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Open House Cafe

Blog by Remy Chausse
Tustin, California

You can search for homes for sale anytime at www.GoFindRealEstate.com I'm a southern California real estate agent, working with buyers and sellers who often say ... I've never done this before ... I have no idea what I'm doing! ... and we get through it together, as we both look forward to a successful transaction! I created the Open House Cafe to provide a warm and cozy format with tips for buying a new home (or selling the existing home). Every day is open house day for you to ask your real estate questions!

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PMI (Private Mortgage Insurance)

May. 9, 2008

If you put less than 20% down on a home, many mortgage lenders require that you take out private mortgage insurance. The insurance can cost you several hundred dollars. It's there to protect the lender should you default.

At closing, you will pay anywhere from a couple months' premiums to more than a year's premium, in advance.

To avoid this insurance, make a 20% down payment … or, obtain an 80/10/10 loan. This type of loan is subdivided so that the primary mortgage lender gives you an 80% loan, and your loan officer also finds you a 10% loan that becomes your "second mortgage." Those two loans are coupled with your 10% down payment. The primary lender still has less risk involved in this scenario, and will often waive the PMI.

PMI is a good thing to have in a worse case scenario -- you suffer a job layoff or a disability. If you are not able to keep your home, the lender will allow you to sell your home up to 20% below market value. This is because the PMI is, in effect, insuring 20% of your home's value. This will allow you to produce a quick sale and pay off the mortgage, thereby saving your credit.

Be sure and ask your loan officer when the PMI can be removed from your loan. Typically, it's the point where you've accumulated 20% equity in your home.

When you're ready to start house hunting, visit www.OpenHouseCafe.info

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