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7 Things Worth Saving Space for in a Small House
Sometimes that bigger house is just not in your budget this time around. Here are some nifty tips for maximizing space in smaller homes! Include these elements to make your compact space comfortable, functional and stylish.
Advice for decorating a small home is often about eliminating and deciding what to compromise on. But there are some things every home should have. Here are seven essentials that are always worth making room for.
1. A landing pad. You may not have a grand foyer, but you deserve somewhere to decompress for a moment when you arrive home.
Take a little bit of space by the front door to include somewhere to drop your coat and keys, as well as a seat for quick moments such as when tying a shoe. A mirror and a glass table will open up the look of the space, and a bouquet of flowers will provide a welcoming touch.
2. Color and pattern. Sure, using lots of white and neutrals will make a small space look as big and breezy as possible. That doesn’t mean that all color and pattern should be strictly forbidden. Embracing some drama will make the look personal and inviting.
To get the best of both worlds, fit color into high and low places and keep the walls neutral so the main sightlines are still clear.
Try using a fun paint color on your ceiling, or go for a low-slung sofa or other piece of furniture, so it pops without overtaking the natural field of vision.
Ceiling paint (similar): Your Majesty, Benjamin Moore
3. A real dining surface. In a small home, you rarely find a dedicated dining room. That doesn’t mean you can’t incorporate somewhere for a proper sit-down meal that isn’t at your desk or in your lap. Try pushing a small dining table up against a wall or window to seat just two diners.
If you don’t have room even for a small fixed table, try using a fold-down table with stackable seats that can be pulled out when needed, or a convertible coffee table that can be raised to dining height so you can eat at the sofa in proper comfort.
4. A truly comfortable place to sit. While it’s often tempting to try to stuff many compact pieces of furniture into a small home, you shouldn’t skimp on a full-sized place to sit.
Including a truly comfortable sofa or lounge chair, rather than many tight modern seats, will make the whole home much more satisfying. To fit in occasional extra guests, have compact side chairs on hand that are only meant for sitting in for a few hours while someone visits, or you can even use a plush ottoman.
5. Great lighting. In a small space, the lighting is often inadequate, as it tends to be assumed that a single fixture can properly light each area. In reality, good lighting can never come from just one source, so it’s always important to include a diverse palette of fixtures.
To save room while adding a lot of light, choose a plug-in sconce with multiple bulbs, like the one here. It will brighten the walls in a rich way without taking up any square footage from your floor plan or table surfaces.
6. A living plant. Speaking of your floor plan, now that you’ve saved a little space with a great sconce, why not use that square footage for a healthy living plant?
Including an element of living greenery will make the space feel more human and welcoming, bringing a sense of the outdoors in.
7. Space to breathe. Lastly, when decorating your small home, don’t forget to leave room for one very important thing: empty space.
Filling every square inch of your walls and flooring with decorative baubles and unneeded furniture leaves the space feeling cluttered and cramped. Let some walls remain empty, and keep lots of circulation space open so you can move about freely and really enjoy the great pieces you have.
Source: CB Blue Matter / houzz
Millennials Are All About the Online Experience—Except in Real Estate
There is just no doubt about it…the millennial generation is impacting real estate sales in a huge way. This generation prefers the tried and true method of one on one communication and trust building in person with their Realtor as opposed to an online agent. Read on!
When it comes to interacting with businesses, millennials are all about the online experience—except, a new survey shows, when in need of real estate services.
Seventy-five percent of millennials recently surveyed by CentSai, a financial wellness website, would prefer to enlist the help of a local real estate agent than an online agent. Seventy-one percent, in addition, would prefer to work with a local mortgage lender.
Why favor face-to-face collaboration? “Amount of hassle,” handholding,” “local knowledge,” “longstanding relationships” and “personal touch” were all given as reasons behind the desire to hire local.
“We were surprised to learn that online providers are not yet as big a disruptor in this sector as we first thought, despite purported cost savings,” says Doria Lavagnino, co-founder and president of CentSai. “We found that millennials place a high value on the personal touch and knowledge of a local agent. Buying a home for the first time is daunting, and working with a local agent—particularly an agent referred by a parent or friend—could provide peace of mind.”
The findings of the survey correspond with the results of a recent Ellie Mae survey that revealed mortgage borrowers—millennial and others—would benefit from a combination of in-person and online communication with a lender, and more seek out referrals for lenders, rather than find one online.
The internet is still an important part of the home-buying process for millennials, however, according to the CentSai survey. Ninety-one percent of those surveyed would look for prospective homes and neighborhoods online, either through an app or a site—in line with National Association of REALTORS® (NAR) research that shows 95 percent of homebuyers rely on the internet.
For real estate professionals, the survey’s findings emphasize the value of referral-based business in gaining millennial clients, as well a balanced, tech-and-touch approach to customer service. Fifty-six percent of the millennials surveyed, decidedly, plan to buy a home in the next two years.
Source: RisMedia
Installing a Pool? The Ultimate Homeowner’s Checklist
With spring upon us and typically hotter summer weather right around the corner, many homeowners wonder whether or not this year is the year to go ahead with a decision on installing a pool. This checklist is a really good resource for review before any home in-ground pool installations.
The decision to install an in-ground pool should never be taken lightly. Take the time to review this checklist before calling up the nearest pool installer.
While this iconic amenity adds a level of beauty and recreation to the property, it also imparts significant real estate considerations. Without careful forethought and planning, unexpected roadblocks may put the pool to a grinding halt. Take the time to review this checklist before calling up the nearest pool installer.
Local Laws, Permits, and Municipal Codes
Check with the local jurisdiction to find out what is required. The pool contractor should be well-versed in the codes, permits, and fees necessary to begin. However, the responsibility lies with the homeowner. Some areas have restrictions on size and type of pool, setback, and safety features.
Homeowner’s Association Restrictions
Some homeowner’s associations may forbid the installation of pools altogether, while others have specific restrictions. They may prohibit excessively large pools or require additional safety measures not required by the city. Consult with them prior to investing in a pool or they may put a stop to it.
Utility Easements
Known easement issues should be dealt with prior to installing a pool. Utility service easements and other access issues can make the prime location of the pool far less inviting. Natural obstructions such as sinkholes, rocky terrain, and trees can increase the difficulty further.
Space Requirements
A pool will also take up more area than most people are expecting. Account for plenty of excess space for ease of movement, garden area, and play areas for children. Have a contractor assist in plotting out the available space, and making note of any questionable areas.
Property Taxes Versus Property Value
Typically, expect a new pool installation to qualify as new construction on the property. This will subject it to higher property taxes, which will vary based on locale. However, the amount of the investment is not often reflected by an equivalent increase in property values. Consider a new pool an indulgence rather than an investment.
Climate and Neighborhood
Warmer climates are perfect locations for pools; so much so that they are essential property features, not luxuries. Even homes close to coastal regions still require pools, to maintain the health of the real estate market and to sell quickly. Homes in colder climates are more likely to add a pool as a novelty, only available for use in the warmer spring and summer months. Likewise, take a look at the other homes in the neighborhood, for indications on how desirable a pool is, and what styles are preferred in this market.
Patio, Landscaping, and Amenities
Consider how the in-ground pool fits in with current and future outdoor amenities. A patio is a natural pairing, but proper landscaping will prevent the pool from looking staggeringly out of place. Lighting, fire pits, and cooking areas can all be incorporated into a comprehensive outdoor entertainment area, increasing property values and market desirability.
Financing with Home Equity, Second Mortgage, or Unsecured Loan
Choosing the right financing should be done prior to putting a deposit down with a pool contractor. A qualified lender can explain the available options and assist in deciding what is best at the time. Many people turn to home equity loans immediately, but they are not always available on a newer home purchase or during a slow market. A second mortgage is another popular choice, but may not be a sound investment if a quick sale is expected. Unsecured loans are less popular, but are good when a large deposit is already available.
Resale Value and Attractiveness to the Market
A new pool is no guarantee of increased property values. In unfavorable markets, some buyers may not desire an in-ground pool at all, and it may end up buried in the future. Proper research will indicate what kind of market the property is located in. Often, a pool remains a luxury investment that is not easily recouped in the future.
The decision to install a pool is complex, but need not be overwhelming. By covering these areas prior to beginning, it will be easy to determine if a pool will be a reality or a pipe dream.
Look for homes with pools for sale in your area by visiting www.kappelgateway.com.
Now that you know the skinny on home in-ground pool installations….happy swimming!!
Source: CB Blue Matter / Sharon Lee
5 Tips for First-Time Homebuyers
You’ve decided to go for it. You know mortgage rates are enticingly low. Buying a home can be thrilling and nerve-wracking at the same time, especially for first-time homebuyers. It’s difficult to know exactly what to expect.
Take these five steps to make the process go more smoothly.
Check Your Credit
Your credit score is among the most important factors when it comes to qualifying for a mortgage.
“In addition, the standards are higher in terms of what score you need and how it affects the cost of the loan,” says Mike Winesburg, formerly a mortgage planner in Wheeling, W. Va.
Scour your credit reports for mistakes, unpaid accounts or collection accounts.
Just because you pay everything on time every month doesn’t mean your credit is stellar. The amount of credit you’re using relative to your available credit limit, or your credit utilization ratio, can sink a credit score.
The lower the utilization rate, the higher your score will be. Ideally, first-time homebuyers would have a lot of credit available, with less than a third of it used.
Repairing damaged credit takes time. If you think your credit may need work, begin the repair process at least six months before shopping for a home.
Evaluate Assets and Liabilities
A first-time homebuyer should have a good idea of money they owe and money they have coming in.
“If I were a first-time homebuyer and I wanted to do everything right, I would probably try to track my spending for a couple of months to see where my money was going,” Winesburg says.
Additionally, buyers should have an idea of how lenders will view their income, and that requires becoming familiar with the basics of mortgage lending.
For instance, some professionals, such as the self-employed or straight-commission salesperson, may have a more difficult time getting a loan than others.
The self-employed or independent contractor will need a solid two years’ earnings history to show, according to Winesburg.
Organize Documents
When applying for mortgages, you must document income and taxes.
Typically, mortgage lenders will request two recent pay stubs, the previous two years’ W-2s, tax returns and the past two months of bank statements—every page, even the blank ones.
“Why it has to be every single last page, I don’t know. But that is what they want to see. I think they look for nonsufficient funds or odd money in or out,” says Floyd Walters, owner of a mortgage company in La Canada Flintridge, Calif.
Qualify Yourself
Ideally, you already know how much you can afford to spend before the mortgage lender tells you how much you qualify for.
By calculating debt-to-income ratio and factoring in a down payment, you will have a good idea of what you can afford, both upfront and monthly.
Though there’s not a fixed debt-to-income ratio that lenders require, the standard dictates that no more than 28 percent of your gross monthly income be devoted to housing costs. This percentage is called the front-end ratio.
The back-end ratio shows what portion of income covers all monthly debt obligations. Lenders prefer the back-end ratio to be 36 percent or less, but some borrowers get approved with back-end ratios of 45 percent or higher.
Figure Out Your Down Payment
It takes effort to scrape together the down payment.
There are programs that can assist buyers with qualifying incomes and situations.
“I’ve helped arrange assistance loans for $10,000, which are interest- and payment-free, and forgivable after five years. Although considered a loan, they’re more like grants. Other programs can provide up to $40,000 interest-free,” Winesburg says.
Finally, speak with mortgage lenders when you’re starting the process. Check with friends, co-workers and neighbors to find out which lenders they enjoyed working with and ask them questions about the process and what other steps first-time homebuyers should take.
Boost Curb Appeal in a Day…
Sometimes when planning to sell a house, in the name of renovating interior living spaces, updating bathrooms, replacing appliances and adding decorative touches throughout the bedrooms, homeowners leave outdoor curb appeal as a last priority. While of course the inside of a home is important, sellers make a big mistake when they neglect the exterior. Why is a home’s exterior so important? Consider this: Curb appeal is often a potential buyer’s first impression of a home, the very thing that helps him/her decide whether or not to come inside. Whether they’re shopping online or by cruising through neighborhoods, the outside of your property is the first thing they’ll notice. If you’re selling your home or about to, how can you quickly and effectively tackle the outdoor appeal? Here are some key tips for boosting the curb appeal in a way that means quick turnaround and increased home value:
1. Start with the Front Door. Believe it or not, your home’s front door can be one of its most important assets. A new steel entry door consistently ranks as one of the most rewarding projects in home repairs, yielding an increase in home value that’s greater than the costs to install one. Likewise, to make the door especially captivating, consider painting it a bold, pleasing color that will grab attention and add charm. When buyers see a new door that looks attractive, they see another asset that makes your home the one to buy.
2. Make Any Necessary Repairs. Is the driveway cracked or the front doorbell busted? Now is the time to call a repair company or get out your own toolbox to make repairs. Buyers want turnkey, move-in-properties, and that means they want properties with repairs already done. Do the work now to get your home in ship-shape condition.
3. Keep Up with Landscaping. From mowing the lawn to pulling weeds, make sure you’re keeping up with your outdoor landscaping so that your home looks presentable and well cared for at all times. Overgrown bushes and dying plants are a surefire signal to potential buyers that you’re not caring for your home and leaving more maintenance for them to handle.
4. Add Lighting. While most buyers will come visit your home during the daytime, it’s not at all unusual for the most interested ones to also drive by at night to see what nighttime curb appeal is like. Landscape lighting can make all the difference in terms of how a home looks, so make an investment in attractive lighting options that illuminate and add interest to your property. “Solar landscaping lights are a great addition to any yard because they don’t require complicated and expensive wiring,” says Bob Vila. “Remember, though, you get what you pay for—cheap lights won’t last as long and simply won’t look as good.”
5. Touch Up Paint. A fresh coat of paint is just as powerful outside as it is inside, so to update your home’s look, repaint the exterior or at least touch up problem areas. Another idea is to paint the trim a new color that creates either a nice complement or contrast to your home’s overall look.
6. Make Over the Mailbox. You might not think a mailbox matters much, but it’s yet another one of those little details that can add up together to make a strong impression on a buyer.
7. Add Outdoor Furniture. From rocking chairs on the front porch to an outdoor patio set on the back deck, outdoor furniture creates outdoor living spaces that expand your home’s appeal. Look for attractive, durable pieces that will endure weather damage and look good for years to come — whether or not you include these pieces with the home sale, setting them up is a great way to stage your home for greater resale value.
The bottom line when it comes to curb appeal is that a little investment today can add up to big rewards tomorrow. Take the time to update, clean, repair and add value to your property’s exterior now and you will make it more attractive to buyers, not to mention more beautiful to come home to. Use the tips above to get started now.
Source: Rismedia
Get Your Credit Score Ready for Homebuying Season!
Getting ready to buy a home this spring? Make sure there aren’t any cracks in your credit. A good credit score is essential when it comes to securing a mortgage.
“If (your score is) below 600, you’re probably not going to buy a home in the short term,” says Mike Sullivan, director of education at nonprofit credit and debt counseling agency Take Charge America.
Given the slew of stringent regulation introduced following the housing crisis, most lenders simply won’t risk extending this demographic credit. In fact, even consumers with good scores should polish up the ol’ credit report.
Qualifying for the best mortgage rates starts at a 740 credit score. Scores below that threshold will likely have higher interest on their home loans.
So if you plan on hitting up the housing market this April, make sure to pull a copy of your credit report and check to see where your score stands.
Check Your Status
Under the Credit Card Accountability Responsibility and Disclosure Act of 2009, or Credit CARD Act, everyone is entitled to one free credit report from each credit bureau every year.
Obtain a copy of this report from AnnualCreditReport.com. It won’t come with your score—you can purchase that for a nominal fee. But there also are websites that offer free versions of your score year-round.
A recent version of your credit report will show you where you stand in terms of creditworthiness. The report should also spell out what you need to do to improve your score.
“You don’t have to entirely guess,” Sullivan says. “You simply look at what (the score) takes into account and you deal with those issues.”
Get Current
You’ll definitely want to address any delinquent accounts on your record.
“If you are behind, you want to bring those up to date as soon as possible,” says Kathryn Moore, a certified consumer credit counselor with GreenPath Debt Solutions. Delinquent accounts are a huge red flag to mortgage lenders because they demonstrate a lack of ability to repay debts.
They’re also the quickest way to tank your credit score. A missed payment—particularly following an extended period of good credit behavior—can cause a drop of 70 to 90 points.
Sadly, you won’t immediately recoup all those points once the account is reported as up to date.
Instead, “you need to be patient and make all of your payments on time and slowly build your score up” again, says Stephen Brobeck, executive director of the Consumer Federation of America.
The role that time plays in building stellar credit is why it’s ideally “a good idea to look at your credit at least a year out” of shopping for a mortgage, says Bruce McClary, a spokesman for the National Foundation for Credit Counseling.
Getting a Quick Boost
If you are behind this timeline, there are a few steps you can take to potentially give your score a quick boost.
For starters, scan your credit report for accuracy. An error—such as an old, bad debt; incorrect account balance; or worse yet, a phantom foreclosure—could be needlessly weighing down your score. Have these errors corrected by contacting the credit bureau in question.
“There’s a link (on your credit report) to dispute any inaccurate information,” Moore says. “The credit bureau from there will have to resolve that dispute within 30 days.” Once a negative error is removed, your score should improve.
You can also engineer a quick boost by paying down existing debts, particularly high credit card balances. This move improves your credit utilization rate—essentially how much debt you are carrying versus how much credit has been extended to you — and should bolster your score.
Experts generally say to keep your credit utilization below 20 to 30 percent of your collective credit. However, “you really want to get that ratio down to rock bottom if you’re looking for a house,” McClary says.
Clearing out existing balances will also improve your debt-to-income ratio, which a “lender looks at” closely during their mortgage decision process, Moore says.
Lenders typically say the “back-end” debt-to-income ratio—or the amount of your income that is needed to cover all your monthly debt obligations, including credit card bills and other loans—should be 36 percent or lower.
Finally, if you recently missed a loan payment because you, say, didn’t know about the bill, try calling up the issuer (or lender) to see if they will refrain from letting the credit bureaus know about your faux pas.
What to Avoid
Once you have your score in the upper echelon, make sure it stays there. Avoid running up your credit card balances again, which will help keep your credit utilization in check.
Also avoid applying for other loans, including store credit cards, particularly in an attempt to improve this aforementioned credit utilization rate. Applying for new credit generates hard inquiries on your credit report, which could ding your score.
And “if those inquiries don’t necessarily show up as approved accounts, that sends up a red flag” to lenders because it could look like you were turned down for a credit line, McClary says.
Not to mention that you’re more likely to miss a payment when you have multiple cards at your disposal, Brobeck says.
Conversely, don’t close any accounts while you are looking for a mortgage, as the closure could send your credit utilization skyrocketing in the wrong direction.
Source: RisMedia/Bankrate.com
MUST DO’s Before you move into your new home!
The moving frenzy never ends: Even after you close, the to-do lists drag on and on—endless pages of bullet points that keep you up at night when all you want is to begin your new life. Some of them are fun, like redecorating and buying new furniture.
“When you move into a new house, you’re more concerned with decorating and taking stuff out you don’t like,” says Kevin Minto, president of Signet Home Inspections in Grass Valley, CA. “But let’s not forget about the less romantic things that are mundane—but more important in the long run.”
Once you’ve got the keys, feel free to give yourself a break. You deserve it! But don’t rest on your laurels too long—and make sure to do these eight things right away.
1. Change the locks
Before moving even one tiny piece of furniture into your new home, change the locks—or at least have them rekeyed. It’s not that you don’t trust the sellers (who are, we’re sure, perfectly respectable and upstanding citizens). It’s that you shouldn’t trust everyone who’s had contact with those keys over the years, any of whom could have copied the keys for some unsavory purpose.
2. Change the alarm batteries
Making sure your fire and carbon monoxide detectors have fresh batteries may not seemlike a pressing issue while you’re in the middle of a stressful move (and aren’t they all), but it’s the kind of thing that gets ignored and then forgotten. Better to deal with it now, when the home is empty and you can make a quick sweep of the house—without lugging a ladder around furniture.
3. Review your home inspector’s report
Can’t find your inspector’s report? Minto says reports are often filed with the escrow papers—but don’t wait until something goes wrong to pull them out. A good home inspector will outline the most important issues in their report, so use their expertise as a guide for your first few days of ownership. If they’ve marked anything as particularly pressing, make sure to handle it before moving in.
4. Find the circuit breaker
If you were there during inspection, you should know where your junction box is, but if you don’t, finding it “should be the first and foremost thing that should be attended to,” Minto says. During a move, when you’re plugging all sorts of electrical doodads into the wall, you don’t want to be lost in the dark hunting for that elusive metal box. (While you’re there, find the water shut-off, too.)
Then, get familiar: If it’s not already well-marked, have your spouse or another family member stand in different parts of the house while you flip different switches, and make a note of which ones handle different rooms.
5. Deal with any water problems
Looking at that inspector’s report? Deal with water-related issues immediately, says Minto. These tend to be troublesome because they’re so easily ignored—”out of sight, out of mind,” he says. A leaky toilet might seem minor, but the steady drip can damage internal structural components.
Check your roof, too: If the rubber vent boots on your roof are leaking, you might not know it for a while.
“By the time they see it in a ceiling, there’s been a fair amount of water,” Minto says.
6. Caulk everything
This one isn’t mandatory, but caulking is a whole lot easier if you do it when the house is empty, letting you see all the nooks and crannies that might need a little sealing—and don’t forget the exterior. Minto says he sees caulking issues on “every home,” and while they might seem minor, it doesn’t take long before cracking gives way to leaks and even more water issues.
7. Plan your emergency exits
Before you begin bringing in furniture, walk through every room and decide how you would escape in an emergency. This can help
Buyers Offer More for a Staged Home
The Effect of Environmental Hazards on Home Value
There are several factors that weigh on home value, including condition, location, and—in areas where they are most pronounced—environmental hazards such as poor air quality.
According to the ATTOM Data Solutions recent Environmental Hazards Housing Risk Index, 17.3 million single-family homes and condominiums have a high risk of an environmental hazard, with Denver, Colo., San Bernardino, Calif., and Curtis Bay, Md., facing the highest risk. Environmental hazards include brownfields, or property contaminated (or potentially contaminated) by a hazardous substance, polluters, poor air quality and superfunds.
“Home values are higher and long-term home price appreciation is stronger in zip codes without a high risk for any of the four environmental hazards analyzed,” says Daren Blomquist, senior vice president at ATTOM Data Solutions. “Corresponding to that is a higher share of homes still seriously underwater in the zip codes with a high risk of at least one environmental hazard, indicating those areas have not regained as much of the home value lost during the downturn.
“Conversely, home price appreciation over the past five years was actually stronger in the higher-risk zip codes, which could reflect the strong influence of investors during this recent housing recovery,” Blomquist says. “Environmental hazards likely impact owner-occupants more directly than investors, making the latter more willing to purchase in higher-risk areas. The higher share of cash sales we’re seeing in high-risk zip codes for environmental hazards also suggests that this is the case.”
In areas with a “very high” brownfield risk, 17.2 percent of properties are “seriously underwater,” according to the Index; in areas with a “very low” brownfield risk, 8.9 percent of properties are seriously underwater. Median home prices in very high brownfield risk areas are 2.8 percent below 10 years prior, while median home prices in very low brownfield risk areas are 2.8 percent above 10 years prior. Home sellers in very high brownfield risk areas gained 25.3 percent on average at sale, while sellers in very low brownfield risk areas gained 18.9 percent.
In areas with a very high polluter risk, 12.7 percent of properties are seriously underwater, compared to 9.2 percent of properties seriously underwater in very low polluter risk areas. Home sellers in very high polluter risk areas gained 16.6 percent on average at sale, while sellers in very low polluter risk areas gained 27.7 percent.
For areas with a “low” or “moderate” risk of poor air quality, home sales volume has increased 26 percent in the past five years, according to the report; for areas with a “high” risk of poor air quality, home sales volume has increased 16.5 percent in the past five years, while in areas with a very high risk of poor air quality, home sales volume has increased 3.3 percent over the past five years.
Median home prices in very high superfund risk areas are 1.5 percent below 10 years prior. Home sellers in high superfund risk areas gained 19.6 percent on average at sale, while sellers in very low superfund risk areas gained 24.4 percent.
Source: Rismedia
What You Need to Know Before Buying Mortgage Insurance
If you’re like many borrowers who have less than 20 percent of a home’s value in equity or saved for a down payment, you need to know how mortgage insurance affects the cost of buying a home.
What Is Mortgage Insurance?
Mortgage insurance—also known as private mortgage insurance, or PMI—protects lenders from default on conventional mortgages in cases in which the borrower contributes a down payment of less than 20 percent of the home’s purchase price. PMI is different from homeowners insurance, which protects the home and what’s in it. It’s also different from mortgage protection insurance or mortgage life insurance, which is an insurance policy that pays off the mortgage loan if the borrower passes away. Mortgage insurance is beneficial to both lenders and borrowers. Mortgage insurance lowers a lender’s risk of giving a loan to borrowers with a low down payment. It also benefits the borrower, who, with mortgage insurance, might now qualify for a mortgage he wouldn’t otherwise get approved for.
What You’ll Pay for Mortgage Insurance
The cost of mortgage insurance depends on the type of home loan you have. You could pay anywhere from 0.3 percent to 1.15 percent of your home loan, according to realtor.com®.
Although insurance premium payments usually get paid monthly, you might have the option to pay it up front at closing or roll it into the home loan cost. Check with your lender.
Mortgage Insurance for Different Types of Home Loans
Mortgage insurance programs vary depending on the type of home loan. Generally, mortgage insurance is required when you get a conventional mortgage and put down less than 20 percent, or when you refinance a mortgage and your home equity is less than 20 percent.
Other types of mortgage insurance include:
- Federal Housing Administration mortgage insurance (mortgage insurance premium): An MIP is required for all FHA loans. All borrowers pay their mortgage premiums directly to the FHA, and premiums are the same for everyone regardless of credit score—though if your down payment is less than 5 percent, you can expect to pay a little more. If you get an FHA loan, budget for both monthly MIP costs as part of your regular payment and an upfront payment included in your closing costs. FHA mortgage insurance rates are usually about 0.625 percent.
- U.S. Department of Agriculture home loan insurance: U.S. Department of Agriculture insurance covers USDA home loans. It’s a lot like FHA mortgage insurance but less expensive. USDA home loan insurance requires making a payment both at closing and as part of your monthly payments. You have the option to roll the upfront cost into your mortgage, but if you do this, you’ll increase both your monthly payment and your overall loan cost.
- VA home loan guarantee: VA loans come with a mortgage guarantee instead of mortgage insurance, but it provides similar benefits. Instead of a monthly mortgage insurance premium, you’ll pay a funding fee upfront. The fee amount varies depending on factors like your military service type, down payment amount, disability eligibility, whether you are purchasing or refinancing, and if you’ve had a previous VA loan.
Alternatives to Mortgage Insurance
Although there are benefits to mortgage insurance, having it adds to the cost of getting a home loan. If you want to cut costs or are ready to get rid of PMI, consider these five alternatives to mortgage insurance.
Pay a higher interest rate.
When financing a home, some lenders might offer the option to avoid PMI by accepting a higher interest rate. If you choose this option, the higher mortgage rate cannot get canceled, so you’ll have to refinance to lower your rate in the future.
Get your home reappraised.
If you believe you now have at least 20 percent equity in your home due to renovations or the rising local property values, get your home reappraised. You might have enough equity to cancel your mortgage insurance, but you’ll have to pay for the appraisal up front.
Get a piggyback loan.
Whether your lender calls them piggyback loans or piggyback mortgages, these home equity loans or credit lines enable borrowers with low down payments to borrow more money. Before applying or signing for one, review the fine print carefully to see if your total monthly cost is actually cheaper than paying for mortgage insurance.
Ask your lender about other programs.
Some lenders offer programs that don’t require mortgage insurance, even with down payments below 20 percent, though you’ll likely have to prove that you have excellent credit to qualify. Before talking to your lender, focus on building your credit history, especially if you or your spouse has bad credit.
Save more for a down payment.
Sometimes it pays to wait and save up or to choose a home that requires a down payment you can afford. If you save 20 percent of the home’s purchase price to use as a down payment, you might qualify for a conventional mortgage without mortgage insurance. A conventional loan comes with a lower interest rate, and you’ll be able to avoid the headache of comparing mortgage insurance rates altogether.
Source: Rismedia
