Section 203(h) Mortgage Insurance For Disaster Victims - The FHA to the Rescue

By J Hodson

Have you been the victim of a major disaster such as a flood, tornado, or hurricane within the last year? If so then the Federal Housing Administration (FHA) might be able to help you with your next mortgage. The FHA offers a program to help victims of such disasters rebuild or purchase a new home under Section 203(h) of the National Housing Act.

What is the FHA

The FHA is a division of the Department of Housing and Urban Development (HUD). The agency grew out of the National Housing Act of 1934 and was created to fix many of the problems that plagued the mortgage industry during the Great Depression.

The purpose of this new agency was to lower down payments on mortgages and increase home ownership by insuring those mortgage loans against default. Because the loans were insured by the FHA against the borrower defaulting, lenders were willing to loan their money to riskier borrowers. This made mortgages available to more people.

It should be noted that the Federal Housing Administration is not a lender. They simply insure mortgages issued by various FHA-approved lending institutions.

How 203(h) FHA-Insured Loans Work

The FHA 203(h) mortgage insurance program for disaster victims was designed to help borrowers in areas declared by the President to be official disaster areas. The program was created to help victims in those areas during the first year following the disaster to become new homeowners or for individuals who where previously homeowners in the area, to help them rebuild or buy a new home.

The FHA 203(h) loans offer many of the same benefits as other FHA-insured loans and more. Some of the benefits of the program include:

• No down payment: Unlike borrowers insured by other FHA programs, disaster victims are allowed to finance 100% of the value of the home up to the FHA loan limits allowed in their area.
• Limited Closing Fees: The FHA limits many of the fees normally charged by lenders for processing and closing a loan.
• Relaxed Credit Requirements: Unlike most conventional loans these days, FHA-insured loans are available to individuals with less than perfect credit.

Applying for a 203(h)-Insured Loan

Again, if you live in an area declared a Federal disaster area within the last year and your home was damaged or destroyed as a result of the disaster then you are eligible to apply. Application for mortgage insurance under Section 203(h) must be made through an FHA-approved lender within the first year following the disaster.

J Hodson operates FHA-Loan.org, an online resource center dedicated to educating consumers about FHA loans.

Visit the site to learn more about the various FHA loan programs available to borrowers in the United States and its five territories. The site includes a wide range of information about these programs including FHA loan limits by county, borough, or parish for all 50 states and the five U.S. territories.

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What is Lenders Mortgage Insurance?

By Michael Sterios

Lenders Mortgage Insurance (LMI) protects the lender in the event that a mortgage borrower defaults on their loan. The insurance policy is only required for home loans that have a balance exceeding 80% of the value of the property at application.

Traditionally, home loans were only issued up to a maximum of 80% loan to value. This meant that the borrower needed to put down a deposit of at least 20% if they wanted to buy a home with a mortgage. This was done because the lower loan to value ratio resulted in a lower risk mortgage for the lender. In the case of default, the lender could repossess and sell the property at a discount to recover their funds.

However as time has gone by, some lenders have allowed people to borrow more than 80% of a property's value. To offset the risk, lenders take out an insurance policy against the balance of the loan above 80% of the value of the property. That way, if the loan goes into default, the lender can recover some of the balance of the mortgage from the insurance company.

Although the LMI protects the lender, it is paid for by the borrower by way of a lump sum payment. While many types of insurance policies allow for regular monthly payments, the LMI premium must be paid for when the mortgage is taken out. Because LMI is usually take out by people who were unable to save for a deposit on their home, it is unlikely they will be able to pay an expensive premium as a lump sum. For this reason, many lenders allow borrowers to add the premium to the balance of their mortgage and pay it off over time.

The lender will usually have a commercial arrangement with one insurance company with whom they put all their LMI cases to. This means that you will not be able to shop around for an insurance company if you want to apply for a home loan with a particular lender. The lender will also apply for the LMI for you - there is no need for you to apply separately.

LMI only insures the lender. It is not a replacement product for building or contents insurance, or for personal insurances such as life assurance and income protection. The borrower receives no benefit from the LMI, except for the fact they will not need to pay for a large deposit to buy a home. Borrowers should therefore seek to protect themselves from financial distress by way of a personal insurance policy.

Being approved for LMI is not the same as being approved for a home loan. If you are buying a home you will still need to meet the lender's normal requirements in order to be approved for the mortgage.

If you are looking to take out a high loan to value mortgage on your property you should speak to a mortgage broker. They will be able to select a lender which will offer the most beneficial home loan and the cheapest LMI to suit your particular circumstances.

For expert advice on Lenders Mortgage Insurance from an independent Mortgage Broker visit Moneynet.com.au today

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Article Source: http://EzineArticles.com/?expert=Michael_Sterios

Different Types of Mortgage Insurance

By Milos Pesic

There are different kinds of mortgage insurance. Private Mortgage Insurance (PMI) is insurance that protects the lender - the mortgage company. Many home buyers cannot afford to make the traditional 20% down payment on a home. They can make SOME down payment, but they don't have and can't get the money necessary to make a 20% down payment. With less than a 20% down payment, the lender is taking a larger risk. PMI is their guarantee that they won't lose money. The buyer pays the monthly premiums for PMI.

The Federal Housing Administration (FHA) and the Veterans Administration (VA) are both governmental entities that guarantee mortgages. Borrowers must meet certain requirements in order to qualify for an FHA or VA guaranteed loan.

Basically, mortgage insurance works like this. Let's say that you want to buy a home that sells for $264,000 - that was the average price of a home in the U.S. in October 2007. A 20% down payment would be $52,000. Not many people can come up with that much cash all at one time. If you can make a down payment of, say, $15,000, a private mortgage insurance policy will be written to insure the balance of the usual down payment, and the premiums will be added to the monthly payment.

Many people do not realize that the PMI policy can be canceled after the mortgage has been reduced and/or the home has appreciated in value.

In the past, buyers were not informed that mortgage insurance could be canceled when the loan-to-value ratio decreased to a certain point - usually 78%. The Homeowner's Protection Act of 1998 made it mandatory for companies to inform buyers each year about the terms and status of their mortgage insurance and give them the option to cancel when it was no longer required by law.

Milos Pesic is a mortgage agent and owner of a highly popular and comprehensive Loans and Mortgages informational web site. For more articles and resources on different types of mortgages and loans, mortgage refinancing, mortgage lenders and brokers and much more, visit his site at:

=> http://mortgage.need-to-know.net/

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Home Owners Need Home and Mortgage Insurance Coverage

By River C.

Any one who owns a home, and that includes the majority of us who are making monthly payments to a home and mortgage company, must have insurance coverage on their home. If the home is not paid for yet the mortgage company will insist there is at least hazard insurance cover. The cost of the insurance policy is generally included in the monthly mortgage payments. It is considered part of the PITI that constitutes the total payment we must make each month. The initials PITI represent the Principal, Interest, Taxes, and Insurance.

Taxes and insurance come from escrow accounts

Typically the home buyer takes out a "secured loan" when purchasing a home. This means they have the real estate and home as collateral and if the mortgage payments are not met, they can lose the house to the mortgage company. The term mortgage means a mortgage loan which is considered a "secured loan". Along with the principal payments which must be made on the balance of the home each month, there are also taxes and insurance which must be paid, usually yearly. Taxes are generally paid to the county in which the home lies, while insurance payments must go to an insurance company which provides various types and amounts of coverage.

Home and mortgage insurance cover is usually based on how much the home is worth and that amount will usually increase year to year. The mortgage company makes once a year payments to cover both the taxes and the insurance premium and then will add this amount on to the mortgage payments to be made by the homeowner each month. This amount is deducted from an escrow account which is an estimate of taxes and insurance cost for that year. Mortgage companies then determine how much is to be added on to the PI or principal and interest payments to cover the amount owed for the TI or taxes and insurance, prorated over the length of one year. In other words, one twelfth of the total cost of the insurance premium and one twelfth of the taxes will be added on to the monthly payment. This way the home owner does not need to pay the entire tax bill or insurance premium at one time.

Types of insurance coverage vary

Basic home and mortgage insurance cover, generally called hazard insurance, is designed to protect the home buyer from loss if damage occurs to the home. The type and amount of coverage depends on the location of the home, the value of the home, and many other factors. The structure itself as well as personal property inside the home and garage will be evaluated and their worth may increase year by year. Loss of use of the home, which may include added living expenses while repairs are made to the home, is usually included in the basic policy. Fire, flood, earth quake, hurricane, and other disasters may be part of the policy and sometimes involve extra coverage.

Liability coverage should be included in home and mortgage insurance and will provide coverage in case of accidents at the home and in some policies, cover the home owner when away from their home. Visit our website for more information.

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How to Cancel Private Mortgage Insurance (PMI)

By Peter Bivolarsky

The most common ways to cancel private mortgage insurance (PMI) are two, but both of them are relying on your payment of at least 20 percent of the principal on your loan. This is simply because lenders feel concerned they won't recover their investment in case a loan provider defaults just before reaching that repayment threshold.

To start with, it is possible to request your lender to cancel your private mortgage insurance once the whole of your down payment and your principal pay-down equates to 20% of the initial loan. In case your mortgage payments are current plus your finances are good, there is a good chance of success.

The other main method to cancel PMI is to hold on until you have got 22 percent equity in your home, according to your home's worth during the time you got out the loan. Should you achieve this point, your lender and mortgage insurer must instantly cancel your private mortgage insurance, under the Homeowners Protection Act of 1998.

One big catch: your home loan repayments need to be current. And also, the federal law on canceling PMI only relates to mortgages that are closed on or after July 29, 1999, even though your state could have further protections.

Additionally you may inquire your lender to cancel your private mortgage insurance sooner in the event the price of your property has increased. For instance, if you have made a 10 percent down payment on your home, then redesigned the living room and increased the home's worth by 10 percent, you might have a case for earlier private mortgage insurance cancellation. Your lender could request you to cover an accepted appraiser to verify the home's new worth.

By law, mortgage servicers need to give a number for borrowers to phone to ask about PMI guidelines. Furthermore, you could contact your mortgage expert or lender to inquire about regarding to the canceling of PMI when you reach the 20 percent threshold.

Learn how to cancel private mortgage insurance at the www.MortgageLoanLibrary.com.

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