Mortgage Fearbuster 3

Posted by  on Feb 08, 2010

Q: I am really discouraged by how much it costs to buy a home and get a home loan. Even with mortgage rates so low, the extra costs such as mortgage insurance are so high, and I've learned that mortgage insurance doesn't protect me, only the lender. What exactly is mortgage insurance, and why do I have to pay for it?

A: Mortgage insurance (MI) protects mortgage lenders against losses occurring when borrowers default and go into foreclosure. For conventional loans, any mortgage with a loan amount exceeding 80% of your new home's appraised value requires MI. You could also apply for an FHA loan, which requires a mortgage insurance premium (MIP) to be paid in part at closing and as part of your monthly mortgage payments. This sounds like a pain, but think of it this way: Mortgage lenders would likely not lend to anyone with less than 20% down and less than excellent credit if mortgage insurance wasn't available.

Q: I'm selling my home, and just received a notice from the title company that my property taxes are delinquent. They say I have to make them current before the sale can close. My ex-husband tells me the mortgage company should be paying them. What can I do?

A: Pay the taxes yourself, or allow the closing agent to pay them from the proceeds of your home sale. Mortgage lenders typically impound property taxes and hazard insurance monthly and pay them when your mortgage exceeds 80% of your home's value. Before paying the taxes, contact your mortgage company and verify that they impound these expenses and pay them on your behalf.


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