Ryan Seward - RE/MAX Select Realty

Posted by Ryan Seward on 3/8/2018

You may have heard of private mortgage insurance, also known as PMI, but youíre probably not sure what exactly it is. If your down payment is less than 20% of the purchase price of the home, then youíll need to pay for this additional insurance in order to secure a loan for the home. This type of policy protects the lender if you end up in a foreclosure situation. This way, the lender is assured that they will not lose money. 

Private mortgage insurance is also required if you refinance your home when it has accrued to less than 20% equity. Again, this protects the lender from losing money if the loan is defaulted on. 


The fees involved with private mortgage insurance can range based on a few factors including the actual size of the down payment and your credit score. You can expect the cost of the insurance to be somewhere between 0.3% and 1.5% of the loan amount per year. The PMI premiums are tax deductible some years and other years they are not. It really all depends upon the state of the government and what they have enacted for the particular fiscal year. Private mortgage insurance premiums can be paid either monthly or with a large payment upfront, although most policies will require the borrower to pay on a monthly basis.    

This Insurance Can Be Canceled

The lender will automatically cancel your PMI once the loan drops down to 78% of the homeís value. For this reason, youíll want to keep track of your payments in order to see how far away you are from shedding this monthly fee. When your loan is paid down to 80% of the homeís original value, you have the right to ask your lender to discontinue to insurance premium payments.

What Is The Loan-To-Value Ratio?

This ratio is the amount of mortgage debt in the form a percentage based on how much the home is worth. Itís calculated by the following formula:

Amount owed on the mortgage/Appraised value

This is an important factor when it comes to matters of PMI insurance, as itís how the required loan payment percentages are calculated. If a home is worth $100,000 and $80,000 is still owed on the home, the loan-to-value ratio is 80 percent. This means the borrower can request the insurance be cancelled.      

FHA Loans Have Different Requirements

If you secure an FHA loan, they require the payment of PMI premiums for the entire life of the loan. You canít exactly cancel these insurance payments but you can refinance the loan in order get rid of the insurance. This means that you will no longer have an FHA loan.           

Private mortgage insurance can be a nuisance, however as a first-time homebuyer with little capital, the fees may be worth it when youíre able to secure your first home.

Tags: mortgage   pmi   what is pmi  
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Posted by Ryan Seward on 9/14/2017

One of the challenges that individuals and couples face when buying a house is finding the money to put toward their mortgage down payment. Since you'll work with a lender to cover the balance of your mortgage, taking on another loan to cover your mortgage down payment may not be what you want to do.

Build your mortgage down payment early

The sooner you decide to buy a house, the sooner you can start cutting back on spending and increasing your savings. This single move keeps you from taking on unnecessary debt. It also teaches you better money management skills.

Expenses that you could trim or cut out altogether to improve your savings include clothes, tickets to live entertainment events like concerts and stage plays and jewelry. Money spent on eating out at sit down restaurants, out-of-town trips and electronics are other expenses that you could cut and invest in your savings.

In addition to cutting back on spending, following are more ways to find more for your mortgage down payment. Use three or more of the steps to make it easier for you to build $10,000 or more in savings.

Open separate bank account - Start a bank account that you use solely to invest in your mortgage down payment. This bank account should not be attached to a debit or credit card. Use the account strictly to deposit money for your down payment into.

Pay off accounts that require you to pay interest - Examples of these accounts are credit cards, computers and furniture accounts that attach interest to your payments. Definitely, pay off high interest accounts as soon as possible. You could make payments 10 or more days before they are due to reduce the amount of interest you pay on the accounts. Similar to how American Express works, try to pay off your total credit card balances within 30 or 31 days. Some credit card companies charge higher rates if you keep balances on a card for two years or longer.

Invest in certificates of deposit (CDs)- If you have an IRA or 401(k), consider working with your financial advisor to purchase CDs. You'll get a bigger return on CDs if interest rates increase.

Contact state housing agencies - You may be able to get financial assistance from state housing agencies. This help may come in the form of grants or loans. To avoid taking on debt, opt for the grant path.

Sell products and items - Raise money for your mortgage down payment by selling clothes, shoes and household items that you don't use. Online resellers are just one avenue that you could use to raise money by selling items.

Freelance or take on contract work -The freelance community is growing. All you need is a computer and a skill to start earning money as a contractor. Jobs you could take on as a freelancer include web designer, writer, virtual assistant, life coach or consultant. You could also find money for your mortgage down payment through gigs with taxi and transportation companies.

Despite your current financial situation, you can grow your savings. You can find money to put toward your mortgage down payment. To successfully save your mortgage down payment, you need to focus. You need to track your monthly expenses. If you're striving to become financially disciplined, you may need to track how much you spend on a weekly basis.

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Posted by Ryan Seward on 8/10/2017

If youíre hoping to buy a house in the near future, youíll want to focus on saving for a down payment.

Down payments are a way to let a lender know that you are a low-risk investment, and a way to save money on interest over the term of your loan.

If you have your other finances in order--a good credit score and stable income--thereís a good chance that making a 20% or more down payment will land you a low interest rate that can save you thousands while you pay off your loan.

How large should my down payment be?

The larger the down payment you can afford, the more money youíll likely save in the long run. While there are ways to get a loan with no or very small down payments, these arenít always ideal.

First, if you put less than 20% down on your home loan, youíll be required to pay private mortgage insurance, or PMI. These are monthly payments that you make in addition to the interest that is accrued on your loan.

So, if you donít put any money down on your home, youíll accrue more interest over your term length and youíll pay PMI on top of that.

What affects your minimum down payment amount?

Lenders take a number of factors into consideration when determining your risk. If youíre eligible for a first-time home owners loan, a veteranís loan, or a USDA loan, your loan can be guaranteed by the government. This means you can likely pay a lower down payment while still receiving a reasonable interest rate.

When applying for a mortgage, be sure to reach out to multiple lenders and shop around for the rates that work for you. Many lenders use slightly different criteria to determine your eligibility to pay a lower down payment.

Other things that affect your minimum down payment include:

  • Credit score

  • Location of the home you want to buy

  • Value of the mortgage

Saving for a down payment

Youíll get the most value out of your mortgage if you put more money down. However, if youíre currently living in a high-rent area, it could mean that itís in your best interest to get out of your apartment and start building equity in the form of homeownership.

If you want to buy a home within the next year or two, there are a few ways you can help increase your savings.

First, determine how much you need to save. Depending on your housing needs and the current market, everyone will have different requirements. Do some home shopping in your area online and look for homes that are within your spending limits. Remember that you shouldnít spend more than 30% of your monthly income on housing (mortgage, property taxes, etc.)

Next, find out what a 20% down payment on that home would be, adjusting for inflation.

Once you have the amount you need to save, remember to leave yourself enough of an emergency fund in your savings account to last you a month or two.

Tags: mortgage   down payment  
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Posted by Ryan Seward on 4/13/2017

Buy a house and you probably just made the largest purchase of your life, a decision that will impact you daily. Buy the right house and you can finally start to feel rooted, as if you found the place where you feel balanced and centered. You can make this house your own, hanging original art pieces and pictures on the walls and filling the space with furniture and knick knacks that showcase your remarkable personality, your amazing style.

Stop guessing how much house you can afford

If you let yourself develop your creative muscle, thereís a strong likelihood that you created those original art pieces yourself. Clearly, buying a house is about more than the base price of the house. Itís about stepping into new experiences. Allow those experiences to be rewarding, certainly financially stress free. But, that wonít happen like magic. It takes thought, action and understanding. You can do it.

You must know everything that youíll be responsible to pay for before you buy a house. It could keep you out of foreclosure should you or your spouse get laid off. It could keep you from taking on debt that will put your finances in a gripping headlock. Specific fees that you may incur when you buy a house vary, depending on the lender. However, general fees and costs you can expect to be responsible for include:

  • Base price of the house (Itís easy to think that the base mortgage is all youíll have to repay when you buy a house. But, although itís the largest chunk of what goes into a mortgage, the base price or principal of a house is only one piece of the costs.)
  • Interest or adjustable rate mortgage (Adjustable interest rates may start lower, but they can shift upwards and put your mortgage out of reach. Research lenders. Make sure youíre not working with a predatory lender.)
  • Property taxes
  • Down payment (The bigger the down payment you can put on your new house, the better. It can lower your monthly mortgage payments significantly.)
  • Closing costs (Try to negotiate a deal that splits closing costs with sellers. You might even get a deal where house sellers pay all of the closing costs.)
  • Homeownerís association fees
  • Mortgage insurance
  • Homeowners insurance (This is separate from the mortgage insurance. Homeowners insurance covers the costs of damages the house may incur during natural and human-made disasters. This insurance is similar to car insurance.)
  • House inspection fees

Eliminating mortgage fee surprises helps you enjoy your home

There is more than one way to become a homeowner. Options include rent-to-own, a newly built house and buying an old house that you restore. Housing communities also vary, giving you the chance to move into communal housing neighborhoods, single family homes, tiny houses, mobile homes and elegant Victorian houses. You could also make the land more a priority than your living space, especially if you aim to start a farm or another outdoor business.

Go with the housing option that best matches your personal needs. Youíre probably going to be spending a lot of time in your new home. But, donít just fall in love with your house. Set yourself up for financial success. Be aware of all costs that go into your mortgage before you buy a house. Also, understand additional costs that you are responsible for paying a lender that arenít built into your monthly mortgage payments. Shop for and buy a house with your eyes wide open.

Tags: mortgage  
Categories: Uncategorized  

Posted by Ryan Seward on 12/24/2015

Buying your first home can be confusing. Securing a mortgage is one of the most important parts of the home buying process. Making sure that you have the right loan and have chosen the right loan officer are among†the things a first time buyer has to do to start the process. Here are some more tips on how to ensure a successful purchase: 1. Make sure your deposit is in order. Talk to your loan officer about what amount of a deposit is required for the purchase and type of loan. You will also want to make sure the funds are accounted for and readily available. You can expect deposits to run anywhere between 3 and 20 percent of the purchase price. 2. Plan to have a cash reserve in addition to your deposit. You may want to have a reserve of at least two months mortgage payments. 3. Ask your lender to go over all the fees that apply to the purchase. It is better to be prepared and know how much the actual purchase will cost. These costs are typically added into your loan but there may be some out of pocket expenses too. 4. Consider how much you can comfortably afford not how much you have been approved for. These numbers may vary considerably. Your mortgage costs should not be more than†30% of your household income. 5. The lowest rate is not always the best deal. You will want to look at not only the rate but also the terms and fees associated with the loan.