Isaac F. Davis asked:




Many VA borrowers ask about private mortgage insurance (PMI). PMI is a lender-charged fee on mortgages with more than 80% loan-to-value (LTV) ratio. VA loans never require PMI, and it’s important to understand why this is such an attractive feature.

For conventional and other type mortgage programs, PMI functions as insurance against loss in case of foreclosure. VA loans are backed by the federal government, so VA-approved lenders don’t need added PMI.

The savings a VA borrower can experience by not paying PMI are big. Typical rates for PMI on a $200,000 conventional loan are around $120 per month or about $1440 per year. A conventional borrower would need to bring twenty percent cash down at closing in order to avoid monthly PMI charges. Even though VA loans require no money down at closing, they never require PMI.

PMI is a reality for most other mortgage borrowers. And, once PMI is charged, there is no legal obligation by the lender or the servicer of the loan to cancel PMI. Even if the borrower pays the mortgage down to an 80 percent LTV ratio, he or she may still be paying PMI. To cancel PMI, the request must come from the loan servicer. This will often require an appraisal to verify that there is 20 percent equity in the financed property. An appraisal may cost the borrower from $300 to $450 and is yet another expense that VA borrowers can skip by using the veterans’ home loan program.

Sometimes people in the market for a home loan can be attracted to mortgage products marketed as no-PMI loans. Buyer should be aware, that loans advertised as “no PMI required” may simply be lender-paid PMI loans with higher interest rates. In these cases, the borrower would ultimately pay for the PMI indirectly through higher monthly mortgage payments. With VA loans, a borrower will never see PMI disguised as anything else, especially not jacked up interest rates to offset the cost of lender-paid PMI.

Certain non-VA borrowers may be able to avoid PMI by utilizing a second mortgage as a piggyback second. A piggyback second can sometimes help when a borrower has less than twenty percent down. For instance, an 80/10/10 program would mean that 80 percent of the value of the property is financed with the first mortgage, 10 percent is financed by the second and the borrower puts 10 percent cash down. A common disadvantage to the piggyback-second method of avoiding PMI is that interest rates on second mortgages are typically higher than those for first mortgages.

After analyzing all the different issues associated with PMI, a no-PMI VA loan looks better and better. No PMI is just one of the many advantages associated with the VA home loan program. Some of the other benefits of VA loans include:

Zero Down 100% LTV on purchase and refinance loans Less stringent qualifying standards Low interest rates No prepayment penalties Cash-out and debt consolidation refinance Streamline rate reduction refinance.

Diane

Frank Collins asked:




The home loan industry has changed stated income loans requirements if you don’t know yet. Most lenders now want full documentation loans and borrowers qualifying by using traditional debt to income ratio calculations. This directly affects the high cost housing markets like California, Florida, and the tri-state area of New York, New Jersey, Connecticut as well as parts of Maryland, Virginia, and Massachusetts. The reason is a lot of homeowners in these markets used adjustable rate mortgages and qualified by using stated income, stated assets and some instances no verification of employment.

The adjustments for adjustable rate mortgages (ARMs) will continue through 2010 and into 2011. Most homeowners will be unable to refinance due to loss of equity in their home, their job, or other hardship. So, their best option is to negotiate with their loan servicing company or let the home go into foreclosure. Homeowners need to understand that when they send in a payment to the lender or loan servicer, that is their primary business to collect debts not negotiate with the public to change terms or modify interest rates. Furthermore, in a majority of the cases the borrowers do not get through to the right person or worse yet call them back in a timely fashion until they are close to foreclosure.

If a borrower has a truthful hardship and the bank is slow to react or refuses to listen what happens is a foreclosure results and the borrowers credit is hurt for seven years. When you are facing this situation and getting nowhere with a business and you don’t get the results you need in a timely manner, you should hire an attorney who specializes in foreclosures and loan modifications!

There are many stories from borrowers who say they most banks will not discuss your situation unless you are behind two to four months in payments. Once that occurs, your hard earned credit scores from years of being responsible are wiped out. Furthermore, you may never be eligible for a home loan at market rates for quite some time.

The solution is to use a loan modification company that actually does have an attorney on staff to get answers and responses quickly so your situation is resolved quickly. You end up keeping your home, getting a loan modification, reducing your interest rate to an affordable level, and in some cases reducing your loan principal but there’s no guarantees. An experienced debt representative from the attorney backed loan modification company will call you to see if you do qualify based on certain criteria.

Although, some firms will take your money even if you don’t qualify. Those are the ones you have to watch out for. They hit you when you’re down. Work with a loan modification company that has success, years of experience, paralegals and an attorney on staff. You will feel more at ease knowing you have the best team working on a solution for you whether it be a short sale, a deed in lieu of foreclosure, tax ramifications of short sale, or a loan modification.

A lawyer who specializes in negotiating with lenders can achieve magical results especially if they find RESPA or TILA violations to use for leverage. A real estate attorney understands how to speak their language and get the lender to negotiate. When a homeowners uses an Attorney, the lender’s loss mitigation and legal department become very receptive and responsive. Get a good legal team on your side to stop foreclosure and get a loan modification!

Sara