American Dream 21st Century

Private Mortgage Insurance (PMI) - What Is It?

PMI is insurance to protect your lender in case you do not make your mortgage payment. You pay for it.

When you are borrowing using a conventional mortgage loan with less than 20% down, and you have good credit, the insurance coverage allows the lender to make the loan and you get your home now – not in 5 to 10 years from now.

Of course, it is an extra expense. But, did you know you could make it go away? After your equity grows to 20%, you notify your lender to cancel the PMI. How do you get there? Make your mortgage payments, enjoy the market appreciation, and your sweat equity like remodels or upgrades.

Why not wait and save for more money down? While you are saving, home prices are going up – can you save faster than prices increase? Interest rates may also be going up. In addition, the big one – if you are renting, that monthly payment is gone forever! And, did I mention the tax deductions that you would be giving up until you are a homeowner?

For more, click on the link above and have a look at today’s report.

Mortgage Interest Rates Have Begun to Level Off

Rates are not going crazy at the moment – good news for homebuyers and the economy. However, they have gone up from where they were and could go up again. They are projected to move upward later in the year.

So, did you ever want to buy something and then waited for a better opportunity which never came? In fact, same scenario – but instead the price increased instead of going lower? The mortgage rates today are a great window of opportunity. Whether you are looking at buying your first house or moving up to a more expense one, this is a great time to act on it.

This is so important that we have a page on this blog just to show the impact that interest rates have on your purchasing power and monthly payment:

You Don’t Have to Pay Your Parents’ Interest Rate

Holy smokes! Did you know that there was a time mortgage rates shot up to rates like what you pay on a credit card?

I know modern medicine has allowed us a greater life expectancy in this century, but the thought of a greater number of years making mortgage payments is not appealing! I am glad interest rates have returned to a level of sanity.

Click through to today’s report and have a look at the history of rates. One thought comes to mind when I see the peak – YIKES! And, yours truly was right in the middle of buying a 10 plex at the time – that story will be a blog post for another date! We will call it “creative financing”.

COST of Your Next Home Will Be LESS Than Your Parents’ Home

Go back and read the title again – I said COST. I did not say price! There is a difference.

I am not going to say much here. I need you to click on the link above to see the chart and the explanation. It is amazing when you think about it.

Building Your Wealth Helped By Rising Prices

Building wealth! Who does not want to do that? Owning a home is a step in that direction. We already shared with you the estimate the a homeowner's wealth is 44 times that of a renter.

The Home Price Expectation Survey reports an expected 5-year growth of just over 18%. My regular readers know this – but let’s take a quick look at what you can do with $10,000 today.

You can leave it in the bank for 5 years and get___ interest. While you are doing that, you could be paying rent. Or, you could use the money for a down payment on a $200,000 house – and pay the PMI – and in 5 years, if the growth prediction is accurate, enjoy cumulative appreciation earnings of 18% on the TOTAL house value – not just on your $10,000. By the way, remember you can ditch the PMI once the equity position reaches 20% and you will lower your monthly payment.

Looking at the possibilities, let’s suppose the 18% prediction is too high. Let’s get really negative and say in five years’ time appreciation is only half that, or a quarter of that – and you earned lower appreciation on your TOTAL house value. How does that compare to what the $10,000 in the bank would have earned? And, those rent payments.

Click the link above to check out the report. It is a short read – worth it!