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How To Calculate Lender Mortgage Insurance

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home loan mortgage conceptBuying a home includes incurring a variety of fees that must be paid to multiple involved parties. If you are financing your new home, you may notice that lender mortgage insurance has been added to your docket of bills to pay. Not every mortgage will require lender mortgage insurance as one of the fees, but if yours does, it is important to calculate how much this additional cost will impact your repayment each month.

Here’s how to calculate lender mortgage insurance and more information about the various types that you may encounter.

What Is Lender Mortgage Insurance?

Lender mortgage insurance is a type of protection that buyers pay for on behalf of their lender when they take a mortgage, but only under certain conditions. In the United States, lender mortgage insurance is more often called PMI, or private mortgage insurance.

When a lender offers a mortgage to a purchaser who is paying less than 20% upfront, the lender is taking a risk. In this instance, there is a higher remaining value outstanding; if the buyer defaults on the loan, the lender is forced to foreclose, causing them to lose a substantial portion of their investment. To protect their investment, lenders require buyers to purchase private mortgage insurance if their down payment is below the threshold.

Generally, lenders will expect buyers to agree to PMI if the down payment on the property is less than 20% of the total value of the home value. An example would be if a buyer is purchasing a $200,000 home and providing $5,000 as a down payment, they would be required to purchase PMI. If they put $40,000 as a down payment, PMI would not be necessary.

In most circumstances, PMI is not required for a long term. Once the home has 80% (or 78%, in some cases) loan-to-value-ratio, the purchaser can request that the PMI be removed. This will likely require an appraisal to assess the value of the home against the outstanding loan.

How to Calculate Lender Mortgage Insurance

care about real estate services and the idea of real estate agents offering interest in installments to their customersUnderstanding how much your lender mortgage insurance will impact your monthly bill is a critical part of planning for your financial future. On average, PMI will typically cost from .5% to 2% of your total loan balance cumulatively over an entire year. Divide that into 12 monthly payments and you will have an idea of how much your PMI will change your monthly payments.

However, different types of PMI may have different costs:

  • Borrower-paid mortgage insurance – By far, this is the most common type of lender mortgage insurance. This reflects the .5% to 2% estimate.
  • Single-premium mortgage insurance – The option to pay all of your PMI at once as a lump sum. It is still usually calculated using the .5% to 2% estimate, but be aware that if you refinance or sell soon after purchase, you do not get a refund of any PMI paid.
  • Lender-paid mortgage insurance – In this scenario, the lender pays for your PMI. However, in exchange, you take a higher interest rate on your loan. This can result in lower monthly payments, but your interest rate may rise by around 1% which should be factored into your costs.
  • Split-premium mortgage insurance – This is a hybrid of the first two options. You pay some as a lump sum and some monthly. The upfront premium usually ranges from .5% to 1.25%.

Factors That Impact the Cost of Mortgage Insurance

man working on calculator to find a refinanced mortgageCertain elements can make your private mortgage insurance more, or less, expensive. PMI is based on numerous factors:

  • The loan term (length of the loan)
  • LTV (loan to value ratio)
  • Your credit score (or that of anyone on the loan)
  • The type of interest rate you agree to (fixed, adjustable)
  • The amount of coverage the lender requires
  • Factors considered to be especially risky, such as jumbo loans, investment properties or second houses

While you may not be able to control some of these factors, others are more flexible. If you are concerned about the amount of lender mortgage insurance that you are being asked to pay, consider which of these elements you may be able to negotiate. It is also wise to avoid making big purchases (including cars or furniture) before you close on your home allowing your credit score to remain as high as possible.

Trust the Experts to Help You Understand All of the Factors of a Home Purchase

Whether you are purchasing a residential home, a commercial property or an investment property, you may be required to pay private mortgage insurance. The experts at Mathis Title Company can help you understand how to protect your new investment, from planning for PMI to purchasing a secure title insurance policy that protects your purchase. Contact Mathis Title Company to learn more or to schedule an appointment to get started.

The Different Types of Title Insurances and Choosing the Right One For Your Needs

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man showing new house keysAmong the many decisions you will need to make when you purchase a home is whether you should buy title insurance and if so, what kind. In the majority of cases, purchasing a title insurance policy is well worth the investment, but you need to ensure that you are paying for coverage that will actually help you.

If you have already started to do research, you may have come across a number of diverse title insurance types: fee policies, lender’s policies, owner’s policies and more. Here’s what you need to know about what all these terms mean and how you can secure insurance that properly protects your home.

What Does Title Insurance Do?

Title insurance is a type of protection that safeguards your investment in your new home. If a problem arises with the deed or your ownership of the property (and the equity you have put into it) may be called into question. In the worst cases, you could even be forced to return the home to the rightful owner, even though you already “purchased” it and may be living in it.

Title insurance covers a wide variety of potential pitfalls, from fraud and forgery in the home’s record history to previously unknown liens on the property. If you buy a home and then it is discovered there are liens against it, you will be responsible for paying those back, even if you had nothing to do with why they happened in the first place.

Title insurance can also protect you from people trying to take ownership of the home. For example, if someone was given the home in a will but the court could not locate them, they may show up later claiming that the home is theirs. Title insurance protects you from situations such as these, either by resolving the issues directly or by assisting with legal fees.

Lender Or Loan Policies

estate agent with renterThe first exposure many home buyers have to title insurance is when they must pay a fee for a “lender’s policy” (also called a loan policy) prior to closing on a home. If you are financing your home, your lender will typically require you to purchase this title insurance policy for their interests in your property.

This is understandable as they are providing the money to help you purchase your home. If a title issue arises that causes you to lose your home, they would lose their investment as well. Be aware, however, that while it may seem that a lender’s title insurance policy, or loan policy, would provide coverage for you, it does not. It protects only the lender.

Owner, Buyer And Fee Policies

If you want protection for yourself against potential title issues, you will need to purchase owner’s title insurance. While you may have heard of a buyer’s policy or fee policy, rest assured that these are all the same thing: insurance for the purchaser/owner of the home. For this protection, you must purchase an owner’s policy which is separate from the lender’s policy, and incurs two separate fees.

Riders To Alter What Title Insurance Covers

In the end, there are only two primary title insurance types, though they are known by a variety of names. In addition, adding riders to the title insurance policy can change what type of protection it offers. While these specific variants do not have individual names, they can lead to different types of title insurance coverage depending on the situation. For example:
accountant makes a note on how much the lender’s title insurance policy will cost for a case

  • Market value riders – Ensure that the value of the property tracks with the market, rather than with the original purchase price. This is important for determining some types of damages when a claim arises.
  • Zoning additions – Some title insurance policies can have zoning or border provisions added to contribute extra protection. These protect against a home being improperly zoned, as well as disputes that arise when there is a disagreement about the legal location of the border of a property. Depending on the specifics, it may also cover disputes about how easements may be used and where they are located, as well as other issues that commonly present problems.

Obtain Your Title Insurance From A Reputable Agency

Whether you are purchasing your first home or have been through the purchasing process multiple times, do not neglect title insurance as part of the process. The experts at Mathis Title Company would be happy to help you understand how to secure the best title insurance for your needs and parse all of the potentially confusing language surrounding policies. Contact Mathis Title Company to schedule an appointment to get started or to learn more about our services.

4 Times Title Insurance Could Save You Big Time

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title insurance written on paperAmong all of the other documents and coverages that must be completed when you purchase a home, be sure not to overlook title insurance. This type of insurance coverage can safeguard you should you find yourself having to defend your ownership of the property which can incur considerable legal fees. Here are some of the most common times when having title insurance could save you from stress and financial damage.

What Title Insurance Actually Does

Title insurance is a type of coverage that is specifically made to protect the owner of a home or property. It is used to fight against any claims that the owner (you) is not entitled to own the property, or if there is a problem that makes the owner responsible for something that they were not aware of before they completed the purchase. The types of protection offered will depend on the policy, but in general, they will include the following:

If An Unknown Heir Or Inheritor Appears

One of the ways that a new owner can come into possession of a property is if they are an heir or someone who is set to inherit that property. However, sometimes, when the time comes for the heir or inheritor to claim the property, they cannot be located. In this situation, the home would be made available for sale to the public. If this potential heir or inheritor later appears and makes a claim to the home, you, as the new homeowner, could be required to surrender the property to them without a title insurance policy to protect you.

What If The Title Insurance Paperwork Has Been Forged?

fake document checkThe deed to a home is a piece of paper and as with any other document, it can be forged or tampered with at any point. For example, someone may forge title papers to indicate that they are the true owners of a home and thus have a right to sell it. Often, this sort of scam happens when someone who is not the actual owner wants to make money by selling the property. If you purchase a home that is sold by someone without the rights to do so, then you did not legally buy the home from the owner and therefore, you do not own it either. Title insurance can help you resolve this situation.

What If Liens Have Gone Unreported?

One of the most common types of protection that title insurance offers is against undisclosed liens. A lien is a judgment against a property for debt. One example is if a previous property owner had work done to the home and did not pay the contractor, the contractor may have filed a lien against the home to recover that money upon the sale of the home.

Another example would be a loan that any previous owner took out that used the property for collateral and was not paid. If this paperwork is overlooked and then later discovered, you as the owner would be responsible for paying that lien off even if you had no part in creating the debt.

What If Documents Have Been Improperly Executed?

Many types of documentation errors can lead to confusion or dispute about who owns a property outright. This need not be malicious in nature, as in the case of forgery. Instead, simple processing and data entry errors can also cause issues that could threaten your ownership of the property.

title insurance documentSince title documentation goes through so many hands—the seller, the buyer, the real estate agents (if any), the county clerk and more—it is possible that the documents will be executed improperly or mistakenly changed or indexed. Title insurance can help you to protect your purchase if one of these mistakes ends up being costly or threatens your rightful ownership of the new property that you purchased.

These represent just a few of the types of protections that title insurance can offer. If you are interested in other safety features such as coverage against zoning and border disputes and more, an expert can help you put together a blend of coverage that is right for your situation and goals.

Trust The Title Experts To Help You Protect Your Investment

Whether this is your first property purchase or you are a veteran of the real estate market, do not neglect a robust title insurance policy to help protect your investment. The experts at Mathis Title Company would be happy to help you choose coverage that suits your needs and budget. Contact Mathis Title Company to learn more about our services or to get started on a policy for your goals.

Why Owner’s Title Insurance Is Essential When Owning A Home

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Among the many considerations when buying a home, whether it is your fifth or your first, are important insurance policies including homeowner’s insurance. However, one coverage not to overlook is title insurance. Title insurance is a critical element for protecting your investment in your new home, commercial building or property, but it is important to read the fine print. Otherwise, you may come away from the sale without the owner’s title insurance that you thought you had.

What Title Insurance Actually Does

Title insurance is a type of protection that specifically applies to a property’s deed or the history of how the property has changed hands over the years. This may not seem to be anything worth spending money on, but a large number of issues can arise with the title of a property, many of which can jeopardize not only the money you have invested in the purchase but also your ownership and ability to live in the residence.

property owner reading statements on a contractOne of the most common problems faced by those without title insurance is that an issue has occurred at some point in the history of the property; this could arise due to documentation errors or even fraud. If your property is affected by such a mistake, this may mean that the person you bought the property from was not the legal owner and thus, they did not have the authority to sell the property to you. In turn, you then are not the legal owner either. In a situation like this, those without title insurance may need to pay substantial legal fees to defend their right to own the building, or they could lose the property entirely.

Another problem that can arise with a deed is undisclosed liens and other judgments. If you purchase a home and afterward discover that there is a lien on the property, this means that the building is associated with a debt that must be paid. The current homeowner is responsible for clearing all loans from the property, regardless of whether or not that person was responsible for generating the debt in the first place. A title insurance policy can shield you from the responsibility of having to pay liens that were undisclosed when you bought the property.

Why Owner’s Title Insurance Critical

These are just a few of the many potential issues that could arise before or after you invest in a property. For these reasons, title insurance is critical; specifically, owner’s insurance is the most important. It is an owner’s title policy that will offer these protections against problems with the home’s title, but you may be surprised to learn that even if you paid for title insurance during the closing, you may not be covered.

How Lender’s Insurance Can Surprise You

team of legal experts reviewing a contract on a wooden tableOne of the most common pitfalls that new homeowners find themselves in is failing to purchase an owner’s title policy. Before closing on a home, you will likely be expected to pay for a title insurance policy, and so many buyers see this line item on their closing documents and assume that they are protected. However, what has occurred is simply the purchase of a lender’s policy.

When a lender provides money (in the form of a mortgage) to purchase a property, they are putting that money at risk. The buyer could default, pay late or otherwise cause them to lose their investment. One way that could happen is if a title issue arises. Thus, lenders require that buyers purchase a title insurance policy for them.

However, this policy only protects the lender. If you want to make sure that you, as the new owner, are also protected, you will need to secure your own separate owner’s insurance coverage. You can expect roughly the same cost paid for the lender’s coverage, but title insurance is not a repeating purchase. Unlike other types of insurance policies, you will not pay a premium each month; instead, you pay once and are then protected for as long as you own the property.

Trust The Title Experts To Help You Secure The Right Policy For Your New Property

Owner’s title insurance is essential when owning a home, but it can feel overwhelming to ensure that all of the details are taken care of. The experts at Mathis Title Company can help you secure the right title insurance coverage for your new property so that you can rest assured that any title disputes will not threaten your investment in your new home or commercial building. Contact Mathis Title Company to learn more or to schedule an appointment to get started.

What To Look For When Shopping For Title Insurance

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Title insurance is a policy you purchase when you buy a new building or piece of property. It protects you against disputes about the ownership of the property or any other hidden problems with your deed.

It can help you avoid the financial losses associated with the possible issues with a deed. This includes information on your deed that is inaccurate, mortgage fraud, debts attached to the property (such as liens) and property use considerations such as easements and encroachments.

Title insurance can be an invaluable part of the home-buying process. But there are many title companies with a variety of policy types, so which one should you choose? The following qualities will show you how to shop for title insurance.

A Local Company

local business team celebrating with a huddle and applauseOne important element of choosing a title company is that they are local. A local company will know the area making it easier for them to locate information and understand the context and nuances of what they uncover about any situation.

Of the local companies, look for a local company that is tied to the community. They will be a company that wants what is best for everyone involved, which should make you more comfortable trusting them with your property. They will also be more familiar with some of the most common claims in your area and know, for example, whether zoning issues are a regular problem in your town.

A History Of Success In Title Claims

You should also look for a company that has established itself as having quality, dependable service. A history of success means that if an issue arises with your title, you can be confident that the people assisting you with your case can obtain a favorable resolution.

Title insurance, as with other types of insurance policies, works on the premise that everyone who has a policy pays a premium that is held by the insurer. Thus, choosing a reputable company that has the finances to pay out on claims made by their clients is critical for your protection. A successful company will have a history of navigating claims in favor of its clients and covering damages when problems do arise.

Comprehensive Coverage That Spans Multiple Types Of Troubles

As with any insurance purchase, you want to make sure that you are protected against as many possible misfortunes as possible. Since there are so many unexpected problems that could potentially appear regarding your ownership of your property, finding a company that regularly manages many will allow you to trust in their expertise if something does go wrong.

Most title insurance claims will be for problems involving a dispute over who owns the home. This can occur if a previously unknown heir appears and makes a claim to the property. This can also occur if formerly undisclosed liens are discovered for which the new owner would be responsible.

Not all title insurance companies will offer all services, therefore research any prospective company before committing. Some will only offer basic policies, while others will provide you with the option to add riders for less commonly covered situations such as easement disputes and zoning or border issues.

Costs And Rates

lawyers meeting in a conference room to discuss a property titleAnother consideration when looking for title insurance is the cost of policies at various companies. Determine which company offers the best coverage for the price. You should also take into account what other extra services are offered, including closing and document preparation. The lowest priced option may not necessarily be the best one; be sure to review the coverage policy carefully for what is, and what is not, included.

Agents That Are Widely Reachable So That Claims Are Processed Quickly

If you find yourself with an issue with your title, it is best to have an insurance company that can quickly and efficiently settle disputes to maintain ownership and eliminate resulting financial hardships. If a company has a sufficient number of agents and they are easy to contact, your claim process will be more streamlined.

A Company That Works With Each Person To Meet Their Specific Needs

Finally, you should look for a company that will personalize your policy with you. A good title insurance company will help you through the process of selecting a policy by determining what type of coverage your specific situation requires.

Trust The Professionals To Help You Choose The Right Coverage

Determining what type and how much title insurance coverage you need may feel overwhelming, especially when you are managing the other settlement paperwork involved in buying a property. The experts at Mathis Title Company will help to keep your purchase secure by guiding you to make an informed decision about title insurance. Contact our experienced team to learn more or to schedule an appointment to get started.