tue, 25 Apr 2017 09:00:12 +0000 Tim Lemke 1931276 at https://www.wisebread.com 8 Signs You're Paying Too Much for Your Mortgage https://www.wisebread.com/8-signs-youre-paying-too-much-for-your-mortgage <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-signs-youre-paying-too-much-for-your-mortgage" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/imagecache/250w/blog-images/iStock-495980844.jpg" alt="Learning signs that you&#039;re paying too much for your mortgage" title="" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>Buying a home can be a great step along the path to financial freedom, but it can also become a burden if you're not careful. A mortgage can be a heavy weight on your finances if you either buy a house you can't afford, or get locked into unfavorable loan terms.</p> <p>Here's how to tell if your mortgage is too expensive.</p> <h2>1. You Are Having Trouble Making Ends Meet</h2> <p>No matter what you do, you feel like you're struggling to get ahead financially. It always seems like there's only a small amount leftover at the end of each month to pay bills or place into savings. It could be that your house is weighing you down. If you're working too hard to get ahead with your money, it may be time to <a href="http://www.wisebread.com/refi-shy-how-to-determine-if-now-is-the-time-to-refinance?ref=internal" target="_blank">refinance your mortgage</a> or move into a less expensive home.</p> <h2>2. It's Eating Up More Than 30% of Your Income</h2> <p>The federal government advises that homeowners should avoid paying more than 30% of their income on housing. The theory behind this number is that for most people, keeping payments below this level will leave them with enough to pay for other non-discretionary spending. Keep in mind that many lenders will approve prospective homeowners for a loan even if their payments would be above that 30% threshold. Lenders will often instead refer to a person's &quot;debt-to-income&quot; ratio, and will lend if that ratio is as high as 43% &mdash; and banks went even higher during the housing bubble.</p> <p>Even if you are comfortably able to make your mortgage payments, it's wise to try and get under the 30% threshold. After all, more money in your pocket means more money to take care of your other financial obligations, invest for the future, or simply enjoy life.</p> <h2>3. Your Interest Rate Is Higher Than Everyone Else's</h2> <p>It's very easy to get a fixed-rate mortgage, make the payments, and not concern yourself with how interest rates are going up and down. But you never want to be locked into a higher rate than necessary. If you bought your home more than a decade ago, chances are your interest rate is higher than what's available now. The rate on a 30-year fixed rate mortgage is a little over 4% right now. If your rate is considerably higher, look to refinance and see what you can save.</p> <h2>4. You Are Barely Making a Dent in the Loan Principal</h2> <p>You've been making mortgage payments for years, but every time you look at your account statement, it seems like the principal balance barely budges. What gives? It's normal to pay mostly interest when you first get a loan, but over time your money should increasingly go toward paying off principal. If you find that you're not paying down the loan as quickly as you want, it could be because your interest rate is too high or your term is too long (or both.)</p> <h2>5. Your Income Has Gone Up</h2> <p>When you bought your house, your interest rate was based at least partially on your household income. But if you've received multiple pay raises since, you might qualify for a lower rate. Or, you may be able to refinance into a shorter loan term, thus saving you money in interest over time.</p> <h2>6. Your Credit Score Has Improved</h2> <p>A mortgage interest rate is also partially based on a homeowner's credit score when they apply for a loan. If your credit score was mediocre back then, there's a chance you got stuck with a high rate. If you've worked hard to be financially responsible ever since, your credit score may be much higher. Thus, you may be able to refinance your mortgage into a lower rate. According to FICO, a person with a credit score of 650 might pay as much as $100 more per month on a $200,000, 30-year fixed loan than someone with a score of 800. That could add up to tens of thousands of dollars over the course of a loan. (See also: <a href="http://www.wisebread.com/7-easy-ways-to-raise-your-credit-score-this-year?ref=seealso" target="_blank">7 Easy Ways to Raise Your Credit Score This Year</a>)</p> <h2>7. Your ARM Just Adjusted</h2> <p>During the housing bubble, many homeowners were lured into adjustable rate mortgages that offered low interest rates initially and then jumped after a certain number of years. (In 2005, these loans made up nearly 40% of the mortgage market.) Many families saw their payments increase sharply and beyond what they could afford. If you currently have an adjustable rate mortgage, make sure you are prepared to make payments once the interest rate adjusts upward. Otherwise, consider refinancing to a fixed mortgage with a low rate.</p> <h2>8. You Are Paying for Mortgage Insurance</h2> <p>Many lenders require borrowers to pay <a href="http://www.wisebread.com/what-is-private-mortgage-insurance-anyway?ref=internal" target="_blank">private mortgage insurance</a> (PMI) if they put less than 20% down on a home. This is to protect the lender if a home ends up in foreclosure. Mortgage insurance essentially adds to your cost of homeownership, often to the tune of hundreds of dollars annually. This requirement goes away once your principal balance drops below 78%. Ideally, you want to avoid paying PMI altogether by putting more than 20% down. This also means you're borrowing less overall and will save money in the long run. But if you can't quite save that much up front, work aggressively toward paying off your loan so you can get rid of the PMI requirement sooner.</p> <div class="bankrateWidget" app="ratetables" kind="tabbed" template="standard" pkey="yxx5914ebb" tabs="mortgage" rowsperpage="4" fontfamily="Overpass" mtgheadertext="Best Mortgage Loan Rates" mtgloanamount="$200,000" mtgdefaultloantype="refinance" pid="kawb">&nbsp;</div> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="https://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="https://www.wisebread.com/8-signs-youre-paying-too-much-for-your-mortgage">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/8-signs-your-house-is-holding-you-back">8 Signs Your House Is Holding You Back</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/4-surprising-things-lenders-check-besides-your-credit-score">4 Surprising Things Lenders Check Besides Your Credit Score</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/how-to-build-equity-in-your-home">How to Build Equity in Your Home</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/heres-what-to-do-if-you-cant-afford-your-mortgage-payment">Here&#039;s What to Do If You Can&#039;t Afford Your Mortgage Payment</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/what-is-private-mortgage-insurance-anyway">What Is Private Mortgage Insurance, Anyway?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing adjustable rate down payment fixed rate interest loans mortgage pmi private mortgage insurance saving Fri, 10 Mar 2017 10:00:23 +0000 Tim Lemke 1902766 at https://www.wisebread.com What Is Private Mortgage Insurance, Anyway? https://www.wisebread.com/what-is-private-mortgage-insurance-anyway <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/what-is-private-mortgage-insurance-anyway" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="https://wisebread-killeracesmedia.netdna-ssl.com/files/fruganomics/imagecache/250w/blog-images/woman_fence_house_000024946015.jpg" alt="Woman learning what private mortgage insurance is" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Private Mortgage Insurance is one cost that mortgage borrowers hate to pay. And that's not surprising given than this form of insurance &mdash; Private Mortgage Insurance &mdash; doesn't actually protect homeowners. Instead, it protects mortgage lenders from borrowers who don't make their mortgage payments on time.</p> <p>PMI isn't cheap, either: Freddie Mac says that you can expect to pay from $30 to $70 a month in PMI costs for every $100,000 you have borrowed. According to this formula, you'd pay from $60 to $140 a month in PMI for a $200,000 mortgage.</p> <p>There is good news, though: Conventional mortgage borrowers won't need PMI if they have a large enough down payment. And even if you don't, your lender must drop PMI when you build up enough equity.</p> <h2>The PMI Hit</h2> <p>You'll need PMI if you have a conventional mortgage loan &mdash; one not guaranteed by the government &mdash; whenever you borrow with less than a 20% down payment.</p> <p>Fortunately, PMI isn't permanent on a conventional loan. You can ask your lender to drop PMI when the equity in your home reaches 20%. For instance, if your home originally appraised at $200,000 and you owe $160,000 on your mortgage loan, you now have 20% equity in your residence. If you owe $180,000 on your mortgage and your home is worth $200,000, you only have 10% equity in your home and must keep paying your PMI.</p> <p>If the balance of your mortgage drops to 78% of your home's original appraised value, your lender will automatically drop your PMI.</p> <p>If you want to calculate whether you can eliminate PMI, simply divide the balance of <a href="http://www.wisebread.com/4-reasons-why-youre-too-old-or-too-young-for-a-mortgage-loan" target="_blank">your mortgage loan</a> into the original appraised value of your home. Most often, this appraised value will be the same as your home's original selling price.</p> <h2>Dropping PMI</h2> <p>If you want to drop PMI when your loan value reaches 80% of your home's original purchase price &mdash; which is the same as reaching 20% equity &mdash; you must request the cancellation in writing, sending a letter to your lender. You'll need to be current on your mortgage payments, and you might have to pay for a new appraisal to prove that your home hasn't lost value since you purchased it.</p> <p>When you take out your loan, your lender should provide you with the date on which, if you made your monthly mortgage payments as scheduled, your equity would reach the 20% level. You might reach this equity level earlier, though, if you've made additional payments. You might also reach it sooner if your home appreciates in value. But you'll need a new appraisal to prove that your home's value has risen.</p> <h2>FHA Mortgage Insurance</h2> <p>If you take out a mortgage insured by the U.S. Department of Housing and Urban Development's Federal Housing Administration, you must take out a different form of mortgage insurance. And this insurance is required, no matter how much of a down payment you put down.</p> <p>First, you'll need to make an upfront payment of 1.75% of the amount of your loan. If you take out a mortgage for $100,000, you'll have to pay $1,750 for this upfront premium.</p> <p>You'll also have to pay an annual premium, which you'll pay out in monthly installments throughout the year. For a 15-year fixed-rate loan with a down payment or equity of less than 10%, your annual FHA insurance premium will be 0.7%. For a 15-year loan with a down payment or equity of 10% or more, your annual premium will be 0.45%.</p> <p>For a 30-year loan and with a down payment or equity of less than 5%, your annual insurance premium will be 0.85%. For a 30-year loan with a down payment or equity of 5% or more, your annual insurance premium will be 0.80%.</p> <p><em>Did you have to pay PMI? For how long?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="https://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="https://www.wisebread.com/what-is-private-mortgage-insurance-anyway">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-6"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/do-you-really-need-a-20-percent-down-payment-for-a-house">Do You Really Need a 20 Percent Down Payment for a House?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/4-reasons-millenials-should-invest-in-a-home">4 Reasons Millenials Should Invest in a Home</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/4-worst-reasons-to-buy-a-house">4 Worst Reasons to Buy a House</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/8-signs-youre-paying-too-much-for-your-mortgage">8 Signs You&#039;re Paying Too Much for Your Mortgage</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="https://www.wisebread.com/9-warning-signs-you-cant-afford-that-new-house">9 Warning Signs You Can&#039;t Afford That New House</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing buying a house down payments equity new homeowners pmi private mortgage insurance Tue, 03 May 2016 09:00:05 +0000 Dan Rafter 1702378 at https://www.wisebread.com