Archive | September, 2012

FHA MIP Release

24 Sep

FHA loans require mortgage insurance premium to cover a possible loss to the lender if the property has to be foreclosed and sold. The premium is substantial and eliminating the MIP would reduce the payment considerably.

The MIP must remain in effect for five years but after that, when the balance is 78% of the original purchase price, FHA will release the requirement and your monthly payment will go down. Since amortization is affected by interest rates, the normal time to reach this 78% point could be from 9 to 12 years at today’s interest rates.

In the example below, the MIP would be released in 9 years 6 months with normal payments. An extra $100 a month would allow the borrower to reach the release point in 7 years 1 month. To reach the release point in the minimum five years, the borrower would have to make an extra $268.04 per month principal contribution.

Releasing the MIP in this example would save the borrower $177.67 per month. The borrower would also save interest, build equity and shorten the term of their mortgage. Once the MIP is released, the borrower could continue the same payment schedule to further accelerate the debt reduction.

To make some projections on your mortgage, click here.

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Home Safety & Security Tips

17 Sep

house-padlock.pngA quick once-over of the items on this list may improve the safety and security of your home and could protect your family and friends. It is important to periodically pay attention to these things because things change over time.

Security

  • Does each exterior door have a deadbolt?
  • Does the lock on each window work?
  • Have you added pins or clips to your windows for additional security?
  • Do you have dowels or broom sticks in the track of windows and sliding glass doors?
  • Do you have security company labels or signs displayed prominently?
  • Do you have an alarm system? Is the system monitored?
  • Do you have a dog that barks when strangers approach the home?
  • Are emergency numbers posted near the telephones?

Fire

  • Do you have smoke detectors near all sleeping areas?
  • Do you check the batteries monthly and change them annually?
  • Do you have two carbon monoxide detectors?
  • Do you have an escape ladder for upper floors?
  • Do you have fire extinguishers near exits and in the kitchen?
  • Do you have an emergency escape plan and is the family familiar with it?
  • Are any outlets or switches warm to the touch?
  • Are kitchen ventilation systems working properly?
  • Is the dryer ventilated to the outside and is the exhaust free of lint?
  • Is the furnace cleaned and serviced yearly?
  • Is the space around the hot water heater clear of combustible materials?

Falls

  • Are all electrical and phone cords out of the flow of traffic?
  • Are rugs and runners slip resistant?
  • Is your step-stool sturdy and in good condition?
  • Are stairs clear of objects that could cause a fall?
  • Are all entrance ways, exits, halls and walks well lighted?
  • Do bath tubs and showers have non-skid strips or suction mats in them?

Other

  • Do you keep drugs and medicines out of reach and sight of small children?
  • Are interior doors designed so small children cannot lock themselves in rooms?
  • Are pool and play areas fenced to keep small children in and uninvited guests out?
  • Are firearms kept out of reach and sight of children?
  • Is a well-stocked first aid kit available for emergencies?
  • Is there one member of your family trained in first aid, CPR and the Heimlich maneuver?

Rates Are Down But It Costs More?

17 Sep

The latest Housing Affordability Index from the National Association of REALTORS® shows an interesting trend taking place this year that needs buyers’ attention. Most people know that the mortgage rates are still at incredibly low rates but don’t feel there is much sense of urgency.

This report shows that mortgage rates have fallen from 4.37% in January to 3.81% for June. However, the report shows that the payment as a percentage of income has gone from 12.1% to 13.9% which simply means that buyers have to spend more of their income on a home.

The reason is that the median price of homes nationally has gone from $154,600 in January to $190,100 in June which is a 23% increase. The two major components of housing affordability are the price of the homes and the mortgage rates a buyer must pay.

Even if one of those components is going down, the other could have a significant affect as is shown in this year’s trend in housing affordability. In the past few weeks, the effects of which are not show in this report, mortgage rates have been moving up.

Home buyers and investors who have been taking a wait and see approach need to make a decision if now is the time to act.

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