Mortgage insurance issues you want to know about

My lender is insisting on mortgage insurance before I can get the mortgage on the home I want. What is it, and can I refuse?

You probably cannot refuse to get mortgage insurance and still get the loan you want from the lender. Most lenders are requiring mortgage insurance if the buyer is not putting a 20% down payment on the property.

The requirement for mortgage insurance is a result of the housing market cooling and the lenders reassessing how they loan money. In this tightening market the free-form creative financing that was available a few years ago has dried up.

First-time home buyers, those with credit flaws, and those with small down payments who are correctly selecting the conventional fixed rate mortgage are being directed to a fixed rate mortgage backed by private mortgage insurance (PMI). The PMI is paid for by the borrower as a monthly fee. Your mortgage lender will probably include this in your monthly mortgage payment as your property taxes and house insurance already are.

The PMI monthly fee is typically a set percentage of the total mortgage loan. If in the future you are unable to repay the mortgage loan, then the lender is assured of getting some of its money back. It is a way for a mortgage lender to be secure in loaning money to a borrower who may not qualify under current guidelines.

What is a lender’s escrow account and how does it affect my mortgage?

Your lender will create an escrow account for your real estate taxes and homeowners’ insurance. A portion of each mortgage payment will be put into this account to cover the annual charge for real estate taxes and insurance. An escrow account is good because it is a way for you to budget over twelve months for annual bills. However, this does increase your monthly mortgage payment.

I was rejected by the mortgage lender. Now what?

If possible, see if you can find out why you were rejected and correct the problem. Your real estate agent may have other lenders for you to contact.

However, if the rejection is due to a tiny down payment, lack of sufficient income, excessive debts, or anything that indicates you are financially overextended, you may need to stop house hunting and concentrate on fixing the problem. It may take a year or two for you to reduce your current debts and save for a larger down payment. Of course, another option would be to look for a less expensive house.

1. Think well before spending a certain amount of money
Thinking Clearly, Spending Mindfully How many times in the past year have you made a purchase you really couldn't afford, but you whipped out a credit card and ...

2. Life values and how we spend our money
Market research and advertising firms know we make spending decisions based on what we value. Insurance sales pitches focus on how much we value our families and are co...

3. What are competing values and how to become financially fit
Competing Values The same value tradeoff is at work when we decide where to spend our limited time. For most of us, when we have finished work, we want to kic...

4. Learn financial management and make the right decisions
Learning Financial Management Can Be Fun Financial management starts with education - whether through taking a formal class, reading a book, or talking to a fin...

5. Buy today pay tomorrow is not doing any good to your finances
Who takes care of your fnancial well-being? Do you pursue happiness through the "things" and "services" you buy? The answer is most likely "yes" for most of us ...

6. Buy only what you need and become financially competent
Searching for What You Really Value You either decided to keep your promise to yourself or to buy the prized item, according to your inner priorities. Did you...

7. Be a savvy consumer and make the right financial choices
Becoming a savvy consumer This is not our parents' (or grandparents') financial marketplace. Only a few decades ago, we were faced with far fewer financial de...

8. Health insurance you can afford if you choose your provider carefully
Health Insurance and Health Care The health insurance industry and our nation's employers are setting themselves up squarely in opposition to the vast fast fo...

9. How to get and keep good credit to balance your financial situation
Getting and keeping good credit Mastering the marketplace includes questions about if, what, and when to buy. Having good credit reflects how we choose to pay...

10. Cash money disappears in the USA while credit grows
Credit Society - Our Way of Life Cash and the use of cash money is slowly disappearing in the USA. It is predicted that before long, our nation will be a "cashles...