Zillow Advice RSS: Question-Discussion-Guide,, http://www.zillow.com/advice/United-States%253B%253B%253B%253B%253B%253B%253B%253B/null/question-discussion-guide/ Zillow Advice search results | Zillow Real Estate How Private Mortgage Insurance Affects a Mortgage http://www.zillow.com/advice-thread/How-Private-Mortgage-Insurance-Affects-a-Mortgage/4105/ <wikipage><p>If you are making a down payment of less than 20 percent, you will most likely have to get <pagelink type="wikipage" dest="Private-Mortgage-Insurance-(PMI)">Private Mortgage Insurance (or PMI)</pagelink>. It ensures that the lender is guaranteed, by the mortgage insurer, 80 percent of the loan if you default. The insurance premium amount varies by the <pagelink type="wikipage" dest="Loan-To-Value-Ratio-(LTV)">loan-to-value</pagelink> of the house and type of loan. But generally, the initial premium is 1-5% of the mortgage total, and possibly an additional monthly fee.</p><br/><p>Not all lenders will require PMI, but those that follow the <pagelink type="wikipage" dest="Fannie-Mae">Fannie Mae</pagelink> and <pagelink type="wikipage" dest="Freddie-Mac">Freddie Mac</pagelink> guidelines will.</p><br/><p>Some borrowers opt to get a second mortgage to use for part of the down payment to avoid paying PMI. For example, you can get an 80/10/10 loan (80 percent loan, 10 percent second mortgage, and 10 percent down) or a variation thereof and sidestep PMI.</p><br/><p>Government loan programs, such as <pagelink type="wikipage" dest="Types-of-Mortgages">FHA or VA loans</pagelink>, are backed by the government rather than PMI.<br/><br/><pagelink type="external" dest="https://plus.google.com/116010607353595760297/posts?rel=author" nofollow="false">By Diane Tuman</pagelink></p></wikipage><br \><br \>1 reply Fri, 12 Oct 2012 22:24:00 GMT http://www.zillow.com/advice-thread/How-Private-Mortgage-Insurance-Affects-a-Mortgage/4105/ 2012-10-12T22:24:00Z Why Do I Need to Pay Private Mortgage Insurance? http://www.zillow.com/advice-thread/Why-Do-I-Need-to-Pay-Private-Mortgage-Insurance/2051/ <wikipage><p>Private mortgage insurance (PMI) is also known in different parts of the country as mortgage insurance, mortgage protection insurance (MPI), and Mortgage Insurance Protection (MIP).</p><p>&nbsp;</p><p>Think of the down payment as a gesture of good faith--the bigger the down payment, the more you prove to the lender that you have the ability to pay back your mortgage. This is why, traditionally, people always put down 20 percent of the home's purchase price.</p><p>&nbsp;</p><p>Whatever you call it, when you're buying a home and have less than a 20 percent down payment to put on a house, you are required to pay for private mortgage insurance. Generally, the larger the loan amount, the more risky it is to the lender. Private mortgage insurance is protection for the lender against a borrower defaulting on the loan. If the borrower can't pay back the loan, the lender has a way to get its money back.</p><p>&nbsp;</p><p><strong>Private Mortgage Insurance Can Be Expensive</strong></p><p>According to the Mortgage Bankers Association of America (MBAA), private mortgage insurance is usually about one-half of one percent of the loan amount. So let's say you're buying a house that costs $150,000 and your down payment is $7,500 (or 5% of $150,000). Your loan amount then, is $142,500. The amount of annual PMI you'd have to pay is $712.50. That comes to nearly another $60 a month to have to pay along with your mortgage payment. For many people, this can be pretty costly. If you think about it, $60 could pay between one and two tanks of gas, depending on what kind of vehicle you own.</p><br/><p>Fortunately, the Homeowners Protection Act of 1998 allows you to discontinue private mortgage insurance when you've reached 20 percent equity in the home (meaning you've paid off 20 percent of the principal loan balance). If you haven't proactively called your lender to cancel PMI, the law also requires lenders to automatically discontinue it when you've reached 22 percent equity.</p><br/><p>However, there are ways you can avoid paying PMI altogether.</p><br/><p><strong>How to Avoid Paying Private Mortgage Insurance</strong></p><p>There are two ways to get out of paying costly private mortgage insurance. One way is to agree to a higher interest rate. If you're paying a higher interest rate, the loan is considered less risky to the lender and the lender will waive the PMI requirement. The benefit to you is that mortgage interest is tax-deductible* whereas private mortgage insurance is not.</p><br/><p>The other way to avoid paying PMI is to get a "piggyback" loan. A piggyback is when you get a first and second mortgage at the same time or within a few days of each other. So, if you didn't have any money for a down payment, you'd get an 80-20 where the first number represents the first mortgage (80 percent of the loan amount) and the second number represents the second mortgage (the remaining 20 percent of the loan amount). If you had a five percent down payment (as in our previous example), you'd get an 80-15-5 where the 80 represents your first mortgage; the 15 represents the second mortgage; and the 5 represents the percentage amount of your down payment. It's possible to have other permutations of this as well, such as 80-10-10. The second loan will have a higher interest rate, but the monthly payments on the first and second loan will still equal less than paying one loan with PMI.</p><br/><p>Getting a mortgage has to fit your situation and your circumstances. You may have to get a mortgage that requires paying PMI. If that's the case, you can cancel PMI after you've reached 20 percent equity in your home. But if it's at all possible, try to choose a loan that doesn't require having to pay costly private mortgage insurance. Your wallet will thank you.</p><p><pagelink type="external" dest="https://plus.google.com/116010607353595760297/posts?rel=author" nofollow="false">By Diane Tuman</pagelink></p><p>*Please consult your tax advisor.</p></wikipage><br \><br \>1 reply Fri, 12 Oct 2012 22:17:00 GMT http://www.zillow.com/advice-thread/Why-Do-I-Need-to-Pay-Private-Mortgage-Insurance/2051/ 2012-10-12T22:17:00Z A Guide to the Good Faith Estimate http://www.zillow.com/advice-thread/A-Guide-to-the-Good-Faith-Estimate/2621/ <wikipage><p>Most real estate purchases are bought with loans so getting a <pagelink type="wikipage" dest="Good-Faith-Estimate-(GFE)">good faith estimate</pagelink> and <pagelink type="wikipage" dest="Pre-Approval">pre-approval</pagelink> letter from your lender helps the process start off on the right foot. The good faith estimate, or GFE for short, is required by law to be provided by lenders when you are seeking a loan. It lists out the estimated closing costs, monthly payments, and interest rates for the loan program you are looking at getting. The pre-approval letter is provided by lenders once they have run your credit and get your income / debt information. By getting the GFE and pre-approval letter, you can be confident that the loan will get processed with no surprises. There are also additional benefits to getting pre-approval and GFE before you even begin the property search.<br/><br/>For one, by discussing your debt to income ratio with your lender and obtaining the GFE, you can determine your maximum price. It helps to know the maximum sales price when shopping around so that you do not waste time and energy looking a over-priced properties, and also vice verse, you do not waste time and energy looking at under-priced properties. You can find an area in your price range that fits your needs and narrow down your search. You also will determine your monthly payments with the GFE. The monthly payments should include the property taxes, insurance, <pagelink type="wikipage" dest="Principal">principal</pagelink>, and interest plus any <pagelink type="wikipage" dest="Private-Mortgage-Insurance-(PMI)">private mortgage insurance (PMI)</pagelink>. If the monthly payments are higher than you wanted, then you can adjust your sales price to be lower.<br/><br/>Another reason to get your pre-approval and GFE before starting your home search is that you may find out some issues with your credit or financial situation that you could clean up before moving forward with a purchase. For example, the first time I bought a house, I found out that I had a $50 charge on my <pagelink type="wikipage" dest="Credit-Report">credit report</pagelink> from 3 years ago, which brought my <pagelink type="wikipage" dest="Credit---What's-in-a-FICO-score">credit score</pagelink> down. And with a lower credit score, I would have gotten a worse interest rate on the loan. I say 'would have' because I was able to pay off this collection and clear up the ding on my credit before going into the loan underwriting process.<br/><br/>Finally, by getting a pre-approval letter, you have proof for a seller that a lender has confidence in being able to fund the purchase on your behalf. This helps with presenting offers and negotiating. Many sellers will not even accept an offer unless it is accompanied by a lender's letter. Furthermore, if you do not have a letter, the seller may counter higher given that he feels he is taking on more risk that you may not be qualified for the loan amount. Also, if you happen to get into a multiple offer situation, your offer will be much stronger with a pre-approval letter.<br/><br/><pagelink type="external" dest="https://plus.google.com/116010607353595760297/posts?rel=author" nofollow="false">By Diane Tuman</pagelink></p></wikipage><br \><br \>1 reply Fri, 12 Oct 2012 22:00:00 GMT http://www.zillow.com/advice-thread/A-Guide-to-the-Good-Faith-Estimate/2621/ 2012-10-12T22:00:00Z Should You Pay Points on a Mortgage? http://www.zillow.com/advice-thread/Should-You-Pay-Points-on-a-Mortgage/2437/ <wikipage><p><strong>What Are Points?</strong><br/> Points are an up-front fee paid to the lender at the time that you get your loan. Each point equals one percent of your total loan amount. So, for example, 2 points on a $200,000 loan is $4,000, or 2% of the loan amount.<em><br/></em> <strong><br/> How Do Points Affect My Mortgage Rate?</strong><em><br/></em> Points and interest rates are inherently connected: in general, the more points you pay, the lower the interest rate you get. However, the more points you pay, the more cash you need up front since points are paid in cash at your loan closing. This is also known as a "buy-down" or a "discount" since you're paying for a reduced rate over the entire term of the loan.</p><p>&nbsp;</p><p><strong>Should I Pay for Points?</strong><br/> You don't necessarily have to pay for points. Many of the rates you hear quoted in ads on the TV or radio may include points, but there are mortgages available without them. Keep in mind that the rate you get for a mortgage without points will be higher than a rate with points.</p><p>&nbsp;</p><p>Deciding whether or not to pay for points depends on your situation. Do you want to pay for more points in exchange for a lower rate, or do you want to pay fewer points and accept a higher rate? The answer usually depends on how long you expect to own your home and how you like to budget your money.</p><br/><p>If you don't plan on owning your home for very long, buying points may not be your best option. The length of time you have your mortgage determines how much interest savings you can achieve from a lower rate. On the other hand, if you plan on owning your home for a longer period of time, the money you pay up front for points could be more than made up for in interest savings over the term of your loan. Another consideration when deciding to pay points is how much money you want to bring to your loan's closing versus how much you would like to lower your monthly payment. While points are paid for at closing, a lower interest rate will reduce your mortgage payments every month.</p><br/><p>Your decision should be based on how long you'll have the mortgage and how you prefer to manage your budget. The longer your mortgage term, the more you'll benefit from having a lower rate.<br/><br/><pagelink type="external" dest="https://plus.google.com/116010607353595760297/posts?rel=author" nofollow="false">By Diane Tuman</pagelink></p></wikipage><br \><br \>1 reply Fri, 12 Oct 2012 21:52:00 GMT http://www.zillow.com/advice-thread/Should-You-Pay-Points-on-a-Mortgage/2437/ 2012-10-12T21:52:00Z Why do you need title insurance? http://www.zillow.com/advice-thread/Why-do-you-need-title-insurance/1905/ <wikipage><h2 align="left">Why do vou need <pagelink type="wikipage" dest="Title-Insurance">Title Insurance</pagelink>?</h2><p align="left">&nbsp;</p><p align="left">To protect possibly the most important investment you'll ever make - the investment in your home.</p><p align="left">&nbsp;</p><p align="left">With a title insurance policy, you as owner, have an indemnity contract that will reimburse you for loss in the event someone asserts a claim against your property that is covered by the policy.</p><h2 align="left">How can there be a title defect if the title has been searched?</h2><p align="left">&nbsp;</p><p align="left">Title insurance is issued after a careful examination of copies of the public records. But even the most thorough search cannot absolutely assure that no title hazards are present, despite the knowledge and experience of professional title examiners. In addition to matters shown by public records, other title problems may exist that cannot be disclosed in a search.</p><h2 align="left">What does Title Insurance protect against?</h2><p align="left">&nbsp;</p><p align="left">Here are just a few of the most common hidden risks that can cause a loss of title or</p><p align="left">create an encumbrance on title:</p><ul><li>False impersonation of the true owner of the property</li><li>Forged deed, releases or wills, instruments executed under invalid or expired power of attorney</li><li>Undisclosed or missing heirs</li><li>Mistakes in recording legal documents</li><li>Misinterpretations of wills, deeds by persons of unsound mind</li><li>Deeds by minors</li><li>Deeds by persons supposedly single, but in fact married</li><li>Fraud</li><li>Liens for unpaid estate, inheritance, income or gift taxes</li></ul><h2 align="left">What protection does Title Insurance provide against defects and hidden risks?</h2><p align="left">&nbsp;</p><p align="left">Title insurance will pay for defending against any lawsuit attacking your title as insured, and will either clear up title problems or pay the insured's losses. For a one-time premium, an owner's title insurance policy remains in effect as long as you, or your heirs, retain an interest in the property.</p><h2 align="left">What this means to you</h2><p align="left">The peace of mind in knowing that the investment you've made in your home is a safe one.</p><p align="left">&nbsp;</p><p align="left">Call a <pagelink type="wikipage" dest="Title-Company">title company</pagelink> if you have any questions concerning title insurance <pagelink type="external" dest="https://plus.google.com/116010607353595760297/posts?rel=author" nofollow="false">coverage.</pagelink></p><p align="left"><pagelink type="external" dest="https://plus.google.com/116010607353595760297/posts?rel=author" nofollow="false">By Diane Tuman</pagelink></p></wikipage><br \><br \>1 reply Fri, 12 Oct 2012 21:23:00 GMT http://www.zillow.com/advice-thread/Why-do-you-need-title-insurance/1905/ 2012-10-12T21:23:00Z Private Mortgage Insurance (PMI) http://www.zillow.com/advice-thread/Private-Mortgage-Insurance-PMI/167/ <wikipage>Private Mortgage Insurance (also known as PMI Insurance) is coverage that insures the mortgage lender against loss if the borrower or borrowers default on the home loan.<br/><br/>PMI is normally required when a borrower's down payment or equity is less than 20 percent of the loan value. Not all lenders will require PMI, but those that follow the <pagelink type="wikipage" dest="Fannie-Mae">Fannie Mae</pagelink> and <pagelink type="wikipage" dest="Freddie-Mac">Freddie Mac</pagelink> guidelines for home loan approval will require PMI. <br/><br/>The mortgage insurance is usually escrowed into the mortgage payment, and when a borrower reaches 20 percent equity, mortgage insurance is not required. <br/><br/>PMI is the equivalent of FHA or VA insurance on government mortgage loans.<br/><br/>(See <pagelink type="wikipage" dest="Mortgage-Insurance">Mortgage Insurance</pagelink>.)<br/><br/><pagelink type="external" dest="https://plus.google.com/116010607353595760297/posts?rel=author" nofollow="false">By Diane Tuman</pagelink></wikipage><br \><br \>1 reply Fri, 12 Oct 2012 21:18:00 GMT http://www.zillow.com/advice-thread/Private-Mortgage-Insurance-PMI/167/ 2012-10-12T21:18:00Z Get Money For Closing Costs http://www.zillow.com/advice-thread/Get-Money-For-Closing-Costs/2288/ <wikipage><p>First-time home buyers rarely have the funds for closing costs, or they may have the funds, but they are tied up in IRA's and 401k's, which should not be tapped unless absolutely necessary.&nbsp;</p><p>&nbsp;</p><p>100% financing is widely available, but this does not cover the multitude of little fees that add up.&nbsp; Standard <pagelink type="wikipage" dest="Closing-Costs">Closing Costs</pagelink> include things like: Transfer Taxes, Title Insurance, Appraisal cost, Home Owner's Insurance, and certain "pre-paids" like your property taxes, a certain amount of which MUST be paid at closing.</p><br/><p>It really is possible to get into a home for very little money out of pocket.&nbsp; You are going to need some money for things like the deposit to the seller and home inspection, but here's how you get money for all that other stuff:</p><p><strong>1.</strong>&nbsp; Seller Concessions: In a buyer's market, you, the buyer, are more in control than ever.&nbsp; A seller concession means the seller will credit you a certain percentage of the sales price at closing.&nbsp; Most loans will allow up to 3% of the sales price as a seller credit.&nbsp; On a $200,000 property that would be $6000.<br/><strong>2.</strong> Down Payment Assistance Programs:&nbsp; You can make up to $100,000 and still qualify for certain programs.&nbsp; These programs offer money towards closing and low interest rates.&nbsp; You are able to combine these programs with seller concessions.<br/><strong>3.</strong>&nbsp; Loans that allow you to borrow more than 100% of the sales price.&nbsp; There are some loan programs that will allow you to borrow up to 103% or even 105% of the sales price.&nbsp; This is not recommended, unless you absolutely have to.&nbsp; Also, rates on these loans tend to be a little higher, plus you are borrowing more than what your new property is worth and that's never a good idea!&nbsp; This is generally how those "no closing cost" programs you hear about work.&nbsp; Raise the interest rate slightly and credit back to you, but you shouldn't pay a higher rate unless you have to.</p><p><pagelink type="external" dest="https://plus.google.com/116010607353595760297/posts?rel=author" nofollow="false">By Diane Tuman</pagelink></p></wikipage><br \><br \>1 reply Fri, 12 Oct 2012 21:07:00 GMT http://www.zillow.com/advice-thread/Get-Money-For-Closing-Costs/2288/ 2012-10-12T21:07:00Z Finding your Maximum House Price http://www.zillow.com/advice-thread/Finding-your-Maximum-House-Price/2442/ <wikipage><p>When someone decides to buy a house, one of the first tasks is to talk to a lender and determine the maximum loan they can get. The max loan will determine the cap on real estate prices for that the buyer. There's lots of calculators out there that will help determine this. Here's a <pagelink type="external" dest="http://../../../../../../mortgage/calculator/Mortgage-payment-calculator.htm" nofollow="true">mortgage payment calculator.</pagelink><br/><br/>But what if you want to have a certain payment per month and you want to know what the max house price would be for that payment? For example, you are renting at $800 per month right now, and you could deal with a couple hundred more per month to be able to have ownership. So, you want to know what house price would be equal to paying $1000 per month.<br/><br/>Well, you still take into consideration a lot of familiar items:<br/>1) Your down payment, which is how much cash you will put down on the real estate up front. The rest of the sales price will be the loan amount.<br/>2) The number of years the loan will be amortized over.<br/>3) The interest rate for the loan.<br/>4) The tax rate of the area where your property is located.<br/>5) And the insurance rate.<br/><br/>The difference is that you take into account the $1000 monthly payment you want to make and go towards figuring out the house price, rather than the vice versa.<br/><br/>Setting your monthly limit first rather than your price maximum puts your home purchase in perspective with your daily life. You know you spend a certain amount on rent, so it's a good starting point to figure out what price of house you could own by investing the rent you are paying someone else.<br/><br/>If houses in your area are more expensive than what your rent allows, you can work your way up figuring out how much more you can spare per month to raise your house price. There are of course benefits to home ownership like mortgage interest deductions and possible appreciation, but that is a topic for another article&hellip; For now, get started thinking about what payments you can comfortably pay per month.</p><p><pagelink type="external" dest="http://tps://plus.google.com/116010607353595760297/posts?rel=author" nofollow="false">By Diane Tuman</pagelink></p></wikipage><br \><br \>1 reply Fri, 12 Oct 2012 18:16:00 GMT http://www.zillow.com/advice-thread/Finding-your-Maximum-House-Price/2442/ 2012-10-12T18:16:00Z Your Credit Renaissance http://www.zillow.com/advice-thread/Your-Credit-Renaissance/2853/ <wikipage><p>Credit is a recorded history of a person's financial culpability. If it is wrought with late payments and continued debt, major product and service providers are less likely to engage in business with you. It's important to keep your record as immaculate as possible and one must be constantly vigilant to do so. This is a difficult task and the best way to maintain a good credit image is to stay informed and remain alert.<br/><br/><strong>Know your history.</strong> Your <pagelink type="wikipage" dest="Credit-Report">credit report</pagelink> tells your financial story, from the cars you have to the loans you've owed and owe. If you come across something that seems unfamiliar it's not that uncommon. Identity theft and fraudulent spending is more common than ever and deserves attention, inquiring about it may be your only defense against having unjustly bad credit. You can request a free annual report from the credit bureau or at www.annualcreditreport.com.<br/><br/><strong>Know your card limit.</strong> Credit cards with no limit are reported as maxed out, so you should find a credit card with a limit. Be aware of the card's limitations and stay well below them. An intelligent way of doing this is to transfer enough of the payment into another card, making sure the other card has a low rate, to balance them into two payments.<br/><br/><strong>Don't make an exit too soon.</strong> As enticing (and advantageous) as it appears to drop a credit card account that is currently not in use, it will actually work against you if you are not timely and have not had the card for at least two years. Unless you have at six accounts open with other companies, hold the unused account with the prudence not to use it.&nbsp; Just think about the small interest loan you can get for a beautiful home,&nbsp; if you ever get tempted to leave.<br/><br/><strong>Minimize the effects of late payments.</strong> Even the most passionately punctual payment planners can make a late payment. You must hold yourself to a high standard of on-time payments, this will make it easier for companies to forgive and erase other accidental late payments.<br/><br/><strong>Get rid of collections A.S.A.P.</strong> Those agencies that constantly harass you about payments also besmirch your credit score every time you're delinquent on your payments. These companies can do no good for your credit and should be paid and left immediately. Overdue payments will be as obvious as a black eye on your pristine record. Dissolve your relationship with them as quickly as possible through on time or even overpayments.<br/><br/><strong>Charge-offs are damaging.</strong> Getting the simple term "charge-off" on your credit report can be the "nail in the coffin" for your credit. Charge-off means that a credit company has had an unsuccessful transaction with you where they didn't receive return on their investment. This is an unfortunate circumstance and damning in the realm of credit. This circumstance can be avoided by practical investments payment management.</p><p>&nbsp;</p><p>&nbsp;</p></wikipage><br \><br \>1 reply Wed, 03 Dec 2008 01:30:00 GMT http://www.zillow.com/advice-thread/Your-Credit-Renaissance/2853/ 2008-12-03T01:30:00Z The ABCs of Closing Costs http://www.zillow.com/advice-thread/The-ABCs-of-Closing-Costs/1714/ <wikipage><p>You&rsquo;ve found your dream home, the seller has accepted your offer, your loan has been approved and you&rsquo;re eager to move into your new home. But before you get the key, there&rsquo;s one more step&mdash;the <pagelink type="wikipage" dest="Closing">closing</pagelink>.</p><p>&nbsp;</p><p>Also called the settlement, the closing is the process of passing ownership of property from seller to buyer. And it can be bewildering. As a buyer, you will sign what seems like endless piles of documents and will have to present a sizeable check for the down payment and various closing costs. It&rsquo;s the fees associated with the closing that many times remains a mystery to many buyers who may simply hand over thousands of dollars without really knowing what they are paying for.</p><p>&nbsp;</p><p>As a responsible buyer, you should be familiar with these costs that are both mortgage-related and government imposed.&nbsp; Although many of the fees may vary by locality, here are some common fees:</p><p>&nbsp;</p><ul><li><strong>Appraisal Fee:</strong> This fee pays for the appraisal of the property. You may already have paid this fee at the beginning of your loan application process.</li></ul><ul><li><strong>Credit Report Fee:</strong> This fee covers the cost of the credit report requested by the lender. This too may already have been paid when you applied for your loan.</li></ul><ul><li><strong>Loan Origination Fee:</strong> This fee covers the lender&rsquo;s loan-processing costs. The fee is typically one percent of the total mortgage.</li></ul><ul><li><strong>Loan Discount:</strong> You will pay this one-time charge if you have chosen to pay points to lower your interest rate. Each point you purchase equals one percent of the total loan.</li></ul><ul><li><strong>Title Insurance Fees:</strong> These fees generally include costs for the title search, title examination, title insurance, document preparation and other miscellaneous title fees.</li></ul><ul><li><strong>PMI Premium:</strong> If you buy a home with a low down payment, a lender usually requires that you pay a fee for mortgage insurance. This fee protects the lender against loss due to foreclosure. Once a new owner has 20 percent equity in their home, however, he or she can normally apply to eliminate this insurance.</li></ul><ul><li><strong>Prepaid Interest Fee:</strong> This fee covers the interest payment from the date you purchases the home to the date of your first mortgage payment. Generally, if you buy a home early in the month, the prepaid interest fee will be substantially higher than if you buy it towards the end of the month.</li></ul><ul><li><strong>Escrow Accounts:</strong> In locations where escrow accounts are common, a mortgage lender will usually start an account that holds funds for future annual property taxes and home insurance. At least one year advance plus two months worth of homeowner&rsquo;s insurance premium will be collected. In addition, taxes equal approximately to two months in excess of the number of months that have elapsed in the year are paid at closing. (If 6 months have passed, 8 months of taxes will be collected.)</li></ul><ul><li><strong>Recording Fees and transfer taxes:</strong> This expense is charged by most states for recording the purchase documents and transferring ownership of the property.</li></ul><p>Make sure you consult a real estate professional in your area to find out which fees&mdash;and how much&mdash;you will be expected to pay during the closing of you prospective home. Keep in mind that you <em>can</em> negotiate these costs with the seller during the offering stage. In some instances, the seller might even agree to pay all of the settlement costs.</p><p>&nbsp;</p><p>&nbsp;</p></wikipage><br \><br \>1 reply Wed, 12 Nov 2008 22:44:00 GMT http://www.zillow.com/advice-thread/The-ABCs-of-Closing-Costs/1714/ 2008-11-12T22:44:00Z What is Amortization http://www.zillow.com/advice-thread/What-is-Amortization/4100/ <wikipage><p>Amortization is a true measure of what a borrower pays annually against a loan.</p><p>&nbsp;</p><p>A loan has a life &mdash; whether it's 15, 30, or even 50 years. You pay in installments, and the principal decreases (except in the case of <pagelink type="wikipage" dest="Interest-Only-Loan">interest-only loans</pagelink>, negative amortization and <pagelink type="wikipage" dest="All-About-Reverse-Mortgage-Loans">reverse mortgages</pagelink>) until the loan is paid off by the end of the term.</p><p>&nbsp;</p><p>The payments are evenly spread over the life of the loan, with the interest payments making up the majority of the payment at the beginning, and then principal paid off toward the end of the term. Pay attention to the amortization schedule, which shows the payments for the life of the loan including interest.</p></wikipage><br \><br \>1 reply Wed, 05 Nov 2008 22:47:00 GMT http://www.zillow.com/advice-thread/What-is-Amortization/4100/ 2008-11-05T22:47:00Z Mortgage Prepayment Penalties http://www.zillow.com/advice-thread/Mortgage-Prepayment-Penalties/4099/ <wikipage><p>Think it's a good thing to pay off a loan? Well, it might be, but you could pay a penalty if you do. Penalties apply for a specific period of time, usually 1, 2, or 3 years after the loan is originated. How much is the penalty? It varies, but it could be six months of interest or 2 percent of the <pagelink type="external" dest="http://../../../../../../wikipages/Principal">principal</pagelink> remaining on the loan &mdash; nothing to sneeze at.</p><p>&nbsp;</p><p>Some lenders offer very low (and therefore tempting) interest rates in exchange for the borrower's agreeing to pay a penalty for early payoff. The existence of prepayment penalties is supposed to be disclosed by the lender, but it is worth asking outright if penalties apply to your loan.</p><p>&nbsp;</p><p>Prepayment penalties are more common with non-traditional loans than conforming loans, and often they are aimed at borrowers with bad credit who will agree to them if it's the only way they can get the loan.</p></wikipage><br \><br \>1 reply Wed, 05 Nov 2008 22:43:00 GMT http://www.zillow.com/advice-thread/Mortgage-Prepayment-Penalties/4099/ 2008-11-05T22:43:00Z Mortgage Insurance or Second Loan http://www.zillow.com/advice-thread/Mortgage-Insurance-or-Second-Loan/1698/ <wikipage><p>There are <strong>two methods of using MI</strong> in todays market. The first is <strong>borrower paid monthly MI</strong>. This is a monthly amount paid into an escrow account with monthly taxes and insurance. After the close, the borrower has the option to call the loan servicer to cancel this payment if the borrower has either paid down the principle quickly or, the loan to value has fallen to 80% of the house value by sheer home appreciation. A new appraisal is usually required, paid for by the borrower of course, and many servicer will not address the issue until <strong>at least two years after the transaction has closed</strong>. Different loan service companies have different rules on this so, check with your particular loan servicer for exact requirements.</p><p>&nbsp;</p><p>The second method is the <strong>Lender Paid MI (LPMI)</strong> where the lender increases the rate by a certain percentage to cover the MI. The main argument against the LPMI is that the loan payment can never be reduced. However you have to remember that in a high loan to value situation it will be a long time before you reach less than 80% LTV anyways. So, if you are planning on being in the house for only a few years <strong>this can make good sense</strong>.</p><p>&nbsp;</p><p>Every situation is different and there are many MI companies out there. To determine what is best for you,&nbsp; <strong>work with a good mortgage professional</strong> who understands the nuances of the different MI scenarios.</p></wikipage><br \><br \>1 reply Thu, 30 Oct 2008 19:31:00 GMT http://www.zillow.com/advice-thread/Mortgage-Insurance-or-Second-Loan/1698/ 2008-10-30T19:31:00Z Mortgage Insurance http://www.zillow.com/advice-thread/Mortgage-Insurance/211/ <wikipage>A policy protecting lenders against some or most of the losses that can occur when a borrower defaults on a mortgage loan; mortgage insurance is required primarily for borrowers with a down payment of less than 20% of the home's purchase price. Also known as PMI (Private Mortgage Insurance). <br/> <br/> <h2>Related Links</h2> <ul> <li> <pagelink type="wikipage" dest="Basic-Mortgage-Questions">Basic Mortgage Questions</pagelink> </li> </ul></wikipage><br \><br \>1 reply Thu, 30 Oct 2008 19:29:00 GMT http://www.zillow.com/advice-thread/Mortgage-Insurance/211/ 2008-10-30T19:29:00Z Forbearance Agreement http://www.zillow.com/advice-thread/Forbearance-Agreement/406/ <wikipage><p>Forbearance allows you to temporarily postpone or reduce your principal payments.&nbsp; You are still responsible for the accrued interest during the forbearance period. Unpaid interest will be capitalized into principal at the end of the forbearance period.<br/><br/>A forbearance is commonly used in <pagelink type="wikipage" dest="Foreclosure">foreclosure</pagelink> and other distressed situations where the property owner can show potential to repay the loan.</p></wikipage><br \><br \>1 reply Thu, 23 Oct 2008 23:14:00 GMT http://www.zillow.com/advice-thread/Forbearance-Agreement/406/ 2008-10-23T23:14:00Z Principal Interest Taxes and Insurance (PITI) http://www.zillow.com/advice-thread/Principal-Interest-Taxes-and-Insurance-PITI/249/ <wikipage><p>The four elements that make up a monthly mortgage payment. The <pagelink type="wikipage" dest="Principal">principal</pagelink> and <pagelink type="wikipage" dest="Interest">interest</pagelink> payments go towards repaying the loan, while taxes and insurance (homeowner's and mortgage, if applicable) goes into an escrow account to cover the fees when they are due.</p><h2>Related Links</h2><ul><li><pagelink type="external" dest="http://getprequalified.com/article_list_mortgage_purchase.php">Mortgage Articles</pagelink></li><li><pagelink type="wikipage" dest="Can-You-Afford-to-Buy">Can You Afford to Buy?</pagelink></li></ul></wikipage><br \><br \>1 reply Sat, 13 Oct 2007 15:42:00 GMT http://www.zillow.com/advice-thread/Principal-Interest-Taxes-and-Insurance-PITI/249/ 2007-10-13T15:42:00Z What Are Pre-Payment Penalties? http://www.zillow.com/advice-thread/What-Are-Pre-Payment-Penalties/2136/ <wikipage><p>A pre-payment penalty is a penalty charged if the mortgage loan is paid off in its entirety earlier than the specified term of the loan. Pre-payment penalties are calculated as a percentage of the outstanding balance at the time the loan is paid off or as a certain number of months of interest and usually disappear over time.</p><p>&nbsp;</p><p>Pre-payment penalties apply to home sales as well as refinance transactions. For home sales, a pre-payment penalty is sometimes referred to as a "hard" penalty. For refinances, it is sometimes referred to as a "soft" penalty.</p><p>&nbsp;</p><p>If you are a <pagelink type="wikipage" dest="Subprime-Loans">subprime borrower</pagelink>, or a borrower with less-than-perfect credit, a pre-payment penalty may be required because of the fact that subprime borrowers carry a higher risk to the lender. But even so, if you're a subprime borrower, you may be able to negotiate the terms of the pre-payment penalty.</p><p>The benefit to lenders charging a pre-payment penalty is not only to protect them from risk, but also discourages the borrower from refinancing should rates drop in the future.</p><p>&nbsp;</p><p>However, prime borrowers, or borrowers with good credit who make a large enough down payment, usually can get a better interest rate if they accept a pre-payment penalty. If you are a prime borrower, ask your mortgage banker about accepting a pre-payment penalty in exchange for a lower interest rate.</p><p>&nbsp;</p><p>Some lenders, such as Quicken Loans, do not charge any pre-payment penalties. Also, depending on the type of loan program and whether or not your state allows them, pre-payment penalties may or may not even be charged.</p><p>&nbsp;</p><p>Be sure you ask your mortgage lender lots of questions before closing. Make sure you know exactly what fees you will have to pay upon closing as well as any other charges that may be incurred, such as pre-payment penalties. Then at the day of closing, don't just sign the loan documents without reviewing them carefully. Be sure you read each page carefully and are aware of <em>all</em> the terms of your contract.</p></wikipage><br \><br \>1 reply Tue, 07 Aug 2007 16:33:00 GMT http://www.zillow.com/advice-thread/What-Are-Pre-Payment-Penalties/2136/ 2007-08-07T16:33:00Z Overages http://www.zillow.com/advice-thread/Overages/2397/ <wikipage><p>Overages are the difference between the lowest available price and any higher price that the home buyer agrees to pay for the loan. Loan officers and brokers are often allowed to keep some or all of this difference as extra compensation.</p></wikipage><br \><br \>1 reply Fri, 13 Jul 2007 23:59:00 GMT http://www.zillow.com/advice-thread/Overages/2397/ 2007-07-13T23:59:00Z Loan Origination Fee http://www.zillow.com/advice-thread/Loan-Origination-Fee/2396/ <wikipage><p>Loan origination fees are fees charged by the lender for processing the loan and are often expressed as a percentage of the loan amount.</p></wikipage><br \><br \>1 reply Fri, 13 Jul 2007 23:55:00 GMT http://www.zillow.com/advice-thread/Loan-Origination-Fee/2396/ 2007-07-13T23:55:00Z Good Faith Estimate (GFE) http://www.zillow.com/advice-thread/Good-Faith-Estimate-GFE/180/ <wikipage>A written estimate of all expected closing fees including pre-paid and escrow items as well as lender charges. It must be given to the borrower, by a potential lender, within three days after submission of a mortgage loan application. By law, brokers and lenders are required to make as accurate an estimate as possible. <br/><br/><h2>Related Links</h2><ul><li><pagelink type="wikipage" dest="Real-Estate-Buyer's-Closing-Costs">Real Estate Buyer's Closing Costs</pagelink> </li><li><pagelink type="external" dest="http://www.searchlightcrusade.net/posts/1122472894.shtml">The Good Faith Estimate (part I)</pagelink> </li></ul></wikipage><br \><br \>1 reply Thu, 21 Dec 2006 00:49:00 GMT http://www.zillow.com/advice-thread/Good-Faith-Estimate-GFE/180/ 2006-12-21T00:49:00Z