Private Mortgage Insurance is Temporary. Here's Why.

Home buyers who can’t put at least twenty percent (20%) down usually have to carry private mortgage insurance, often an expensive proposition. One good thing about the insurance, though, is that it doesn’t last forever. Private mortgage insurance protects the lender in the event that a borrower stops making payments before building up much equity in the property. A borrower who diligently pays down a loan, eventually crossing that twenty percent (20%) equity threshold, is no longer considered a big risk, and can expect to be rewarded with cancellation of this requirement. Under the Homeowners Protection Act of 1998, lenders must terminate the insurance after a certain point, something that hadn’t been done consistently before then. The act set the termination date as the point at which the principal balance on the loan is scheduled to reach 78 percent of the original value of the home.

In other words, if you buy a home for $100,000 and put ten percent (10%) down, your starting loan balance is $90,000. Once you have paid enough toward principal that the balance reaches $78,000, or twenty percent (20%), the insurance policy should be automatically cancelled.

A compliance bulletin issued earlier this month by the Consumer Financial Protection Bureau reminded lenders that automatic insurance cancellation is required even if the value of the home has declined from the original value (in other words, the sales price).

The law also creates a way to seek earlier cancellation.

The cancellation rules do not apply to the low-down payment loans backed by the Federal Housing Administration as borrowers must pay insurance for as long as they have an FHA loan if the loan was acquired after June of 2013.

Read The Full New York Times Article Posted August 30th, 2015

2016 Maximum Conforming Loan Limits Established for Fannie Mae and Freddie Mac

Valley West Mortgage is licensed in California, Colorado, Idaho, Maryland, Nevada, New Mexico, Oregon, Utah, Virgina, and Washington.

2016 Maximum Conforming Loan Limits Established for Fannie Mae and Freddie Mac
National Baseline Loan Limit Remains Unchanged; Limits Rise for 39 High-Cost Areas

The Federal Housing Finance Agency (FHFA) today announced that the maximum conforming loan limits for mortgages acquired by Fannie Mae and Freddie Mac in 2016 will remain at existing levels, except in 39 high-cost counties where they will increase. In most of the country, the loan limit will remain at $417,000 for one-unit properties.

The Housing and Economic Recovery Act of 2008 (HERA) established the baseline loan limit at $417,000 and mandated that, after a period of price declines, the baseline loan limit cannot rise again until home prices return to pre-decline levels. The $417,000 loan limit will stay the same for 2016 because FHFA has determined that the average U.S. home value in the third quarter of this year remained below its level in the third quarter of 2007.

The state of Colorado will see the highest increase. In 2015, the Maximum Conforming Loan Limit was $424,350. In 2016, the Maximum Conforming Loan Limit will increase to $458,850. The increase is a grand total of $34,500.

HERA provides for higher loan limits in high-cost counties by setting loan limits as a function of area median home value. Although the baseline loan limit will be unchanged in most of the country, 39 specific high-cost counties in which home values increased over the last year will see the maximum conforming loan limit for 2016 adjusted upward. Although other counties also experienced home value increases in 2015, after other elements of the HERA formula—such as the statutory ceiling and floor on limits—were accounted for, these local-area limits were left unchanged.

A list of the 2016 maximum conforming loan limits for all counties and county-equivalent areas in the country may be found here. A description of the methodology used for determining the maximum loan limits can be found in the attached addendum.

Addendum: Calculation of 2016 Maximum Conforming Loan Limits Under HERA


Fannie Mae and Freddie Mac are restricted by law to purchasing single-family mortgages with origination balances below a specific amount, known as the “conforming loan limit.” Loans above this limit are known as jumbo loans.

The national conforming loan limit for mortgages that finance single-family one-unit properties increased from $33,000 in the early 1970s to $417,000 for 2006-2008, with limits 50 percent higher for four statutorily-designated high cost areas: Alaska, Hawaii, Guam, and the U.S. Virgin Islands. Since 2008, various legislative acts increased the loan limits in certain high-cost areas in the United States. While some of the legislative initiatives established temporary limits for loans originated in select time periods, a permanent formula was established under the Housing and Economic Recovery Act of 2008 (HERA). The 2016 loan limits have been set under the HERA formula.

What is Mortgage Escrow?

When you begin your new mortgage, you’re likely to hear about escrow accounts, homeowner’s insurance premiums and property taxes, but did you know that they can be some of the most difficult portions of loan servicing? To prevent complications down the road and make payment simpler for new homeowners, escrow accounts are often required by loan providers to cover insurance premiums and tax costs for your new property. These accounts are in place to hold your estimated monthly dues until their annual collection, and the additional monthly expenses are typically added to your mortgage payment for a simple, one payment solution to the costs of your property. While it sounds simple, complications can arise as a result of fluctuating costs and misguided estimates, so knowing the ins-and-outs of escrow calculation is a necessity of any successful mortgage. Let’s take a closer look at the individual portions that amount to your escrow account, as well as possible pitfalls to keep in mind while searching for your dream home.

Mortgage Escrow Account Benefits

The first portion of your escrow fund is meant to cover property tax costs, which are due once per year and can change depending on the assessed value of your home.

Property tax payments are based on the assessed value of your new home. Since a new value assessment is typically performed a year after a home is purchased or constructed, an updated appraisal could lead to a major boost in regard to your tax obligations. Discovering the true costs associated with property taxes can be difficult, and, depending on the time of year in which you purchase your new home, the costs could put a major dent into your down payment and relocating funds. While an escrow account estimates costs to make the transition easier, be mindful of the upcoming reappraisal to avoid a shock when entering your second year of homeownership. Contacting the county property appraiser and tax collector could be a worthy endeavor to get a better estimate of the tax bills which your new home will present in the upcoming future.

With property tax values fluctuating based on home value, escrow account estimations can sometimes leave homeowners with additional funds due when tax time rolls around.

Many new homebuyers overlook the specifics of escrow accounts, which can present issues regarding annual tax bills, according to The Street. For example, if your new home appraisal calls for a $200 monthly boost to your mortgage payments, your monthly installments could see an even larger jump. Since payments are estimated for the year, you’ll also have costs for the current year to consider. Suddenly, your escrow account needs are raised $400 per month, and your housing budget is stretched to its limit. While savings or deferment options could help you cover the costs more effectively, it is vital to consider the importance of property tax assessments on escrow accounts when deciding upon a housing budget.

Homeowner’s insurance premiums are also covered in annual payments, so the estimated costs are collected and placed into your escrow account each month to keep your property insured against catastrophe.

Insurance premiums are the other portion of your escrow account. Luckily, those costs are more easily estimated in most cases. Depending on the location of your new property, additional policies could be required to cover natural disasters including hurricanes, earthquakes and flooding, so check with your lender and real estate professional when determining a proper budget for your housing search. Similar to property tax increases, however, a boost in insurance premiums can lead to premium increases for multiple years being due simultaneously. Careful planning and adequate savings are necessary to prepare for enlarged payment obligations regarding your mortgage.

Foregoing a Mortgage Escrow Account

If you prefer to avoid escrow accounts and have a dedication to savings, mortgages without escrow accounts could net you a financial gain through safe investment throughout the year.

According to BankRate, avoiding escrow accounts and investing your annual payments can be a worthwhile option for some additional income. While the same risks of premium increases are present, saving the money while investing in low-risk money market accounts and certificates of deposit can provide a noticeable increase in funds if your dedication to monthly saving is maintained. Just remember, by forgoing an escrow account, the responsibility for property tax payments and homeowner’s insurance premiums is in your hands, which can be a bit of an inconvenience when separate tax bills must be paid individually. To find out more about escrow accounts, depend on the knowledge of your real estate professional and mortgage lender to find the perfect scenario for your needs.

More about the author:

Cleo D. is a writer whose interests include homes for sale in Georgetown and the Austin area, stock market trends and snowboarding.

The 5 best review websites for the mortgage industry.

In the last 8 years, reviews have become one of the major deciding factors in choosing whether to use a company and their services. Five great examples of service based review websites include Yelp, Angie's List, Zillow, Lending Tree and obviously Google. In the mortgage and real estate industry, Zillow and Lending Tree are the major review sites for clients to give their opinion. Reviews are a great way to inform other individuals about the experiences you had with a specific company. It's like asking for advice, except this time you're asking 200+ people instead of your close group of friends and family. It's also a possible way to make new friends.

At Valley West Mortgage, we value the voice and opinion of every client / borrower that we do business with. From just answering questions about the average home buying experience to asking about the best mortgage rate offered today. It's in our benefit to understand how our is perceived from an outside perspective. Why? So we can keep doing the things we do right even better and improve on them.

1. Google's Review System

If you have used Google to search for a business online, more than likely you have seen their business come up on Google Maps. If the business has filled out their profile, you can see the hours of operations, contact information, website and last but not least, a review left by other Google Users. This is a very useful way to review a business. We're pretty safe to say that most of the people in the United States use Google Maps. So having all of your information in one place is just smart. Google Review System only requires that you are logged into a Google Profile and that the business is listed on Google Maps / Google Plus. What we really like about the Google Review System is that a user can not leave multiple reviews. Of course a person can make multiple Google accounts, but we like to assume that most users do not need 500 profiles just to leave a review. We also like that a user can update their review or change the review up. Maybe to re-word their experience or give a recent update if they have been back recently.

2. Yelp's Review System

Yelps review system is pretty amazing. All that is required to leave a review for a business contains a profile and a listing for the business. Very similar to the review system used by Google. Once you're logged in you can tell other Yelper's, is that what they're called?, about the business and how you were satisfied. What's really cool about Yelp is that there is a list of the same information Google Plus provides, plus most restaurants provide a link to their menu's online. It's very helpful. How this ties into the mortgage industry is simple. It's another place that potential borrowers / clients can learn about a mortgage company and see read a past review from other Yelpers. Ok, we're going to make it what Yelp users are called. We also like the fact that Yelp will not allow a business to buy their way out of hiding or deleting a users bad review. If you do amazing work, this problem will solve itself.

What we do not like about Yelp is the ability to leave multiple reviews for the same business. Why this can be helpful in many ways, it can cause confusion for some.

3. Angie'sList Review System

The review system at Angie's List is very similar to the above mentioned websites. The exception is that you must pay to list your business and go through a kind of background check before you can allow users to use your service's through the website. You must also pay to become a user of the site. The idea here is that providing a little bit of money will somehow ensure that a review is more genuine. Angie's List also wants the business's listed on their site to have all of the appropriate credentials / paperwork needed to run a company in their industry. It was a really smart idea. Since the inception of Angie's List other websites like theirs have become an industry standard. An example would be

4. Zillow's Review System

The review process for Zillow is a bit different as well as the same. Same login to an account and leave a review process. The only difference is that a review, when written by a customer who received a quote on Zillow from the Mortgage Company, holds more credibility. The reason being that a review from a client, who has used their website and the company to obtain a mortgage loan, has gone through the entire process and probably has a really good reason to leave a positive / negative review. It's actually a pretty smart idea. That's why we use it. You can see all of our Zillow Reviews online 24/7.

5. Lending Tree's Review System

Lending Tree is a rare breed of website. It's a mix between Angie's List and Zillow. Where you do not need to have a paid membership, like using Angie's List, in order to use the site you must offer up some information about what you're looking for. If you're looking for a mortgage loan, the website is going to ask you a series of questions in order to provide a lead to a company or to build your profile. It usually does both. Then you're greeted with offers from banks and brokers on the lowest rates available. Where it meets the Zillow review process is that all the reviews are from people that use the site from initial offer to close of the loan.

That's been our review of the 5 best review websites for the mortgage industry. We hope you learned something and we look forward to working with you in the future. Let's help you find your dream home or help you stay in your current dream home. You can always contact us by filling out our form online or by calling us at (702) 696-9900. You can also ask us a question through Facebook and Twitter. Did you know that you can view our rates on Facebook?

FHA Lowers Cost of Mortgage Insurance Premiums, Possibly.

President Barack Obama announced on Wednesday that the Federal Housing Administration (FHA) annual insurance premiums will lower to 0.85 from 1.35, according to an article published by CNBC. This move is said to expand responsible credit borrowing to qualified lenders, according to the article, and is an effort to bring more first-time home buyers into the current market.

Mortgage issuers stocks also fell on Wednesday, according to the report, while home builder’s stocks across the nation rose. Julian Castro, Secretary of the U.S. Department of Housing and Home Development, believes that this move will increase the affordability of American homes over the next few years. He said that taking the premiums down for American citizens will improve opportunities and strengthen financial outcomes. He sees this as a step to reduce risks in the mortgage department and help protect consumers.

According to the article, the reduction in premiums could mean a savings of around $80 a month for a first time applicant to the FHA. In addition, Freddie Mac and Fannie Mae (two federally sponsored second-party mortgagers) announced recently a new 3 percent down payment option requiring private mortgage insurance. This, of course, is for qualified lenders, meaning those in very good credit standing. However, it does compete directly with the FHA, which offers down payment options at a 3.5 percent minimum.

The FHA has been working on building its capital reserves back up, according to the article, and because it is not in the clear yet, some people believe that the decision to make cuts could receive some criticism. To be out of the black, its capital reserves must meet a 2 percent minimum.

“Lowering the premium will bring volume back to the FHA,” said Diana Olick, real estate reporter for CNBC. “But it will also bring back risk.”

Among all the risks, the article reports that the White House administration is clearly looking for ways to increase homeownership by making the process and implementation of a mortgage less reckless for buyers. President Obama is expected to address all this and more on Thursday in Phoenix, where he will give a speech on the improvements in the housing market as well as future plans.

Read the full CNBC Article

The Money Store and HomEq set to pay $54.8 Million for unnecessary late fees


A Manhattan federal jury reached a decision on December 19th, 2014, on a case that has been a longstanding suit by borrowers whose mortgages were owned or serviced by HomEq. Plaintiff Joseph Mazzei accused The Money Store and HomeEq of charging unnecessary late fees after the lenders had accelerated homeowner's mortgage loans. They also claimed the late fees were prohibited under the terms of the loan agreement and voided state laws.

The plaintiff, and other homeowners, hope that this case will shred light on banks trying to gain any advantage on their borrowers and force all banks to become transparent in all aspects of their company procedures. Since 2008, the constant struggle for homeowners to just trying to stay in their home is hard enough. Some homeowners are living check to check, working two jobs and spending less and less time in the actual home that they are paying for. Add a bank that tries to squeeze their borrowers for every extra penny and you get almost every plaintiff in this case.

The trial lasted 10 days in the Southern District of New York.

The Home is Possible Program. What is it and who is it for?

Most anything in life worth obtaining is going to come at a cost. Be it financial or otherwise, sacrifices seem to be necessary for the things we need and want most. So many hours of sleep and friends and work that were given up for writing papers and studying were the sacrifices known collectively as college. Being fresh out, it’s easy for me to remember the hard work I put in, as well as the large amount of money to go with it.

However, I think we can all agree that one of the most exciting things about being a college student in good standing and requiring some help was one of the more welcoming factors, due to federal aid programs for college educations.

And now you can have the same kind of assistance with your home in Nevada.

The Las Vegas Review-Journal recently reported that many believe this will give people who once thought they could never be homeowners the opportunity to do so, including first time buyers.

The program is easy to apply for once you select one of the qualified lenders from the website which can be found at The process of applying verifies the potential borrower’s income, and qualifying persons cannot have more than $95,500 reported on their qualifying income. While there is no minimum loan amount, the maximum is $400,000 and it must be for a home that the borrower will use as a primary residence.

The Las Vegas Review-Journal reported that many people find they would qualify for a home loan if only they could take care of down payments and closing costs. The Home is Possible™ program is geared toward such people, with the grant being issued to assist in either closing costs or down costs and the requirement that the borrower enroll in and complete a homebuyer education course.. Of course, when entering a loan agreement a borrower’s FICO (credit score) is a large factor, with the minimum score acceptable for the assistance program at 640.

If you can make it through all of the very reasonable qualifications, buying a home in Nevada might be much more of a breeze than you think. And if your credit score is just not quite there yet, don’t worry: visit our blog about ways to improve your credit score for more information.

Buy points to lower your mortgage interest rate.

It’s no secret: Americans love to get a deal on something – anything.

We see it every day in our dollar menus, gas club member incentives, rewards cards, and we also see it in a not so obvious place: in buying points.

You may not be aware that buying points exists, but if you have ever been in the market for buying a new home and needed a loan or mortgage, you certainly have probably had an encounter with being offered them. The commercials and advertisements that you see from private lenders who are able to offer almost too-good-to-be-true interest rates? Those are buying points, and while they could be beneficial, the ultimately could be detrimental as well.

When you are quoted an interest rate, you will be presented with the opportunity to pay more upfront in the form of what’s called points, according to Business Insider (BI). Each point equals 1 percent of the loan; for example, if your loan is $100,000, one “point” will be $1,000, two points will be $2,000, and so on.

The appeal of buying points at the time of mortgage closing, says Business Insider, is that you may reduce the interest rate of your loan from 3.75 percent to 3.5 percent, which could lower your monthly by about $25 on a $200,000 loan over the life of 15 years. A 30 year mortgage has similar benefits, and more money involved over a longer lifetime means you could potentially save up to $75 on your monthly payment.

Most people, however, believe it doesn’t make sense to take this option.

Given the apparent benefits, BI estimates that it will take about 8 years to “break even” from buying points. What does that mean, exactly? When you purchase buying points, while you may be lowering the interest rate, it does nothing to change the overall amount of the loan. The reason it takes so long to break even is because the monthly savings you gain from buying points is only a fraction of the total cost. One should also consider how long the plan to stay in one place when taking this approach as well. If you plan on refinancing in under 8 years, or moving in under that amount of time as well, which is less than a 15-year mortgage, you could find yourself paying more money overall.

While mortgage points are tax deductible, many people would agree that there seems to be more risk involved than benefits. For more information on mortgage points and if they’re right for you, please contact Valley West Mortgage.

What is Fair Isaac Corporation (FICO)?

FICO is an acronym that stands for the Fair Isaac Corporation. The Fair Isaac Corporation (FICO) specializes in predictive analytics. They have developed a system that is designed to predict the risk associated with lending money to you in the form of a loan. According to Investopedia your FICO credit score makes up a substantial portion of the credit report that lenders use to assess an applicant’s credit risk and whether or not to extend a loan. FICO scores range from 300-850, with 300 being the lowest number and highest risk. The higher the number, the less risk there is associated with lending to you. So what’s a good FICO score? Ideally, you would want have a FICO credit score of about 650 or higher, but it truly depends on the lender and the nature of the loan you wish to receive.


Your FICO score can have a huge impact on your monthly mortgage payments. Your score will help to determine how much money your lender will loan you, how high or low your interest rates will be, and essentially how long you could be repaying your mortgage.

FICO SCORE APR Monthly Payment
760-850 700-759 680-699 660-679 640-659 620-639
3.564% 3.786% 3.963% 4.177% 4.607% 5.153%
$905 $930 $951 $975 $1026 $1092

You can see how a difference in your FICO score can lead to a significantly large monetary difference in your monthly payments. So remember to check your FICO score a few times a year, just to know the status of your financial standing. And always remember to check you FICO Score when you’re preparing to make a big financial move.

What Influences Home Value?

The Value of your home can be influenced by a number of factors. As a homeowner, you want to do everything you can to keep that property value up high. Why, you ask? Because when you are ready to expand your family and move into a larger home, or when you become an empty nester and you’re looking to downsize, the best way to ensure you have a good chance at selling is making sure that your home still has value that you can profit off of. So then, what can positively affect your home value?

How Up to Date is Your Home?

Adding renovations and modern improvements are a great way to keep your home up to date with those that are currently on the market. You’ve got to keep up with the competition.

What Neighborhood are you in?

Location, Location, Location

Are you in the city or the suburbs? Maybe you’re in the country with corn fields all around. Wherever you are, the value of your home can go up or down depending on the quality of your location.

Market Conditions

The market changes all the time. Rates go up then they go down, and sometimes they even mellow out. Remember, a good pumpkin means nothing to a farmer in the spring time. What that catchy little saying teaches us is that the season has to be right in order for good to really sell. You could have an excellent house that still may not sell if the market isn’t right and buyers aren’t buying.