Here are the Top 10 Do’s and Don’ts for Home Buyers currently in escrow:

#1 – DON’T change jobs.

#2 – DON’T make new purchases with your existing credit cards.

#3 – DON’T apply for new credit.

#4 – DON’T make large deposits into your bank account.

#5 – DON’T accept gift funds unless they are given in the form of a personal check OR wired into escrow directly.

#6 – DO transfer all funds used to purchase the property into ONE bank account asap.

#7 – DO expect to provide MANY necessary documents up until the time that your new home keys are in your hand.

#8 – DO shop for homeowner’s insurance and provide a quote to your loan officer.

#9 – DO make copies of all checks before depositing them into your bank account.

#10 – DO expect to receive calls and correspondence from your real estate agent, loan officer, loan processor, escrow company, and title company.

The home buying process is stressful enough. Keep these 10 do’s and don’t rules in mind to make sure the home buying process is as smooth as possible.

Mortgage Insurance (MI) aka Private Mortgage Insurance (PMI) is a necessary evil in today’s lending environment for many home buyers. Here are the top 10 things to know about mortgage insurance:

1. What is Mortgage Insurance?
   Mortgage insurance, aka MI, is an insurance policy which compensates the lenders or investors for losses due to the default of a mortgage loan. If a borrower defaults on the mortgage, the lender or investors is paid back a portion of the loan balance.

2. Why do I pay Mortgage insurance?
   Loans requiring mortgage insurance are considered higher-risk. Put 20% down on a conventional loan and pay no MI.

3. When do I pay Mortgage Insurance?
   There are two types of loans that charge MI: Conventional Loans and FHA Loans.

Conventional loans typically require mortgage insurance when down payments are below 20%. More factually, mortgage insurance is required with the 1^st mortgage is over 80% loan-to-value.

FHA 30-Year loans require mortgage insurance on all loans regardless of the down payment amount. As of June 3, 2013, the monthly mortgage insurance remains for the life of the loan – for loans over 90% loan-to-value, i.e. when the borrower puts less than 10% down.

4. How do I avoid paying Mortgage Insurance?

Put 20% down on a conventional loan or chose a 1^st and 2^nd loan combo. No FHA.

5. How do I pay the Mortgage Insurance?

Mortgage insurance is charged two ways: Monthly-Paid or Single-Paid. Monthly-Paid MI charges on a monthly basis. Single-Paid MI charges a one-time fee at the close of escrow as part of the closing costs.

6. What determines how much Mortgage Insurance I pay?

FICO score and down payment are the two main factors to determine the cost of mortgage insurance. Higher FICO scores and a larger down payment = lower MI costs. A high FICO score will lower the mortgage insurance premiums dramatically.

7. Mortgage insurance Cost

FHA charges 1.30% annually on average.

Monthly-Paid MI costs 0.70% on average.

Single-Paid MI costs 2.5% on average.

Actual charges vary.

8. How to get rid of Mortgage Insurance?

The US Homeowners Protection Act of 1998 allows for borrower to require PMI cancelation when the amount owed is reduced to a certain level, most commonly = 80% loan-to-value. This is for conventional loans only as FHA charges MI on every loan. The only way to ever get rid of MI on FHA loans is to refinance out of FHA and into a conventional loan. Paying down the loan balance or property values increasing are the two ways to get rid of mortgage insurance.

Is MI tax deductible?

No. As of Dec 31, 2013 mortgage insurance the IRS longer tax deductible.

               9. Who pays the MI?

Three parties are allowed to pay the MI.

• Borrowers (you).
• Sellers.
• Lenders

10. Lender and Seller Credits

Lending guidelines allow sellers and lenders to give limited credits to be applied to the borrowers closing costs. To pay off the mortgage insurance entirely, typically the borrower chooses the Single-Paid MI option and negotiates with the seller or lender to cover the cost.

Seller Credits have to be negotiated as part of the contract negotiations between the buyer and seller. Lenders have the ability to generate Lender Credits by increasing the borrower’s interest rate on most loan products and in most cases. On average, a 0.50% increase to the rate generates enough credits to pay the cost of the Single-Paid MI fee. The benefit to increasing the interest rate and eliminating the mortgage insurance payment is an overall lower monthly payment.

In conclusion, nobody likes mortgage insurance but the alternative is to either make a larger down payment or not buy at all. VA loans do not charged mortgage insurance but one must be a Veteran. Good news! Go enlist for 4 years with the US Military, Army or Navy and pay no mortgage insurance on your next loan.

Many home buyers are unable to avoid monthly mortgage insurance–it’s part of taking that next step and buying a property even if you don’t have a large down payment. But if possible, use these 5 strategies to avoid paying monthly mortgage insurance.

1.  Make a minimum 20% down payment on a conventional loan. 20% down is the magical number to avoid paying monthly mortgage insurance.
2. FHA requires mortgage insurance on all loans, so avoid FHA loans if possible.
3. 1st and 2nd mortgage combos eliminate the need for mortgage insurance.
4. HOMEPATH loans do not require mortgage insurance. Homepath loans are only allowed when “Fannie Mae” is the seller.
5. Mortgage insurance can be paid in two ways: “Single-Paid” or “Monthly-Paid”. Choose the single-paid option and pay the mortgage insurance in full to eliminate the need to pay monthly.

With a conventional loan, monthly mortgage insurance eventually falls away, and FHA loans can always be refinanced into conventional loans to eliminate mortgage insurance. So don’t feel bad if you need to incur mortgage insurance to get into a home.