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Q-A Series – MORTGAGE INSURANCE

Q. WHAT IS MORTGAGE INSURANCE

Mortgage insurance is a policy that protects lenders against some or most of the losses that result from defaults on home mortgages. It’s required primarily for borrowers making a down payment of less than 20%.

Q. HOW DOES MORTGAGE INSURANCE WORK IS IT LIKE HOME OR AUTO INSURANCE

Like home or auto insurance, mortgage insurance requires payment of a premium, is for protection against loss, and is used in the event of an emergency. If a borrower can’t repay an insured mortgage loan as agreed, the lender may foreclose on the property and file a claim with the mortgage insurer for some or most of the total losses.

Q. DO I NEED MORTGAGE INSURANCE HOW DO I GET IT

You need mortgage insurance only if you plan to make a down payment of less than 20% of the purchase price of the home. The FHA offers several loan programs that may meet your needs. Ask your lender for details.

Q. HOW CAN I RECEIVE A DISCOUNT ON THE FHA INITIAL MORTGAGE INSURANCE PREMIUM

Ask your real estate agent or lender for information on the HELP program from the FHA. HELP – Homebuyer Education Learning Program – is structured to help people like you begin the homebuying process. It covers such topics as budgeting, finding a home, getting a loan, and home maintenance. In most cases, completion of this program may entitle you to a reduction in the initial FHA mortgage insurance premium from 2.25% to 1.75% of the purchase price of your new home.

Q. WHAT IS PMI

PMI stands for Private Mortgage Insurance or Insurer. These are privately-owned companies that provide mortgage insurance. They offer both standard and special affordable programs for borrowers. These companies provide guidelines to lenders that detail the types of loans they will insure. Lenders use these guidelines to determine borrower eligibility. PMI’s usually have stricter qualifying ratios and larger down payment requirements than the FHA, but their premiums are often lower and they insure loans that exceed the FHA limit.

6 Tips for Choosing the Best Offer for Your Home

By: G. M. Filisko

Have a plan for reviewing purchase offers so you don’t let the best slip through your fingers.

You’ve worked hard to get your home ready for sale and to price it properly. With any luck, offers will come quickly. You’ll need to review each carefully to determine its strengths and drawbacks and pick one to accept. Here’s a plan for evaluating offers.

1. Understand the process
All offers are negotiable, as your agent will tell you. When you receive an offer, you can accept it, reject it, or respond by asking that terms be modified, which is called making a counteroffer.

2. Set baselines
Decide in advance what terms are most important to you. For instance, if price is most important, you may need to be flexible on your closing date. Or if you want certainty that the transaction won’t fall apart because the buyer can’t get a mortgage, require a prequalified or cash buyer.

3. Create an offer review process
If you think your home will receive multiple offers, work with your agent to establish a time frame during which buyers must submit offers. That gives your agent time to market your home to as many potential buyers as possible, and you time to review all the offers you receive.

4. Don’t take offers personally
Selling your home can be emotional. But it’s simply a business transaction, and you should treat it that way. If your agent tells you a buyer complained that your kitchen is horribly outdated, justifying a lowball offer, don’t be offended. Consider it a sign the buyer is interested and understand that those comments are a negotiating tactic. Negotiate in kind.

5. Review every term
Carefully evaluate all the terms of each offer. Price is important, but so are other terms. Is the buyer asking for property or fixtures-such as appliances, furniture, or window treatments-to be included in the sale that you plan to take with you

Is the amount of earnest money the buyer proposes to deposit toward the downpayment sufficient The lower the earnest money, the less painful it will be for the buyer to forfeit those funds by walking away from the purchase if problems arise.

Have the buyers attached a prequalification or pre-approval letter, which means they’ve already been approved for financing Or does the offer include a financing or other contingency If so, the buyers can walk away from the deal if they can’t get a mortgage, and they’ll take their earnest money back, too. Are you comfortable with that uncertainty

Is the buyer asking you to make concessions, like covering some closing costs Are you willing, and can you afford to do that Does the buyer’s proposed closing date mesh with your timeline

With each factor, ask yourself: Is this a deal breaker, or can I compromise to achieve my ultimate goal of closing the sale

6. Be creative
If you’ve received an unacceptable offer through your agent, ask questions to determine what’s most important to the buyer and see if you can meet that need. You may learn the buyer has to move quickly. That may allow you to stand firm on price but offer to close quickly. The key to successfully negotiating the sale is to remain flexible.
G.M. Filisko is an attorney and award-winning writer who has survived several closings. A frequent contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.

Visit houselogic.com for more articles like this. Reprinted from HouseLogic with permission of the NATIONAL ASSOCIATION OF REALTORS
Copyright 2010. All rights reserved.

7 Tips for a Profitable Home Closing

By: G. M. Filisko

Be sure you’re walking away with all the money you’re entitled to from the sale of your home.

When you’re ready to close on the sale of your home and move to your new home, you may be so close to the finish line that you coast, thinking there’s nothing left for you to do. Not so fast. It’s easy to waste a few dollars here and for mistakes to creep into your closing documents there, all adding up to a bundle of lost profit. Spot money-losing problems with these seven tips.

1. Take services out of your name
Avoid a dispute with the buyers after closing over things like fees for the cable service you forgot to discontinue. Contact every utility and service provider to end or transfer service to your new address as of the closing date.

If you’re on an automatic-fill schedule for heating oil or propane, don’t pay for a pre-closing refill that provides free fuel for the new owner. Contact your insurer to terminate coverage on your old home, get coverage on your new home, and ask whether you’re entitled to a refund of prepaid premium.

2. Spread the word on your change of address
Provide the post office with your forwarding address two to four weeks before the closing. Also notify credit card companies, publication subscription departments, friends and family, and your financial institutions of your new address.

3. Manage the movers
Scrutinize your moving company’s estimate. If you’re making a long-distance move, which is often billed according to weight, note the weight of your property and watch so the movers don’t use excessive padding to boost the weight. Also check with your homeowners insurer about coverage for your move. Usually movers cover only what they pack.

4. Do the settlement math
Title company employees are only human, so they can make mistakes. The day before your closing, check the math on your HUD-1 Settlement Statement.

5. Review charges on your settlement statement
Are all mortgages being paid off, and are the payoff amounts correct If your real estate agent promised you extras-such as a discounted commission or a home warranty policy-make sure that’s included. Also check whether your real estate agent or title company added fees that weren’t disclosed earlier. If any party suggests leaving items off the settlement statement, consult a lawyer about whether that might expose you to legal risk.

6. Search for missing credits
Be sure the settlement company properly credited you for prepaid expenses, such as property taxes and homeowners association fees, if applicable. If you’ve prepaid taxes for the year, you’re entitled to a credit for the time you no longer own the home. Have you been credited for heating oil or propane left in the tank

7. Don’t leave money in escrow
End your home sale closing with nothing unresolved. Make sure the title company releases money already held in escrow for you, and avoid leaving sales proceeds in a new escrow to be dickered over later.

Other web resources
(http://www.realtor.com/home-finance/sellers-basics/closing.aspx) Closing costs explained (http://www.homeclosing101.org/costs.cfm)

G.M. Filisko is an attorney and award-winning writer who has survived several closings. A frequent contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.

Visit houselogic.com for more articles like this. Reprinted from HouseLogic with permission of the NATIONAL ASSOCIATION OF REALTORS
Copyright 2010. All rights reserved.

Bank of America refined settling valuation disputes during short sales

Process Refined for Valuation Disputes

Bank of America has refined the process for settling valuation disputes during a short sale.

The value of a property is established by independent third-party vendors shortly after a short sale is initiated. Occasionally, however, a listing agent may wish to contest that value. When that occurs, there is now a revised process for reconsidering the value.

Process Steps

1.     Tell your short sale specialist that you would like a reconsideration of the value.

2.     Receive an investor-specific, easy-to-complete form from your short sale specialist that specifies all requirements for a successful value dispute.

3.     Fill out the form and attach specified evidence.

4.     Stay in touch with your short sale specialist for results.

5.     Expect a value dispute review within 10-12 business days once all required information has been received.

Evidence Needed to Dispute a Value

When contesting a home value, make sure you have compelling evidence to support your claim.

Do not reference property pricing amounts in the narrative on the form. This violates appraiser independence policy and is against industry standards. Any reference to pricing will disqualify the dispute.

Provide comparables that are recent, proximate (nearby) and similar to the property in question.

  • “Recent” means sold within 90 days of the actual value document date.
  • “Proximate” varies by location. In a rural area, for example, a home five miles away could be considered proximate.
  • You will be able to provide additional notes to highlight characteristics of the comps.

When the dispute centers on property condition or hazards:

  • Provide an itemized estimate from a licensed contractor on the contractor’s letterhead.
  • Provide photos to illustrate the repair, condition issue or hazard you want to highlight.

Your short sale specialist can provide additional guidance.

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