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Private Mortgage Insurance: How Does It Work

Private mortgage insurance (PMI) is a policy that protects the lender in the case of default by the borrower. The lender is assured of being compensated for their loss if you fail to make your monthly mortgage repayments. This is not a policy that protects you.

Why Do You Need PMI?

The role PMI plays in financing is simple: it ensures cash flow. The lender needs to know they will be paid back even if there are some extraordinary circumstances.

Any loan where the borrower has less than a 20% stake in the property must have PMI. If you put down 3.5%, you can obtain a 95% LTV mortgage without premiums, but as soon as that drops below 80%, you will need to get PMI for your security.

The benefits of having PMI are that it allows you to finance more than just 80% of the value of your home.

Remember, you do not need PMI if you pay 20%. The lender will give you a lower interest rate because they’re protected in case something happens.

How Does It Work?

When you receive your first billing statement, the lender will give you an annual percentage rate (APR) that includes PMI. Many people think this is their interest rate for the year; it’s not. It’s simply a way of allowing you to see how much PMI you will be paying each month.

Your mortgage lender will decide your true APY (annual percentage yield) and will depend on your credit score and down payment amount.

When Do You Need PMI?

For conventional loans, the lender must ensure that you have PMI once your LTV (loan to value) drops below 80%, but again, there are exceptions. If you opt for an FHA loan, which means you’re borrowing less than 95% of the home’s worth, then you may not need any premium payments at all.

If the borrower is on the hook for PMI, they’ll see how much of each payment goes to principal, interest, and PMI on each billing statement.

For example, if you made $1,000 in payments over one month, your lender would charge you $200 toward your principal, $300 toward interest, and $100 toward PMI. This gives you a clear understanding of where your money is going each month.

What Happens If You Do Not Have PMI?

If you are not paying for private mortgage insurance, then the riskiest part of the loan is what’s called “uninsurable.” Since the lender will assume no one could pay them back, they will charge you a higher interest rate.

Basically, by not paying for PMI, the lender makes the riskiest part of your loan uninsurable and charges you more than if you had insurance in place. You may then be asked to pay an extra month’s payment each year to compensate the lender for this risk.

Contact Pacific Lending Group for Any Mortgage Insurance-Related Advice

If you have any questions about private mortgage policy, please contact a representative from Pacific Lending Group. We will be glad to answer any of your mortgage questions and help you with your home purchase or refinancing needs. Call 954-227-4727

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A Refinance Mortgage Can Affect Your Credit Score?

Refinancing may seem like a viable credit financing option in many circumstances. It involves replacing an existing loan with a new loan using the fresh mortgage to pay off the first one. Borrowers often choose loans with lower interest rates to refinance old loans. Also, a refinance mortgage allows borrowers the freedom to channel more savings into their savings account. Read more

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How To Lower Your Mortgage Rate Without Refinancing

Mortgage interest rates have seen record lows for the better part of this year, thus encouraging a surge in mortgage refinancing. However, we must still acknowledge that not everyone wants to replace their current home loan. Borrowers often wonder whether there’s a possibility of lowering mortgage interest rates without necessarily refinancing. Yes, you can lower your mortgage interest rate without refinancing, although the options available may be very limited. If you are facing financial downtime, you may qualify for a mortgage rate reduction. But most times, you’ll either need to turn to a new route to cut your mortgage costs or work towards getting a refinance approval. Here, let’s review some steps that you could leverage to lower your mortgage rate without refinancing.

1. Simply Call and Request a Lower Mortgage Rate

This may not necessarily be a conventional step, but it has worked for many people. We’ve heard of several cases where folks obtain lower interest rates just by calling their mortgage lender and requesting one.

Of course, you’ll need to indicate during your call that you do not want to refinance with them; otherwise, they may take you towards that route. Perhaps, it won’t be as easy as you probably want, but sometimes it’s just a matter of being direct with your request if you want a lower mortgage interest rate.

2. Speak to an Expert To Help You Do a Rate Review

Another option that you could try is speaking to an expert about your chances. Most South Florida mortgage lenders would be ready to look at your situation and offer recommendations based on current trends. Here at Pacific Lending Group, we have experts that can walk you through the rate reduction process by conducting a rate review for you. You can leverage our lender review service to compare your interest rate to new customers’ rates. This service helps you to assess your likelihood of being eligible for lower mortgage rates.

3. Hire a Mortgage Broker to Help You Negotiate

If you would feel more comfortable leaving the negotiation to an expert, then do. Mortgage brokers would usually help to conduct a rate review and tell you your chances. They’ll also justify to your lender why you should get a lower rate. However, we recommend opting for a professional broker. The best way to know whether a mortgage broker can help you handle the job is by looking at their records. Check what past clients are saying about their services. Ask about their success rates and how they go about the process.

4. Look Into a Recast as An Alternative For Refinance

Loan recasts are not as popular as refinancing, but they can also lower the monthly payments on your mortgage. The only difference is that you’ll need to adjust the amortization schedule of your loan. One of the most significant benefits of choosing non-refinance options is that you won’t need to reset the clock on your mortgage.

Conclusion

That’s it, some practical steps to follow if you want to lower your mortgage rates without necessarily refinancing. It’s often not as difficult as you think, as long as you are willing to follow the right route. Contact the experts at Pacific Lending Group to learn more about the possibilities. Call 954-227-4727

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5 Things to Know Before Purchasing Your First Home

Buying your first home in South Florida can be a meaningful time in your life. Not everyone reaches the point where they can afford a home, and when you’re finally at that point, you want everything to be perfect. However, a lot goes into buying a home, and you must ensure that you know all aspects before you begin buying one. Here are five things you should know before you start looking at homes to potentially buy:

Your Budget

Before looking at homes in your area or another town, you need to know what budget you can work with. Regarding your budget, it’s not the money you have in your bank account currently but all the money you would be able to invest in your home in the future too.

You might want to think about getting a loan or looking for a home mortgage to go along with your property purchase. You need to think about several aspects before looking at homes. Once you have settled on a budget, you can narrow down your search for homes using that budget as a starting point.

Mortgage Rates in Your Area

South Florida has varying mortgage rates, depending on which mortgage provider you’re approaching. You can find a provider available throughout the area, so you can work with one lender no matter where you’re looking to buy your home.

When you know your mortgage rates, you can plan better and find homes that fit the bill and your budget too. Mortgage rates will also ensure you know how much you will be paying in the future for your home.

Timeline for Possession

Once you are in the process of discussing the purchase of a home, you need to know what the exact timeline would be. Sometimes, the seller will need additional time to move out of the home or might want to rent it from you for a while. In these cases, you must know when you can move in.

From the time you put a down payment on the home, the process of purchasing the property officially starts. Ensure you know when you can move into the property before you start the process.

Land Record and Location

While South Florida is one of the most earthquake-free zones in the world, it doesn’t mean you don’t check the land your home was built on. Wildfires, tropical storms, and hurricanes can happen in the area, and you want to ensure that you know what you will be exposed to.
Once you know the location and the land record, you can also get started on disaster insurance for your property if required.

Hidden Charges

You will need to be reading all documents relating to the purchase of the property in detail to ensure that you’re not paying any hidden fees. You might need to pay estate charges or processing fees that you were unaware of. Ensure you’re reading everything, including the fine print, to save yourself from unnecessary expenses.

Looking to Finance Your Home? We Can Help

When you’re looking for a mortgage to help you buy your first home, Pacific Lending Group can help. You need to know your options as a first-time buyer and what you should be watching out for. Our experts can help you be more financially prepared to buy your first home without any hassles. Contact us at 954-227-4727 to get started on your home mortgage process with us.

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Tips for First-Time Home Buyers

Our loan experts can guide first-time home buyers, better understand all their mortgage options to have a complete understanding of the process that entails purchasing a home. Your unique circumstances, budget, and needs will help us develop a plan to assist you better and purchase your desired home. Moreover, you will feel confident and in control of your journey as a new homeowner. Read more