PMI, or Private Mortgage Insurance, is often required by banks when borrowers make a relatively small down payment. After a borrower’s home equity reaches a certain level, cancellation of PMI by the borrower or lender becomes possible. But what could this mean for the borrower and the lender, and when does the insurance become eligible for cancellation?

A mortgage borrower can request that PMI be cancelled after surpassing twenty percent equity, according to the Federal Trade Commission. Lenders are generally required by law to cancel the insurance when twenty-two percent equity has been achieved on loans originated after 07/28/99. However, some situations which indicate continued risk to the lender - such as recent late payments - could delay the cancellation of this insurance. It is typically not possible to cancel PMI on federally insured loans or mortgages with LPMI, and there are a couple other exclusions as well.

So what could it mean for the home owner if he or she is eligible for the cancellation of PMI? The most significant change would be that the borrower will make a lower monthly mortgage payment. Rates for insurance on a $100 thousand dollar mortgage generally range from about $25-65 dollars/month, according to sec.state.ma.us, but differ depending upon other characteristics of the loan in question. It could also mean the end of deducting PMI from federal income taxes, if the borrower is eligible for this deduction and has been using it; this will save some time when paying taxes.

Private Mortgage Ins. does not safeguard the borrower from any type of loss, so he or she is not losing protection by requesting its cancellation. As for what cancellation of PMI could mean for the lending institution, it would be susceptible to greater loss if the borrower becomes unable to keep making payments and the home is foreclosed upon. Regarding the insurance company, it stops receiving monthly premiums from the home owner, but no longer has to protect the mortgage lender from loss on the specific loan for which the insurance has been cancelled.

Basically, the cancellation of PMI will mean that the borrower’s monthly expenses are lower, but it is generally not in the interest of the bank or the insurer. It doesn’t mean much else, except that the borrower has a substantial amount of equity and may no longer be able to use a tax deduction for Private Mortgage Insurance.

Some banks and credit unions in North America provide Green Mortgage programs, which reward borrowers for using more energy efficient homes. It may be necessary to have a qualified inspector verify the home’s efficiency before a borrower can apply for this kind of mortgage. Here are some more details on what a green mortgage is and how it works.

For example, North Carolina State Employees’ Credit Union offers a green mortgage on homes which meet the Energy Star standard. Borrowers qualifying for this mortgage receive lower interest rates and don’t have to pay as high of an origination fee. Another example is Columbia Credit Union’s Living Green mortgage; it claims to reduce costs by “up to $1,500″ if the mortgaged home has qualified for Earth Advantage, Leadership in Energy and Environmental Design (LEED), or Energy Star.

These mortgages vary significantly in what they offer. A different program from TD Canada Trust gives rebates to borrowers when they purchase products which have received Energy Star certification. They also offer a Green Home Equity Line of Credit, which works in a similar way. In the United Kingdom, the Norwich and Peterborough Building Society plants forty trees (among other benefits) when someone initiates a new Green Mortgage. Another lender offers to reduce closing costs by four-hundred dollars.

So what are the main benefits of a Green Mortgage program? They help the borrower by decreasing closing costs and/or interest rates. The main benefit to the lender is that such mortgages help attract borrowers who are concerned with energy efficiency. These programs reduce the negative impact upon the environment by encouraging people to build and buy homes which are energy efficient, or raise the efficiency of existing houses. Thus they provide some advantages to all parties involved.

Ways to improve the energy efficiency of a home include adding insulation or installing Energy Star qualified appliances, cooling/heating systems, and fixtures. In addition to potentially qualifying for green mortgages and home equity loans, such measures can decrease electricity and heating fuel costs, while limiting pollution.

Other lenders with green mortgage and/or home equity loan programs include Bank of America, Citizens Bank of Canada, and Seattle Metropolitan Credit Union. Some also offer Green Auto Loans, which decrease interest rates when people borrow money to purchase a fuel efficient vehicle. Both types appear to be most common among major national banks and local credit unions.

A HELOC is an abbreviation for a Home Equity Line Of Credit. This is a loan where a lender agrees to lend a borrower a maximum amount within an agreed time period. It’s different than a standard loan or a reverse mortgage because the sum isn’t given to a borrower up front, but uses the loan as a line of credit to borrow smaller sums that don’t total more than the agreed upon amount.

If your HELOC does get frozen the first step to take is to find out why. The reasons can range from local home price declines to your credit being seen as negative. Once you know you can try to appeal to your bank to get the funds unfrozen. If that doesn’t work you can also ask for a lower line of credit.

If the reason is due to home prices dropping in your area, you can ask a realtor to check the prices of homes sold within a three mile radius of yours in the past six months. This can help prove your neighborhood hasn’t been affected by lowering prices. You can also have your house reappraised or ask the mortgage originator to intervene.

Finally, don’t forget to shop around. Just because your original HELOC has been frozen doesn’t mean you won’t qualify somewhere else. Generally, if you have at least 10% equity in your home there are places that will approve you.

It is well known that a home appraisal is used to ascertain the monetary value of a real estate property. Banks regularly use appraisals to help determine whether or not they should approve a mortgage application, so that the property’s value is sufficient should a foreclosure occur. However, what is the value of an appraisal to a home owner/seller?

1. Getting a property appraised will clearly establish its value, which makes it more difficult for real estate agents or potential buyers to underestimate how much it is worth.

2. An appraisal can help the owner more realistically determine a selling price for the home, rather than roughly estimating its value or relying upon a realtor to set the price for him or her.

3. Generally, appraisals remain valid to mortgage lenders for 90 to 180 days, so they won’t require a new appraisal as part of the closing costs if the property sells within this time period.

4. An appraisal may be necessary before obtaining a second mortgage or home equity loan from a bank. This will remain useful for selling the property until it is out of date.

5. Appraisals may also be used for some types of home insurance valuation purposes. Some appraiser and city web sites indicate that an appraisal can be utilized when disputing property taxes as well.

Unfortunately, there are also some factors which limit the value of appraisals. One such factor is the potential for inaccuracies to exist; for example, an appraiser may not see less obvious problems that a thorough home inspection might reveal - accidentally causing the property to be overvalued in the appraisal.

Another problem is the possibility for unexpected events to increase or reduce the home’s value at any time after it is appraised. In some cases an owner can adjust the valuation relatively easily (an acre is seized by eminent domain) to suit the changes, while in others he or she cannot (a noisy business appears across the street).

Basically, the value of a home appraisal is that it can be used for mortgage and insurance purposes, it gives a clearer indication of how much the home can be sold for, and it prevents others from undervaluing the home. However, it is not without the potential to quickly become outdated and/or contain inaccuracies.

The current U.S. housing crisis involving subprime mortgages, increased foreclosures, mortgage industry layoffs, and reduced real estate sales started early last year and shows few signs of being over just yet. However, is the worst of the housing crisis over?

Unfortunately, many negative indications for the housing industry continue to appear in the news. On July 11, Bloomberg News reported that oil prices have reached a new record high and the government may need to “rescue” the Freddie Mac and Fannie Mae mortgage corporations. The two companies’ stock rapidly fell during the week over concerns about the implications of this.

High heating and transportation costs are making it more difficult for people to pay their home mortgages. Additional oil facility attacks by Nigerian rebels or a war involving Iran could push these expenses much higher. Elevated unemployment, high inflation, and rising food costs have likely contributed to the high rate of foreclosures and mortgage delinquencies as well.

Meanwhile, reports of continually decreasing home sales persist in newspapers across the country, and foreclosures remain common. A press release issued by RealtyTrac on the 10th indicated that the rate of U.S. foreclosures in June was fifty-three percent higher than it was during the same month last year. California and Nevada remain among the worst affected states.

However, there are some minor positive signs. Foreclosures in June did drop by three percent compared with May 2008, so it can’t be considered the worst month of the housing crisis in this regard. It too early to tell if this is a sign the worst is over, or if it is only temporary. Recent federal tax rebates and increased lender approval of “short sales” may be helping, to at least briefly, decrease the rate of foreclosures.

Mortgage industry layoffs are another area in which the worst of the housing crisis could be over. Although mortgage companies have announced new layoffs during June and July, a press release distributed by MortgageDaily.com on the July 7 indicated that layoffs from April through June were lower than they were in the first quarter of 2008 or the same period during 2007.

Overall, there are a few positive indications that the worst of the housing crisis might be over, but the crisis seems unlikely to end this year. The situation appears worst for people currently trying to sell homes, along with certain housing industry investors.

Many places offer home loans to buyers. You can consider obtaining a loan from a bank, credit union, savings & loans, insurance company and mortgage bankers just to name the more popular options. However, since most home loans are standardized by government rules, you can comparison shop fairly easily between places.

Comparing loans and fees amongst different lenders is the best way to get the best deal. But, first you have to figure out what kind of mortgage you want – fixed-rate, adjustable-rate or any of the hybrids that are available. Once you’ve decided then you can compare the mortgages offered by different companies.

Beyond checking the normal avenues for mortgages, you should also look into government-subsidized mortgages. The government offers loans that have low to no down payments. In addition, ask any lenders that you are speaking with about first-time buyer programs if you qualify for them.

A final way to get the money for a home loan is through private sources of money. You can borrow money privately from your parents, relatives, friends or the seller of the house on occasion. As investors want to put more money into real estate, this is becoming a more popular option.

Your credit score reflects how much debt you currently have and your performance in repaying other debts. Knowing your credit score is important for practical purposes, and here is a list of several reasons why…

1. It provides a better idea of what sort of mortgages and other credit offers you should be eligible for. People with high credit scores typically receive better interest rates. Without knowing the score, it is easier for a high-interest lender to deceive you into believing that loans that are more desirable are beyond your reach.
2. When you aren’t sure if your record has improved enough to make applying for loans worthwhile, knowing the credit score will clarify this. For example, if you made several late payments a few years ago, the score will reveal how much your eligibility has recovered since then.
3. If you are young and/or haven’t used credit much (or for very long), knowing this score is important for determining if you have conducted sufficient financial activity yet to qualify for a mortgage or other major loan. Banks are typically quite willing to offer credit cards to people with no credit history, but reluctant to allow other borrowing.
4. Knowing the score will let you discern if it is currently important to take steps aimed at improving your credit record. Such measures may include looking for and correcting important errors on the record, consolidating multiple debts, or putting a greater emphasis upon paying off your existing debt.
5. Keeping a high score isn’t as simple as some people would suggest. Factors like the number of separate debts and the amount of credit record inquiries (from lenders you have applied to) can influence these scores. It is important not to assume that the score is good, average, or poor without verifying this assertion by actually knowing what it is.

Knowing how favorably the reporting agencies have evaluated your debt management is also interesting, along with discovering how effective your financial strategy has been in this regard. Services are available that continually monitor the score, making it easier to see the impact of paying off debts, submitting late payments, or other financial changes.

The only reasons why you would forgo knowing your credit score would be because of the fee to obtain this information, or if it’s not important because you don’t plan to apply for any type of loan.

With today’s market there are a number of attractive homes in the foreclosure market. However, buying a foreclosed home is much more risky and complicated than the traditional home buying course. There are a few tips that you should know before trying to buy a foreclosed property.

First you can buy a home when it’s in the pre-foreclosure stage, or when the owner of the house has been given a certain amount of time depending on the state to become current with the mortgage or give up the home. Buying a house in this time period often is easier for experienced buyers because you have to deal directly with the homeowner. Not only are they likely upset about losing their home, often homeowners don’t know their properties were made public in a foreclosure listing. Another thing that makes buying homes during this period difficult is the time constraints. Some states give homeowners only 30 days before the bank puts it up for auction. Not a lot of time to make a deal and transfer the mortgage.

If a home does go to auction, the next stage in foreclosure, buying the home then can again be risky. The auction usually happens on the steps of a local courthouse and is difficult because you usually have to pay cash for the home. Homebuyers can’t finance auctioned homes. Additionally you have to buy the house without seeing it. And beyond all of that you can’t get title insurance so if the house has a tax lien attached to it the new owner, you, has to pay it off.

If no bids are high enough to pay for the outstanding loan or no one shows up to the auction then the next step is taken. This means the bank will take ownership of the home and use a real estate broker to sell it. This is the best way to buy foreclosed properties in terms of ease. However, you’re not likely to get a discount any longer because the bank usually tries to sell for right at or close to the market value. Try negotiating though because if a bank has a number of properties they are more willing to chance their asking price.

Another type of foreclosed properties is the homes that were bought with FHA or Department of Veterans Affairs loans. When these homes go into foreclosure they are put up for sale by the government. These listings are updated daily and come with a detailed property report, but can only be bid on by HUD-registered brokers. Better yet, for the first 45 days they are up for sale the listing is only for homeowner occupancy, which means you don’t face competition from foreclosure investors. This means the best chance for the good properties at a reasonable price.

You can find listings of foreclosures at Foreclosure.com, Foreclosures.com and RealtyTrac.com All of these sites list foreclosed properties and charge monthly subscription fees for access to their databases.

Some lenders offer a 40-year mortgage option as an alternative to the more common term lengths. These loans frequently have a fixed interest rate, but adjustable rate versions remain available as well. Large national lenders are more likely to offer them than small banks or credit unions. Read on to learn about the pros and cons of a 40-year mortgage, compared to a fifteen or thirty year loan.

PROS

1. The monthly payments on a 40-yr. loan are lower than payments on a shorter term mortgage. This can make it possible to purchase the same home with lower monthly earnings, or to have more funds to use for other purposes.

2. Although the total interest expense is higher on this type of loan, part of the interest can be deducted from federal income taxes. Generally, this deduction is only useful for people who are fairly wealthy.

3. If the owner eventually decides a shorter term is best, perhaps after an increase in earnings, he or she may be able to refinance it to a shorter term such as 15 or 30 years. Having a 40-yr. loan isn’t necessarily permanent.

Clearly the most significant of these pros are the lower monthly payments. An example of this would be the payments on a $92,000 mortgage at seven percent interest. With a 40-year term, the monthly payments would be about $40 less (compared to a 30-year term).

CONS

1. It will take longer to pay off the mortgage, which could make it more difficult to attain sufficient income for retirement. Another one of the cons for a forty year term is that it takes more time to build equity. This increases the number of years before a reverse mortgage can be used, which also makes it harder to retire.

2. Because of interest, the overall cost of a 40-yr. mortgage is substantially higher. For example, a $170,000 loan at 6.5% interest will cost almost $91 thousand more with a 40-year mortgage than it would with a thirty year term. Compared to a 15-yr. term, the same 40-yr. loan costs about $211,000 more.

Basically, a 40-year loan features more affordable monthly payments, but has a greater total cost and builds equity at a slower rate. Based upon these pros and cons, such loans are more desirable for young home buyers who have a relatively low income and/or want to purchase an expensive property. Lenders which offer this type of mortgage include Countrywide, Wells Fargo, and Bank of America.

When you have excess income beyond the normal monthly expenses, there are two options which might be preferable to just leaving it in the bank. You can pay down your mortgage, reducing the overall cost in interest and increasing your equity, or you could invest in any number of opportunities and hope to increase your gains. Here are some tips on whether you should pay down your mortgage or invest the money.

Let’s say you have $5000 extra, and the mortgage has five years left at 6.25% interest, with $25,000 remaining principal. If you pay down $5000 now, the monthly payments will reduce by almost $100/month, and the overall cost of the remaining loan would decrease by $5835 - a savings of $835 interest.

The easiest options to compare with paying down your mortgage are low-risk investments with a specific rate of return, like money market accounts and certificates of deposit (CDs). For example, investing the $5000 in a 2.5% money market account should produce $125 in earnings over the next year, or $657 in five years.

Some banks offer five-year CDs with 5% interest; this should generate total earnings of $1,381. This is $546 more than the mortgage savings produced by the same amount of money; however, it is considered taxable income. Another option is to purchase a $5,000 Treasury I Bond. This could be withdrawn after five years without penalty, and would produce $1,333 interest (4.84%).

There are many other ways to invest money, such as buying stocks, commodities, precious metals, or starting a business. These opportunities offer a less certain level of return and involve higher risks, but do have the potential to produce much greater gains than paying down the mortgage or using the above-mentioned low risk investments.

Aside from the monetary advantages of either option, there are other factors which should be considered. Choosing to pay down the mortgage is easier, less time-consuming, and less complicated. To invest, you will have to spend a lot of time researching the wide range of choices available to investors. Even after you invest, monitoring the investment’s progress will be necessary.

There are also some factors which affect the level of savings when you pay down your mortgage. If your income is high enough to deduct part of your mortgage interest from taxes, this decreases the importance of paying down the mortgage early; however, limits apply and the deduction varies depending upon your income level. If your mortgage has a prepayment penalty, you may want to invest instead; a large fee must be paid if you pay it down early.