Category Archives: Credit F.A.Q.’s
The basics of private mortgage insurance (PMI)
If your down payment on a home is less than 20 percent of the appraised value or sale price, your lender will require you to get mortgage insurance. A mortgage insurance policy protects your lender in case you default on the payments. As a borrower, you pay the premiums, and the lender is the beneficiary.
There are two types of mortgage insurers: government and private. The main government mortgage insurer is the Federal Housing Administration. Several corporations underwrite private mortgage insurance, often called PMI.
PMI fees vary, depending on the size of the down payment and the loan, from around 0.3 percent to 1.15 percent of the original loan amount per year. Mortgage insurance premiums are tax-deductible through 2013, and it is possible that Congress could extend deductibility longer than that.
Example
Let’s say you buy a $175,000 house and make a 10 percent down payment, meaning that you borrow $157,500. The mortgage insurer charges an annual premium of 0.49 percent. The insurer multiplies the loan amount by 0.0049, for an annual premium of $771.75, which is divided into 12 monthly payments of $64.31.
Tip
Keep track of your payments on the principal of the mortgage. When you reach the point where the loan-to-value ratio hits 80 percent, notify the lender that it is time to discontinue the PMI premiums. Federal law requires lenders to tell the buyer at closing how many years and months it will take for them to reach that 80 percent level and cancel PMI. Lenders must automatically cancel PMI when the balance hits 78 percent.
Some FHA loans require payment of mortgage insurance premiums for the life of the loan.
I recently submitted a dispute to the credit bureaus to have some errors corrected and information updated. Will my FICO score automatically increase when these errors are fixed?
The effect of accepted disputes on FICO® scores
Question: I recently submitted a dispute to the credit bureaus to have some errors corrected and information updated. Will my FICO score automatically increase when these errors are fixed?
Answer:
Often your score will improve when errors on your credit report are corrected. In some situations, however, your score may not improve when credit information is corrected or updated. For example:
- It is often thought that closing credit card accounts will improve your FICO score. This is not true. Closing an account will neither remove it from your credit report, nor will it prevent the payment history from continuing to be displayed and considered in the calculation of your FICO score.
- Removing negative information from your credit report may not have the impact on your FICO score that you expect. There could be additional negative information remaining that will prevent an immediate increase in your FICO score.
- FICO scores only consider credit-related information on your credit report. If you change personal identifying information (address, SSN, employer, date of birth, etc.), the credit information on your report will not be impacted and your FICO score will probably not change. The FICO score only considers credit account, collection, and public record information.
It typically takes the credit bureau 30-45 days to respond to your dispute.