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You can ask any homeowner-buying and owning a home is expensive. Mortgage payments, property taxes, utilities, and other bills quickly add up.
If you want to buy a home but don’t have a large down payment saved, odds are you’ve discovered something called private mortgage insurance (PMI).
PMI is an extra monthly payment that you make (on top of your mortgage payment) when you don’t have enough to make a large (20%) down payment on your home.
However, if you want to buy a home and don’t want to tack on an extra monthly payment for PMI, you have options. In today’s post, I’m going to talk about some ways to avoid paying PMI on your mortgage so you can save more money in the long run.
Before we talk about getting rid of PMI, let’s spend a minute on what to expect when you do have to pay it.
PMI typically costs 0.30% to %1.15% of your total loan balance annually. That means that your PMI payments will decrease a moderate amount as you pay off your loan.
Furthermore, once you have paid off 22% of your loan, your PMI will be cancelled and you’ll only be responsible for your regular monthly mortgage payments.
Getting PMI waived early
With conventional loans, you can request to have your PMI cancelled once you’ve paid off 20% of the mortgage. However, many buyers with PMI are using some form of first-time buyer loan, such as an FHA loan.
With an FHA loan, you’ll be stuck with PMI for the lifetime of the loan if you don’t make a down payment of 10% or more. That’s a lot of PMI payments, especially if you take out a 30 year loan, and it can quickly add up.
If you have an FHA loan with FHA insurance, the only way to cancel the insurance is to refinance into a non-FHA insured loan. And remember--refinancing has its own costs and complications.
Making it to the 20% repayment mark
On conventional loans, the best way to get rid of PMI is to reach your 20% repayment mark as soon as possible. That could mean aggressively paying off your mortgage until you reach that point.
This can be achieved by making extra payments, or just paying more each month. However, you don’t want to neglect other debt that could be accruing costly interest in favor of paying off your loans. Make sure you do the math and find out which debt will be more expensive before neglecting other debt.
Once you do reach the 20% repayment mark, you’ll have to remember to apply to have your PMI canceled with your lender. Otherwise, it will be canceled automatically at 22%.
Buying a home is a very detail-oriented process, and there's a lot of important things you can overlook if you're not organized.
Home buyers generally have the opportunity to do a last-minute inspection of the premises to make sure everything's up to standards prior to closing on the property.
A real estate buyer's agent can accompany you on the final inspection or provide you with advice on what to look for.
If you've already visited the home a couple times and had the house professionally inspected, you're probably well-acquainted with any major malfunctions, flaws, or repair issues. In many cases, home buyers may reach an agreement with the seller to fix, replace, or make allowances for mechanical or cosmetic problems. While real estate negotiations and sales agreements are as varied as the people and properties involved, there are typically dozens of things buyers need to check on before they sign the final documents and accept ownership of the property.
Final Walkthrough Tips
As you're doing the final walk-through of the house, it's necessary to remember or have notes on the condition of the home when you last looked at it. You'll also want to have a clear idea of what appliances, fixtures, and window treatments are supposed to be remain in the house after it's been vacated by the seller. Depending on how close your final walk-through is to the actual closing, that has probably already happened.
If there's anything missing that the seller agreed to include in the sale, then that's an issue you'll want to discuss with your real estate agent or attorney. Any property damage that may have resulted from moving furniture and other belongings should also be discussed before final papers are signed. The same thing would apply to landscaping changes that appear to be inconsistent with the sales agreement. Your buyer's agent and/or lawyer can serve as intermediary in getting these issues clarified and ironed out.
To make sure your final inspection is thorough, it's a good idea to have a "final walk-through checklist" to help keep you organized and focused. You'll want to take a last-minute inventory of items that are supposed to be included with the property sale, such as appliances, lighting fixtures, furnishings, window treatments, children's play structures, hot tubs, and anything else that was agreed to in the sales contract.
Other items you'll need access to may include garage door openers, manuals for appliances and mechanical systems, warranties, invoices for repairs made, and remote control devices for things like ceiling fans, alarms, and other systems.
Your checklist and final walkthrough should focus on a variety of items, including the working condition of appliances, the electrical system, plumbing fixtures, and the condition of walls, floors, ceilings, doors, windows, and landscaping features. For a complete checklist, look online or consult your real estate agent.
Let's face it – buying a home can be difficult, particularly for those who are exploring the real estate market for the first time.
As a homebuyer, it is your responsibility to learn about the ins and outs of the housing market. By doing so, you can understand what differentiates a high-quality house from a subpar residence and proceed accordingly.
Furthermore, an informed homebuyer will know how to evaluate a home's exterior properly.
What does it take to conduct an in-depth assessment of a house's exterior? Here are three questions that every homebuyer should consider as he or she examines a home's exterior.
1. How do I feel about a home's exterior?
For many homebuyers, finding a house with an awe-inspiring exterior is a top priority. However, it is important to consider how you feel when you see a home's exterior for the first time.
A home's exterior should impress. At the same time, you need to evaluate a house's exterior in conjunction with other home features.
For example, a home may boast a massive kitchen and other dazzling interior features. On the other hand, a home's exterior may leave much to be desired.
Consider the pros and cons of a home's interior and exterior as you determine whether to submit an offer on a house. And if you need extra help along the way, be sure to consult with a real estate agent.
2. Will home exterior repairs be needed in the near future?
Examine a house's driveway, walkways and lawn as you conduct a home exterior evaluation. This will allow you to review the condition of these home exterior areas and determine whether repairs may be needed sooner rather than later.
Home exterior renovations sometimes can be costly and time-intensive. Thus, if you notice home siding that is cracked or other exterior issues, you will want to consider the time and expenses that may be required to fix such problems.
3. How much time will I need to commit to home exterior maintenance projects?
A home may have a beautiful exterior. In order to keep a house's exterior looking great, you'll need to conduct regular maintenance.
Consider what you will need to do to maintain a house's dazzling exterior as you explore all of the options at your disposal.
Will you need to hire a landscaping company to mow the lawn and trim the hedges? Or, are you willing to commit the time and resources necessary to perform assorted home exterior maintenance tasks on your own? These are just a few of the home exterior maintenance questions to consider as you review a property.
Of course, if you need guidance during the homebuying process, real estate agents are available to provide expert assistance.
A real estate agent possesses comprehensive housing market knowledge and can offer real estate insights that you may struggle to obtain elsewhere. With a real estate agent at your side, you should have no trouble examining a house – both inside and out – and making an informed homebuying decision.
A home inspection is a crucial part of the homebuying process. At this point, a home inspector will walk through a house with you and examine the property inside and out. If a home inspector identifies underlying problems with a residence, these issues could put your purchase in jeopardy. On the other hand, if a home inspection reveals that there are no major problems with a residence, you may feel comfortable proceeding with a purchase.
Ultimately, how a homebuyer approaches a property inspection can have far-flung effects. For those who want to achieve the best-possible home inspection results, we're here to help you get ready for a house inspection.
Let's take a look at three tips to ensure you know exactly how to approach a house inspection.
1. Prepare for the Best- and Worst-Case Scenarios
Regardless of how a home inspection turns out, you need to be ready. That way, you'll have a plan in place to act quickly, even in the worst-case scenario.
In the best-case scenario after a house inspection, you likely will take a step forward in your quest to complete a home purchase. Conversely, in the worst-case scenario following a home inspection, you may rescind your offer to purchase a house and reenter the real estate market.
It also is important to remember that you can always walk away from a house sale if an inspection reveals there are significant problems with a residence. For a homebuyer, it is paramount to feel comfortable with a house after an inspection. If a home raises lots of red flags during an inspection, a buyer should have no trouble removing his or her offer to purchase a house.
2. Ask Plenty of Questions
A home inspector is a property expert who can provide insights into the condition of a residence. Thus, you should rely on this property expert as much as possible.
Don't hesitate to discuss a home with an inspector. Because if you ask lots of questions during a home inspection, you may be able to receive comprehensive property insights that you may struggle to obtain elsewhere.
3. Analyze the Inspection Results Closely
Following a home inspection, you'll receive a report that details a property inspector's findings. Review this report closely, and if you have follow-up questions about it, reach out to the inspector that provided the report.
Lastly, as you look for ways to streamline the homebuying journey, you should work with a knowledgeable real estate agent. This housing market professional can put you in touch with the top home inspectors in your city or town. Plus, if you want to request home repairs or a reduced price on a house after an inspection, a real estate agent will negotiate with a seller's agent on your behalf.
Let's not forget about the support that a real estate agent provides at other points in the homebuying journey, either. If you ever have concerns or questions during the homebuying journey, a real estate agent will respond to them at your convenience.
Prepare for a home inspection, and you can use this evaluation to gain the insights you need to make an informed homebuying decision.