Job loss mortgage insurance giving homebuyers security

homeIn these uncertain times potential homebuyers continue to sit on the sidelines because they are concerned that a job loss could kill their dreams to own a home.

Innovative job loss mortgage insurance is being offered through mortgage lenders, real estate agents, new-home builders and state and local housing agencies. In many cases this protection is being offered free to the homebuyer as part of their home purchase.

One real estate agent even put out a press release about the "Worry Free" Mortgage Protection."

"The ability to provide home buyers a viable solution to the uncertainty associated with purchasing a home eliminates one of the major obstacles preventing buyers from taking advantage of once in a lifetime purchasing opportunities," Lance Mohr, a Tampa broker, stated. "Interest rates remain near historic lows even as the cost of buying a new or existing home continue to drop; combined with federal tax incentives this is literally one of the best buying opportunities presented in decades. Unfortunately, the fear of job loss and economic uncertainty has prevented many would-be buyers from acting on their desire to purchase a home."Mohr promotes the protection because "buyers have the peace of mind in knowing the mortgage will be paid even if they lose a job or experience other financial set-backs." The "Worry Free" mortgage coverage can be offered by the seller of a home usually for a cost of about $500 paid by the seller.

The "Worry Free" Mortgage covers up to six months and up to $1,800 per month (principal, interest, taxes and insurance (PITI)) for the first 24 months of the loan.

During the first 24 months of homeownership the Rainy Day Foundation may offer emergency grants to assist homeowners in keeping their mortgage payments current if the bank, mortgage broker, or real estate agent has partnered with them. The Rainy Day Foundation also provides financial tips and resources and may assist with medical issues or other events incurring significant financial responsibility challenges.

While I've seen the "Worry Free" Mortgage mentioned in many states, other programs offering job loss protection are also out there including the California Association of Realtors' (CARs), which offers a Mortgage Protection Program for free to first-time homebuyers.

They can get up to $1,500 per month for six months to help make their mortgage payments. The CARs' Housing Affordability Fund has committed $1 million to the program. Also Genworth Financial's Job Loss Protection is available at no charge to buyers purchasing Genworth mortgage insurance. It covers PITI (principal, interest, taxes and insurance) for up to a certain amount, also up to six months.

If you are offered a job loss protection program be sure to read the fine print:
  • Don't assume the policy will cover the full mortgage payment. All plans come with some limits. Be sure you know the limits before you obligate yourself to a loan.
  • Some policies delay their effective date to prevent someone from signing up for a plan knowing that their job is in jeopardy. Check to find out if there is a waiting time before the policy goes into effect.
  • Don't expect immediate payment of the mortgage. Payment goes out 30 to 60 days after a job loss for most of these policies.
Certain people can't qualify at all for these protection plans. If you are self-employed, already unemployed, under the age of 18, over the age of 60, retired or in active military service, you likely won't be able to take advantage of job loss mortgage insurance. Also some plans are geared solely to first time homebuyers. Some plans are renewable and some are not.

If you are looking to buy a home, find out if you can add the "Worry Free" Mortgage Protection to your contract. Your lender or your real estate broker should be able to find out for you.

Lita Epstein has written more than 25 books include "The 250 Questions Everyone Should Ask About Buying Foreclosures."

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