Tag Archives: mortgage

WHAT IS MORTGAGE INSURANCE? A Comprehensive Guide

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Mortgage insurance is a crucial component of the homebuying process, especially for those who are unable to make a substantial down payment. In this guide, we’ll delve into the ins and outs of mortgage insurance, focusing on how it works specifically in the Sacramento area.

What is Mortgage Insurance? Mortgage insurance is a financial safeguard for lenders in case borrowers default on their loans. It is typically required when the down payment is less than 20% of the home’s purchase price.

Types of Mortgage Insurance:

  • Private Mortgage Insurance (PMI): PMI is commonly used for conventional loans and is provided by private insurance companies.
  • FHA Mortgage Insurance Premium (MIP): MIP is mandatory for FHA loans and is paid both upfront and annually.

How Does Mortgage Insurance Work?

  • Protection for Lenders: Mortgage insurance protects lenders by reimbursing them if borrowers default on their loans. It enables lenders to offer loans with lower down payment requirements.
  • Cost to Borrowers: Borrowers typically pay for mortgage insurance either monthly, as part of their mortgage payment, or upfront at closing. The cost varies based on factors such as loan amount, down payment, and credit score.
  • Cancellation Options: Borrowers with conventional loans can request to cancel PMI once they have accumulated sufficient equity in their homes, typically reaching a 75%-80% loan-to-value ratio. For FHA loans, MIP is required for the life of the loan in most cases.

Benefits of Mortgage Insurance:

  • Access to Homeownership: Mortgage insurance allows borrowers to purchase homes with a smaller down payment, making homeownership more attainable.
  • Competitive Interest Rates: With mortgage insurance, lenders are more willing to offer loans with lower down payment requirements.
  • Flexibility: Mortgage insurance offers flexibility in financing options, catering to a diverse range of homebuyers.

Considerations for Sacramento Homebuyers:

  • Market Dynamics: Understanding the local real estate market and loan requirements specific to Sacramento is crucial for navigating mortgage insurance effectively.
  • Consultation: Working with an experienced mortgage lender like Dan Tharp can provide valuable insights into mortgage insurance options tailored to the Sacramento area.

In conclusion, mortgage insurance plays a pivotal role in facilitating homeownership by mitigating risk for lenders and providing opportunities for buyers with smaller down payments. By grasping how mortgage insurance works and its implications in the Sacramento market, prospective homebuyers can make informed decisions to achieve their homeownership goals.

For personalized guidance and expert assistance with your mortgage needs in the Sacramento area, feel free to reach out to Dan Tharp, your trusted mortgage lender.

The above information is for educational purposes only. All information, loan programs and interest rates are subject to change without notice. All loans subject to underwriter approval. Terms and conditions apply.

DOES LEASING A CAR AFFECT A BUYER’S ABILITY TO BUY A HOME?

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As a mortgage professional for almost 20 years, I know just about every gotcha that can cause an underwriter to deny your loan. We look at monthly minimum obligations you pay on your debts. We take those minimum payments, including your proposed total mortgage payment (principal, interest, taxes, insurance, and private mortgage insurance), and then divide this by your gross income. This debt-to-income ratio is the barometer we use to determine your ability to repay the mortgage.

My wife, a college professor, texted me:

“My friend, who is a business/finance professor and contract attorney is insisting that leasing a car will not affect buying a home because it’s not debt… He says he also teaches Mortgage people this stuff.”

WIFE: “Can I tell him he’s wrong?”

ME: “Yes, he’s wrong. It’s debt!” 

WIFE: “LOL, I knew it! He is generally full of crap, but when he said that’s what he teaches in his classes, it made me pause.”

Imagine you have a $375/month car payment, which is nearly equivalent to $75,000 in spending power when buying a home. Or imagine you are a 2-car family spending $750/month on car loans. This reduces your buying power by $150,000. So instead of affording that charming $500,000 home, you have had your eye on, your max is only $350,000. As my clients know too well, this could hinder getting into that perfect neighborhood with the right schools and the short commute you so desperately want.

And here is the rub – a leased vehicle is even worse. Are you listening, Mr. Professor? Most of us know that when your lease period expires; you either lease again, or keep the leased vehicle with a large buyout (this could be money you need for your down payment or closing costs for a new home). Whereas with a conventional car loan, when you make your last scheduled payment, you own the car free and clear (aka no debt).

Also, in some circumstances, if you are a few months shy of paying off your auto loan, an underwriter will not hit you with the monthly auto debt and will not hold it against your ratios. You can see why the hair on the back of my neck jump to attention hearing this professor tell his many students that a car lease is not debt and will not affect their ability to buy a home. Rubbish!

This one financial decision can be the reason you miss that opportunity to get into your dream home. When something sounds too good to be true, it genuinely is too good to be true. My best advice is to sit down with a trusted mortgage professional before paying off any debt, or restructuring those credit card balances, and work through your debt-to-income ratios with someone who does this every day.

ALERT! 3 Mortgage Scams to Watch Out For (And How to Avoid Them)

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Scam Alert! Three Mortgage Modification Scams to Watch out for (And How to Avoid Them)As if homeowners in Sacramento who are facing foreclosure don’t have enough to worry about, a multitude of loan modification scam artists have invaded the internet, public files and even foreclosure notices in newspapers in hopes of targeting their next victim. By identifying the top three modification scams and learning how to avoid them, at-risk homeowners can protect themselves (and their homes). Continue reading →

A 2-Minute Guide To Flood Insurance: Do You Really Need it?

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The 5-Minute Guide to Flood Insurance: What It Is, How It Works, and Whether You Need ItYou’ve got house insurance, and assume your property is covered for any type of detrimental occurrence that can possibly take place.

However, not all homeowners in Sacramento are aware that home insurance policies don’t necessarily cover damage related to a flood, as the risks are too great. As a result, homeowners must purchase flood insurance through a private company.

Floods are one of the most common hazards in the US, costing billions of dollars in damage to properties every year. And more importantly, if you are in the process of shopping for a new home in Sacramento or anywhere in California for that matter, budgeting that monthly payment, its good to know if flood insurance will be required. Continue reading →

Buy A New Home Just One Day After A Short Sale or Foreclosure? Yes, You Can!

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Flex-Banner_600x315px_mockup5Comstock Mortgage, has been helping buyers into homes for over thirty years. Buyers can qualify for the Flexible Credit Home Loan Program just six months after bankruptcy – and just one day after short sale or foreclosure.

Losing your home to foreclosure or going through a short sale is one of the most disheartening experiences the modern homeowner can endure. Traditionally, a defaulted mortgage has meant years of poor credit and renting rather than buying. Continue reading →