Northern Virginia Real Estate Blog

When homeowners borrow more than 80 percent of a home’s value, mortgage lenders often require a corresponding insurance policy called Private Mortgage Insurance.

PMI provides a cash payment to lenders in the event of a homeowner defaults.

But because PMI policies are designed for high LTV loans only, they usually contain cancellation options for when home equity percentages reach 20 percent or more.

In other words, PMI can be temporary.

There is a caveat, however: Lenders will not automatically remove mortgage insurance when LTV falls below 80 percent — the onus is on the homeowner to initiate a formal request.

Earlier this decade — when home values were soaring — many PMI-paying homeowners recognized their equity growth and successfully petitioned out from PMI.

Many other homeowners, however, forgot.

So today, as home values stagnate or depress in different U.S. markets, homeowners eligible for cancellation may find that both their home equity and their right to cancel have vanished.

PMI helps makes high LTV loans possible, but there’s no reason to pay it longer than necessary. If your current mortgage requires PMI payments and your loan-to-value lurks below 80 percent, contact your mortgage lender to start the PMI cancellation process.

Or, if you’re unsure about your home’s value and the 80 percent threshold, call or email me anytime for a home value analysis and we work on your research together.

When a home buyer is gifted cash for a downpayment, there is a right way and a wrong way to receive the funds.

The right way includes:

• Completing an acceptable gift letter
• Documenting the withdrawal of funds with receipts
• Documenting the deposit of funds with receipts

The wrong way is to ignore the rules that mortgage lenders clearly spell out for you.

Mortgage lenders watch gifts closely because they want to make sure that the “gift” is not really a loan-in-disguise. If it’s a loan, the total dollar amount must be counted against the home’s total loan-to-value and higher loan-to-values typically increase lender risk.

If it’s a gift, a signed and dated gift letter should accompany the home loan application. An example:

I am the [relationship to recipient] of [name of recipient] and this letter serves as evidence that I am gifting [name of recipient] [amount of gift] to be used for the purchase of the home at [complete address of property].

This is a gift — not a loan — and there is no expectation of repayment.

Signed,
[Signature of donor]

For additional evidence that the gift is legitimate, the recipient should make sure that deposited funds are not commingled at the bank. If the gift is for $12,000, for example, then the recipient’s bank deposit receipt should indicate that a $12,000 deposit was made.

There may be legal and tax liabilities when gifting funds between family members so if you’re unsure about how donating or receiving a gift may impact you, call or email me. If I can’t answer your question, I can certainly refer you to somebody that can.

Interior designers have 16 million colors in their palettes with which to work, but room planning often boils down to three other numbers — 60, 30, and 10.

As in, the 60-30-10 Rule.

As featured on HGTV.com, the 60-30-10 Rule says that decorating a room should be based on percentages:

• 60% should be a dominant color
• 30% should be a secondary color
• 10% should be an accent color

A quick look through design magazines will show that this is not just a theory — it’s a planning tip that is used over and over again by the world’s most famous designers.

The HGTV piece also explains why do-it-yourselfers should add black elements to every room and how to visually divide colors from dark-to-light.

Interior decoration requires flair and intuition, at times. But, because there are practical methods behind designing, that intuition can be honed with education.

The HGTV Web site is a terrific place to start.

Source
COLORSwatch
Mark McCauley
HGTV.com