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Seaport Real Estate Group Blog

Written by Robert H. Ruth

Last week, in part 1 of this topic, I explained that the purpose of PMI is to offset the additional risk faced by the lender in giving a loan to a borrower when they purchase a property with less than 20% down.

In that post, I explained the basics of Borrower Paid Mortgage Insurance (BPMI), which is the most widely used type of Private Mortgage Insurance.

  • My comparison showed that the expense of PMI is completely driven by the amount of down payment a borrower can make and their credit score. 
  • I also explained that a borrower would pay the PMI until they reach a 20% equity position based upon the initial amortization schedule of their loan or,
  • The BPMI will terminate automatically when the loan gets to 78%
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Written by Robert H. Ruth

Private mortgage insurance (PMI) is required whenever the borrower’s down payment is less than 20% of the home’s value. This insurance protects the lender in the event the borrower fails to pay the mortgage and defaults on the loan.

  • The industry belief is that a borrower who has more equity invested in their home would be less likely to default on their mortgage since doing so would mean they would lose their equity in the event of a foreclosure. 
  • So the lending industry views a borrower with 20% or more equity as a lower risk than a borrower with less than 20% equity.
  • However, the reality is that there are many borrowers who manage their finances well and have not been able to accumulate the savings for
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By Tim Bray


Free Advertising for the Agent

Every "For Sale" sign advertises the agent's company and the agent. Many signs contain the agent's Web site and cell phone number. Some even sport a large color photograph of the real estate agent.

Think of it like a giant billboard for the agent.

If the home is located on a major thoroughfare, all the better. Probably thousands of drivers pass the sign each day and will see that agent's name. And after the sign post is in the ground, it's not costing that agent one thin dime to leave it there.

Agents Find Buyers Through Listings

  • Sign Calls
    If a buyer wants to find out the price of a home,
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Written by Robert H. Ruth 

Before I answer this question, let’s do a mortgage reality check…just so you can see how much you actually pay over time on a mortgage loan.

Let’s assume a borrower buys a house for $ 450,000 and puts down 20%, which is $90,000. They finance the remaining $ 360,000 with a 30 year fixed rate loan at 4.00%.  Here is a breakdown of their purchase transaction:

Sales Price

$ 450,000

20% down payment

( 90,000)

Loan Amount

$ 360,000

P/I payment at 4.00% for 30 years

$ 1718.70

What I want you to know is that the total amount you pay back over 30 years is much larger than what you are borrowing, and the total amount of

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Written by Robert H. Ruth 

In my last post I announced that the Agencies (Fannie Mae and Freddie Mac) have decided to allow financing on certain transactions without an appraisal being performed to determine the collateral value of the property. This is an interesting development to be sure, but it is not an entirely new concept. This has been allowed on certain refinance transactions for about a year now, and so, based upon the success of the refinance initiative, the Agencies have decided to open the box a bit wider and allow this for a subset of purchase transactions.

To review our posting from last week, this is being done because:

  • FNMA and FHLMC are becoming more comfortable with the idea that their home valuation databases
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Written by Robert H. Ruth 

Yes you read that correctly; no appraisal required on some purchase transactions.  Obviously this is not going to be the case on every loan, but this is a possible game changer in the lending industry.  Let’s examine this development in greater detail in this post.


Appraisals are one of the key components of a mortgage loan

  • When a homebuyer goes to a lender for a mortgage the lender wants to make certain that the house is sufficient collateral for the mortgage loan and for this reason an appraisal is done on behalf of the lender.

  • Historically, the lender has relied upon the services of a licensed, professional Real Estate appraiser to perform the appraisal. The appraiser would visit the house to

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Written by Robert H. Ruth 

 A buyer has 3 options in this situation: re-negotiate the price with seller, fight the appraisal, or walk away from the transaction. That’s about it. Let’s look at each option in a bit more detail. 


If the appraisal done by the bank giving you the mortgage comes in below the selling price, you can try to negotiate the price down to the appraised value. That is easier if the value is only off by a few thousand dollars, but very difficult if the price is off by $10,000 or more. You have to remember that the seller has lived in the property and they have a deep connection with the house. Selling it is not always just a business decision for a seller; often it is an emotional one. And when it is emotional

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Written by Robert H. Ruth 

I’m going to share a scenario that happens frequently on purchase loans, and the impact of the wrong decision can be painful, particularly for first time home buyers.

Frequently a house goes under contract, and in the course of the buyer’s inspections, deficiencies are found with the property. In many instances these deficiencies turn out to be small issues, cosmetic in nature, like replacing some roof shingles that are missing, or replacing a switch plate in the hallway, or fixing the bannister on a stairway. These issues are generally taken care of without much hesitation, and the sale is consummated in a routine fashion.

Sometimes the property has issues that are more serious in nature that should to be addressed

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Written by Robert H. Ruth

“OK, Mr. Peabody…but what happened in 2007, and why is it important that we go back there now?”

“Well Sherman, 2007 was a pivotal year for the United States Housing Economy, a year in which all hell broke loose due to the impact of grossly overvalued Real Estate which had been driven to unsustainable levels by Subprime Mortgage Loans.”

“What are Subprime Mortgage Loans Mr. Peabody?”

“Not so fast Sherman…first let’s talk about how values in Real Estate have changed on a historical basis.

You see, historically, US home values have increased by an average of 2 ½-3 % yearly, but during the period from 2003-2006 values went up by 20-30% per year.”

“That sounds like a lot of appreciation, Mr. Peabody.”


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Written by Robert H. Ruth

Over the past 2 weeks I have reported on the current state of the housing market in the United States, and compared today’s market in 2017 to the market in 2007. My comparison showed some striking similarities between the 2 time periods, and in the media there is concern about the possibility that another housing bubble might be in the works. Whether the market is overheated and may experience a correction is not my concern right now.  My objective in this space is to report on what is happening in the market, and what is driving the current housing economy.


In order to do that I thought it might be a good exercise to develop a picture of the market based upon 5 pillars that are holding up the current marketplace.

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