Mortgage Insurance And Title Insurance Explained

Mortgage Insurance
Mortgage insurance is a coverage that a lender requires for a borrower who makes a relatively small down payment. You, as the borrower, have little equity in the property at the time of the home purchase. The insurance is for the protection of the lender in case there is a default on the loan. Because of this insurance, you can afford to purchase a home without making a considerable down payment. The cost of mortgage insurance is based on the amount you borrow. Lenders generally charge between one half of one percent AND one percent of the loan amount. It is calculated as an annual premium and divided by 12 for a monthly cost, which is included in your mortgage payment. Let’s say you buy a home for $200,000, the balance of $180,000 is multiplied by .005 to arrive at the cost of mortgage insurance. The result is $900, which is then divided by 12 for a monthly cost of $75.00. The homeowners protection act states that mortgage insurance must be automatically cancelled when the loan to value reaches 78%. This is calculated on the homes price when purchased. A borrower can send a written request to cancel PMI when the loan has reached 80% LTV.

Title Insurance
Title insurance helps the home buying process by allowing both the home buyer and the financing agent to proceed with assurance that the property is eligible to be sold. It protects against the risk that there are potential claims against the property that nullify the sale after the fact whether its from willful fraud perpetrated by the seller or unknown heirs who suddenly discover they may be your new home’s rightful owner. A title company (other states may use an attorney) performs research to ensure that the deed is valid and that there aren’t any other claimants on the property or mistakes in the record that could prove troublesome at a later date. Once that is complete, an insurance policy will pay to defend you in court if the validity of the title is ever challenged and compensate you for your equity in the property if you lose such a case.

As a third generation real estate agent and native of Arizona, I am passionate about helping you and your loved ones achieve your real estate goals. If you are buying or selling in Gilbert or any of the East Valley cities, trust that I will go the extra mile to ensure a smooth and successful transaction.