4/3/2013

Avoid These Common Mortgage Mistakes

Getting an Adjustable-Rate Mortgage (ARM)

Unnecessarily Paying Private Mortgage Insurance (PMI)

Any home loan that is worth more than 80% of the value of the home is required by law to have Private Mortgage Insurance, which will pay some or all of the loan balance if the homeowner becomes unable to make the payments on the loan. Of course, a great many homeowners today are not able to come up with a 20% down payment on their homes when they buy them, but it is possible to avoid this by getting a primary loan for 80% of the value of the home, make a 5% down payment and then take out a second mortgage or line of credit to cover the difference.

PMI should be avoided whenever possible because it is expensive and does nothing to reduce your mortgage balance when it is paid. It also requires the homeowners to estimate when they think that their loan value has fallen to 80% or less. Then, to get it removed, they must pay for another appraisal to prove that their mortgage is below the threshold to the lender.

Not Shopping Around for Rates