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Homeowners insurance: The mortgage connection
A home owners? insurance is the cover for the house against natural calamities as well as liability. This covers the house and its contents but also other personal possessions which the house secures. The natural calamities include fires and winds. It covers thefts and vandalism as well. It is also called hazard insurance (http://www.mortgagefit.com/hazard-insurance.html)
It is not mandatory, like in the case of automobile insurance to have a homeowners? insurance. But when one mortgages, the deed of trust or mortgage requires the collateral to be insured. This is because in the event of a default, the lender must not suffer. If in the time span the house gets damaged due to a wind or accident, the value on sale will decrease and thus the lender will not be able to get back the debt balance.
Why does the lender insist on a homeowner?s insurance?
Firstly, the lenders? name or the mortgage company appears on the certificate of the insurance policy. The lender is categorized as a ?loss payee? or a mortgagee. This ensures that the lender is entitled to the insurance amount if the borrower defaults.
Secondly, the insurance premiums are paid little by little along with the monthly obligations or it is deposited in with impound or escrow account. In both cases the lender can earn the interest which is earned out of this amount. Moreover an escrow requires an amount much more than a single premium to fund the account.
The manner of payment of the insurance premiums differs from lender to lender. Some require that the insurance premiums be paid off in the first year after closing; while others will spread the same throughout the loan term.
What you should keep in mind before taking a homeowners? insurance?
You should shop for an insurance agent extensively .You must go in for an insurance company which will make an honest evaluation of your home value.
This insurance is not only for a liability security it is important to the borrower as well especially if you aim for a refinance or a remortgage. The collateral remains the same .Thus you can still avail of a loan amount equal to the earlier mortgage amount if not more (due to appreciation).
The Top 5 Reasons to Buy a Home
1. Save on your income tax.
Yes, something good can come out of income tax. Due to income tax deductions, the government subsidizes your home purchase. Therefore all of the interest and property tax you pay throughout the year can be deducted from your gross income tax. A nice perk.
2. A Hidden Savings Account.
If you are anything like me, you cant save money to save your life. Seriously, my fiancee covers all of that, thank God. With being a home owner you actually save money two ways :
Each month a portion of your payment goes towards the principal, so not much at first but after 20 or so years, well you do the math. It will add up.
Homes (if properly kept) appreciate in value. Again not much at first but the average appreciation value is roughly 5 - 6 percent. This by the way is per year. It is said owning a home is one of the very best financial decisions to make.
3. Your monthly payment is fixed.
How so you ask? Have you ever rented an apartment or a condo or a house for that matter? Chances are you probably have. Then one day a knock on the door and the landlord says Hi, I am raising the rent Great!!! He needs extra cash or whatever, you flip the difference, and if you do the math even $20 more a month is still $240.00 out of your pocket. You buy a home you get a fixed price, a fixed monthly payment for ten or twenty or thirty years. Even if its adjustable it wont go up much. So really, what makes more sense here, investing in property for yourself or paying for someone elses?
4. Location, location, location.
Or in this case...space, space, space. No more little 2 bedroom apartment where your back yard is an 80 foot drop to the cement. More areas for more things, recreation or study. Whatever you need you can have.
5. And last but CERTAINLY NOT LEAST.
Freedom!!! Need I say more?
Well there you have it the Top 5 Reasons to Buy a Home. The very reasons my agent convinced me to buy a specific house when I had no money for the down payment. Speaking of.....
Check out the next issue where we will cover How to Buy a House with No Money Down.
Until then
Mortgage After Bankruptcy
most people probably assume that obtaining a mortgage to purchase a home, refinance or to consolidate debt after a bankruptcy is out of the question. in fact, many people are able to obtain these mortgage services, even 1 day after a bankruptcy discharge in some cases. loan programs and lenders are available that require little or no time after the discharge of a bankruptcy. here are a few tips to speed up the road to credit recovery and the mortgage services you desire.
first, continue timely paying on items such as your home and cars that were not discharged in the bankruptcy. having at least a couple credit items you are paying on- time will help. second, limit the amount of other debts such as credit cards or bank loans. too much debt will make it more difficult to qualify for a loan, particularly revolving credit accounts such as credit cards. your debt-to-income ratio is one part of the puzzle lenders will look at in determining your ability to repay a mortgage.
another important aspect is providing all necessary documents in a timely manner to your loan consultant. items such as paystubs and tax returns are generally needed in order to establish your income and show the ability exists to repay the loan. information on your credit report needs to be checked for accuracy. items that you feel are inaccurate need to be disputed in writing with the three major credit repositories. (equifax, experian and trans union). this may take persistence to ensure the items are removed appropriately. the removal of this inaccurate information will help establish a more favorable debt-to-income ratio and make the process of qualifying for a loan easier. finally, if you are unable to qualify for a loan initially, do not despair. sometimes this process requires a little patience. follow the tips mentioned earlier and more options are usually available 6 months to a year after the bankruptcy discharge. your amerinet loan consultant can help guide you through this process
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