If you have a Columbia SC mortgage and didn't make at least a 20% down payment, you probably have private mortgage insurance (PMI.) PMI protects the lender if the borrower is unable to make the mortgage payments. Because PMI premiums are paid monthly in the mortgage payments, they can add up. So, how can you avoid PMI or drop it later?
Avoid Columbia SC Mortgage Insurance
The first way is easier said than done. To avoid PMI make sure you borrow 80% or less of the home's value. In other words, put 20% down when you purchase. Some people – even if they have the money – are hesitant to wipe out their savings or spend the money they were planning to use to make improvements to their new purchase.
Sometimes, your mortgage lender will pay the PMI for you. Lender-paid PMI involves the Columbia SC mortgage lender paying for the insurance in exchange for a slightly higher interest rate. The lender pays the PMI company directly, while the borrower "repays" the premium in higher monthly principal and interest payments. Many homeowners like that because they can deduct all the interest paid, while the PMI premiums are not deductible. One word of caution, however: while you can request the mortgage insurance requirement be dropped in time, the higher interest rate will remain until you sell the home, pay off the mortgage or refinance.
Lenders are required by the Homeowners Protection Act to remove PMI once the mortgage loan balance has dropped to 80% or less of the home's original sales price. That could take a while, but there's a way to remove it more quickly. By watching the marketplace you can get an idea of your home's value. As your home appreciates, the remaining loan amount you owe is a lower percentage of your home's new value. This ratio – called the loan-to-value ratio, or LTV – will over time be at or less than 80%. When that happens, request that your lender drop the PMI requirement.
For documentation, your lender may require an updated appraisal of your home and will require you to pay for it. But remember, only approach your lender when you're confident your home's value qualifies for the 80% or lower LTV. Consult a real estate agent or use the Internet to monitor comparable homes in your neighborhood. An appraisal will probably cost $300-$500, so make sure you qualify to remove the PMI before you contact your Columbia SC mortgage lender. Lastly, some lenders require the borrower to keep the PMI coverage for a minimum of two years. Check with your lender to find out what they require.
Sometimes, simply asking your lender to do away with PMI won't work. An FHA loan, for example, requires PMI for the entire loan term. In that case, you'll need to refinance – either with a non-PMI required FHA loan or a conventional loan. However, be smart. Refinancing just to get rid of the PMI insurance premium probably isn't a good idea since closing costs aren't cheap. It may cost more out of pocket than it's worth. Consider refinancing only if it makes good financial sense.
Get more mortgage tips and information in our Columbia SC Mortgage Info section of articles to your right just below Columbia SC Real Estate Categories. And check us out on Facebook and Twitter as well.
Most Columbia SC home insurance policies cover your home, its contents and personal liability. Specific types of coverage will vary and there are usually exclusions to your policy. Here are a few normal parts to all home insurance policies.
Parts of a Columbia SC Home Insurance Policy
Property coverage. The home and any attached structures are usually covered in your policy against most types of damage (see the exclusions listed.) Structures like unattached storage sheds may also be covered up to a percentage of your total insurance policy.
Exclusions to your insurance coverage are listed in your policy. Typical exclusions are:
- Earthquake damage
- Flood damage
- Standard or normal wear and tear
- Nuclear hazards
- Neglect or intentional loss
Personal property. Personal items including furniture, furnishings, electronics and other items are covered in your policy – usually up to a preset percentage of the total policy. The percentage ranges from 40-60%. Some belongings not on the insured premises may also be covered up to a certain percentage. Items located in a vacation home or secondary residence may be excluded – typically because they should be insured by a policy on that property.
There are also exclusions for personal property, however they are normally protected against loss from:
- Fire, lightning, wind, or hail
- Vehicles or aircraft
- Explosion
- Vandalism or theft
- Accumulated weight from snow, sleet, or ice
- Water or steam
- Artificial electrical surges
- Freezing of plumbing or appliances
- Riots or acts of civil disobedience
Personal possessions such as jewelry, artwork or other valuables may not be fully covered by your Columbia SC home insurance policy. You will need to add additional coverage with riders or umbrella policies to fully insure them.
Personal liability. Your policy provides coverage for bodily injury to others as a result of an accident on the premises. It also covers damage to their property for which you may be held liable. Further, coverage includes actions by family members both on and off your property. Typical coverage may also include medical payments to injured parties regardless of who was liable.
Loss of use. If you incurred damage to your home severe enough to prevent its usage, the expenses for loss of use are covered. Examples are the costs of hotel rooms, meals and required travel. The limits of coverage is usually a percentage of your policy, typically about 30%.
Expenses and other coverage. If you have expenses requested by your insurance company as a result of a lawsuit, they are covered. You may also be insured for other occurrences such as damage to landscaping, loss of rental income or other specific coverages.
If you're unsure of what's covered in your Columbia SC home insurance policy, review your policy carefully or call your agent.
You can find more tips and articles pertaining to Columbia SC home insurance in our Columbia SC Insurance section of articles just below Columbia SC Real Estate Categories to your right. And don't forget, we also post tips on Facebook and Twitter. Find us there as well.
The Columbia SC housing market can expect a continuation of many of the factors it experienced in 2015. Zillow recently released their 2016 predictions for the housing and real estate markets. Let's take a look at what we can expect.
Columbia SC Housing – Challenges Ahead
According to Zillow, many of the recent market trends will linger longer. Some will turn into challenges facing prospective home buyers.
Affordability will worsen.
While many Americans have known this for awhile now, home ownership simply might not be a reachable goal for some.
First time home buyers will be older.
In 1975, the median age of a first time home buyer was 29. Today, it's 33. This trend is expected to continue as millennials delay important life decisions such as getting married and starting families. In addition, many young people will continue to have a hard time moving from being renters to prospective home owners. The available inventory of starter homes remains low and many millennials have been unable or unwilling to save money for a down payment.
Home price growth will still outpace income.
While home values will grow at a slower rate than they did in 2015, they will still rise. Experts predict a return to increases of around 3.5%, which is the historical average. Home affordability is expected to get worse because income growth has remained stagnant — especially at the bottom end of the job spectrum. It is expected that the bottom third of working Americans will be priced out of home ownership.
Rents will continue to rise.
The rental market is a classic case of supply and demand. There is a high demand for affordable rental units and currently a limited supply. Zillow expects that trend to continue well into 2016.
Suburban areas will grow in popularity.
The affordability crisis will dramatically affect the urban centers. This means people will seek housing in the surrounding suburbs. There they will expect many of the amenities the cities offer – and close access to the urban centers – but with more affordable housing costs.
Get more updates on the Columbia SC housing market and news that affects the market by checking back here from time to time, and by checking out the other articles in our Columbia SC real estate news section of articles under Columbia SC Real Estate Categories to your right.
Columbia SC mortgage experts say 2016 may bring greater borrowing opportunities for homebuyers. Although you still have to qualify for the amount you want to borrow, more lenders are reporting a loosening of credit standards. Fannie Mae says loan underwriting is expected to ease in the near future. Let's examine why this may be the case and what the effect may be.
Columbia SC Mortgage Industry to Aid Housing
Relaxed credit requirements will likely help the housing market. Tight credit standards and a short supply of affordable homes for sale have been cited as reasons for the housing market's slow recovery. In a recent survey of Fannie Mae lenders, 16% said they expect a relaxation of credit standards in 2016. Lenders expecting a tightening of standards dropped to 2%. The survey was conducted by Fannie Mae and represented a cross-section of nearly 200 lending institutions.
While credit may improve, affordability for first-time home buyers will remain a challenge. With the number of starter homes on the market, home price appreciation is still higher than growth in household income. However, the easing of credit standards should provide some assistance to offset affordability.
As the prospect of rising interest rates looms in 2016, many lenders expect more competition. This may persuade them to ease some of the lending safeguards added after the last housing crash. Fannie Mae, Freddie Mac and the FHA have all worked to clarify lender liabilities for bad loans. They have been pushing hard for lenders to ease their credit practices to help the housing market recover.
In addition, Fannie Mae recently announced a new credit scoring program. Dubbed "trended data," the scoring model shows a broader review of the credit history of borrowers. That should improve the credit scores of some home purchasers. According to a recent study by TransUnion, trended data would increase the percentage of borrowers in the "super prime risk" tier from 12% to 21%. Those borrowers would get better access to new mortgage loans at the best rates.
Despite the potential relaxation in credit standards, a recent survey by the National Association of Realtors revealed roughly 66% of consumers perceive mortgages as "somewhat difficult" or "very difficult" to obtain in today's market.
Find more articles about the Columbia SC mortgage market in our Columbia SC Mortgage Info to your right just below Columbia SC Real Estate Categories.
We also post on Facebook and Twitter. Follow us there for other Columbia SC mortgage information, too.