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FHA Versus Private Mortgage Insurance

Mar 16
9:44
AM
Category | Blog
Home buyers in New Jersey who make smaller down payments often have to pay for a mortgage insurance policy. Depending on the type of home loan being used, either FHA mortgage insurance or private mortgage insurance might be required. This article explains the differences between these two types of coverage, and how they could affect you as a borrower. FHA Mortgage Insurance vs. PMI in New Jersey Mortgage insurance is usually required when a smaller down payment results in a higher loan-to-value ratio. For example, when a conventional loan accounts for more than 80% of the home’s value, a mortgage insurance policy is usually required. This is just a long-time industry requirement. As mentioned above, there are two main types of mortgage insurance, and they have different features and requirements. These policies generally fall into one of the following categories: PMI for Conventional Loans Private mortgage insurance (PMI) is associated with conventional loans, meaning those that are not  guaranteed or insured by the government. PMI is typically required whenever the loan-to-value (LTV) ratio rises above 80%. Thus, New Jersey home buyers who make down payments below 20% often have to pay for private mortgage insurance. The cost of PMI can vary based on several factors. Premiums typically range from 0.3% to 1.5% of the loan amount, paid annually. But they can fall outside of that range in some cases. These policies can be cancelled later on down the road, when the homeowner reaches a certain level of equity. This typically occurs when the LTV ratio falls to 80% or below. Mortgage Insurance for FHA Loans ...

There’s nothing like tax reform to create confusion among taxpayers. Previously, we wrote that home equity loans in New Jersey (and nationwide) would no longer be tax-deductible, thanks to the new legislation signed into law on December 22. Most major news sources were reporting the same. As it turns out, there’s more to this story. The Internal Revenue Service recently published a news release to clarify this issue and to eliminate some of the confusion. (It seems that even the CPAs were scratching their heads over this one.) What you need to know:  The interest paid on home equity loans in New Jersey could still be tax-deductible, if the funds are used to “buy, build or substantially improve” the property used to secure the loan. Interest on Home Equity Loans Deductible in Some Cases On February 21, 2018, the IRS issued a special advisory to explain that, in many cases, taxpayers can continue to deduct interest paid on home equity loans. The fact that they even issued this advisory indicates the widespread confusion over the subject. In fact, they mentioned it directly: “Responding to many questions received from taxpayers and tax professionals, the IRS said that despite newly-enacted restrictions on home mortgages, taxpayers can often still deduct interest on a home equity loan, home equity line of credit (HELOC) or second mortgage, regardless of how the loan is labelled.” Basically, if you’re using the money received to build out or improve the property, the interest you pay on the equity loan should be tax-deductible. But if you’re using the money for other ...

Should I buy a home in New Jersey now, in 2018, or wait until 2019? What will market conditions be like if I postpone my purchase until later this year? What are home prices and mortgage rates expected to do over the coming months? These are common questions among New Jersey home buyers considering a purchase in 2018. While no one can predict future housing and economic conditions with total accuracy, there have been some recent trends that might create a sense of urgency among buyers. Mortgage rates have risen in recent weeks, and home prices across New Jersey continue to inch upward. These trends make a case for buying a home sooner rather than later, at least from a cost perspective. Here’s what you need to know about them. Buying in New Jersey: 2018 vs. 2019 According to the latest data from Zillow, the median home value for the state of New Jersey rose by 4% over the last 12 months (as reported in February 2018). The statewide median house value had reached $311,600 by the start of 2018. Prices are higher in some parts of the state, including those that fall within the NYC metro area. The point is that prices are higher now, at the start of 2018, than they were last year. And they are expected to continue rising over the coming months. Zillow’s economists recently predicted that the median home value in New Jersey would rise by around 2.6% over the next 12 months, stretching into 2019. But getting back to the question at hand: Should I buy a house in New Jersey now, in 2018, or wait until 2019? House value appreciation has slowed down in many cities across the country, following several years of above-average ...

When home buyers think about down payment assistance, it’s usually grants and short-term loans that come to mind. But there is another form of down payment assistance available for home buyers in New Jersey, and it comes from a source closer to home. We’re talking about down payment gifts from family members, close friends, and other approved sources. This is one way to remove some of the financial hurdles associated with a home purchase. Here’s what you should know about getting down payment assistance in New Jersey from parents, family members, or other donors. The Bank of Mom and Dad? A lot of the mortgage programs available in New Jersey today allow for down payment gift money to be provided by a third party. This is where the home buyer obtains money from a family member (or some other approved source) to cover some or all of the down payment expense. It’s a great way to reduce your upfront, out-of-pocket costs when buying a home in New Jersey. There are several different loan programs that allow this kind of down payment assistance in New Jersey. Both FHA and conventional mortgage loans allow gift money contributions from third parties, though the rules and requirements can vary. There are a lot of myths and misconceptions regarding down payment requirements in New Jersey. For example, a survey conducted by the National Association of REALTORS® found that many people think they have to put down at least 20% when buying a house. Clearly, this upfront investment is one of the most misunderstood topics relating to the New Jersey home buying process. The truth is that there are several ...

Could writing a heartfelt letter to the seller give you an added advantage during a real estate bidding war? A new report suggests that New Jersey home buyers can benefit from this “above-and-beyond” strategy. Bidding wars have become a common occurrence in real estate markets across New Jersey. This is particularly true for hot markets located within the New York City metro area. Buyers priced out of the city are now looking at surrounding towns and suburbs. This increases competition for New Jersey home buyers and often leads to bidding wars. Writing a Letter to Win a Bidding War? In a competitive real estate market, buyers need every advantage they can find to land their dream home. One way to give yourself a leg up over the competition is to write a heartfelt letter to the seller, telling them (A) who you are and (B) why you want to buy their home. Real estate agents in New Jersey and across the nation have long touted the benefits of writing a letter to a seller, in order to win a bidding war. And now they have some data to back up that claim. According to a new report by the national real estate brokerage Redfin , home buyers who write a letter to the seller can increase their chance for success by 52.2%. To uncover these findings, Redfin examined roughly 14,000 purchase offers from home buyers that were made during 2016 and 2017. Specifically, they looked at real estate offers that involved competition bids from other buyers, written by their agents in housing markets nationwide. Here are the key findings, reported previously by the Wall Street Journal : All-cash offers almost doubled a home buyer’s ...

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