Banks have been cutting their mortgage loan portfolios back, that is for sure, but the careful borrower can still locate a mortgage.

Smaller, community based banks are still extremely active in the mortgage business. That small banks are doing this should not be too much of a surprise. The origin of the home loan business was small, locally focused “building societies”, who took in deposits from local citizens to lend out to local homebuyers. Of course, they go by other names nowadays, but lenders that focused on their core business and area have for the most part avoided many of the problems in banking.

They are still able to not only make mortgages available, but are even expanding their mortgage portfolios to fill some of the gap created by the big players who have been forced out of the market because of rapid expansion in low quality loans.

The large, stamdard banks are cutting back on loans across the board, but local, community based banks are predicting continued stability in their lending business, although with not much growth.

Community lenders such as this, that may include credit unions and development banks, have had extraordinary success in lending to the so-called sub prime borrower, because they stay close to the customer they are lending to. In fact, many of these lenders are not just staying alive, they are earning a profit.

A good example is Shorebank of Chicago, a $2.3billion asset bank which is active in the low income community of this city and, compared to the national average of delinquencies of 18.7%, has only 3.1%. Since they are dealing with sub prime customers, their rates are higher, and they tend to be extremely careful about how they manage their loans. They strive to be profitable, but not to be involved in “profit maximizing” according to Mark Pinsky, CEO of Opportunity Finance Network, an umbrella group for community development finance institutions. Reading between the lines, profit maximizing can be understood to represent the greed that has been one of the foundations of the financial markets’ current woes.

If you look at the salary of a CEO of one of these small community based organizations, such as that of Douglas Bystry of Clearinghouse CDFI, at $190,000 in comparison to that of Angelo Mozilo, CEO of Countrywide Financial at $22.1million, you can realize the problem. ShoreBank is located in an abandoned 1920’s movie theater, not a multilevel steel and granite structure in a suburban corporate park.

These kind of lenders prefer to remain close to their customer base, for by doing so, they can monitor their portfolio and protect their assets better. Take the program managed by Shorebank that educates its borrowers in energy conservation in order to save costs, money saved that can contribute to paying the mortgage.

There has been a major upheaval in the world of lending and home mortgages. What next? It is important to make an intelligent guess about how interest rates will go.

Tight conditions in the mortgage world should normally lead to lower rates, since banks would have to lower rates in order to attract customers with good credit ratings. However, the banks are doing the reverse, and raising rates in an attempt to increase revenue.

It seems almost short sighted, but to make up for falling revenues, banks are increasing rates across the board, instead of offering attractive rates for their most credit worthy borrowers. This shortsightedness is not limited to the home loan industry; credit card companies are doubling and even tripling their rates in response to defaults on the part of customers in this depressed economic environment.

In prior times, a slower economy normally meant lower interest rates which would bring in more customers. Today, though, the financial industry is so disrupted that matters was considered normal before are not now.

So what is the solution for a potential homebuyer with the right credentials to borrow? Take a wait and see approach and hope that matters will return to normal, with lower interest rates, or take advantage of any credit that can be obtained, regardless of the rate?

Some pundits are not only predicting a recession, but even a depression, with deflation instead of inflation. Normally, deflation will in turn lead to lower interest rates, so this indicates a wait and see attitude is the best to take right now.

Some lenders are still actively soliciting borrowers. Many small banks never had the capital to delve into the giant home loan programs that many of the larger banks did. In this case, being small was an advantage, since many of them were insulated from the issues now haunting most of the credit industry.

Another argument for waiting is that home prices are also probably not at the bottom and may fall an additional 10% over the 25% decreases seen over the last year. A study of housing prices conducted by researcher Case-Schiller shows an average decrease of 17%, but some regions with home prices falling 25%. If a combination of lower interest rates and lower home prices are in store for the housing market, it may be wise to put off a home buying decision.

There exist only two mortgage insurance products. Mortgage life insurance pays down your mortgage if you pass on. This can be either decreasing term or fixed term, depending on the nature of your mortgage. The other kind of mortgage insurance is disability that will keep paying your monthly mortgage in case you become disabled.

But behind the basic policies, there are some choices homeowners have to make regarding their policies.

First make sure you understand whether you have picked a partial disability policy, with a predefined bebefit or a residual policy, with an amount based on current salary.

Short term in addition to long term disability exists and you may decide to take short term if you feel you have other income that will start at a certain point. This is usually the kind for someone who has another policy that would cover his expenses in at a later age.

In addition to picking a policy, the buyer will have to decide between a choice of riders available. Some of the riders usually offered are guaranteed future insurability, non cancelable policy, waiver of premium, inflation protection or guaranteed renewable policy.

Inflation Protection

Buying this rider will mean that your benefit will increase as inflation goes up. This will protect the mortgage benefit from being too little to pay your future home loan payments.

Guaranteed Future Insurability

The value of your residence may increase due to market forces or improvements you have made, but if you purchase this rider, you will be guaranteed that you can increase the insurance to cover it, without re-applying.

Guaranteed Renewable Policy

This rider assures that the policy will always be renewable (as long as premiums are current, though they may go up.)

Non-Cancelable Policy

This rider will renew the policy and also will protect the premium from increase.

Waiver of Premium

Once you start collecting a benefit, the premiums are no longer due under this rider. This means that when you are disabled, you do not have to keep on paying the premiums on your mortgage disability policy.

You can count on three main factors determining the premium of your mortgage insurance. For any given policy with all the same features, the premiums will be determined by the size of the loan, the age of the homeowner and whether or not he is a smoker.

Both mortgage life (to assure payment of the mortgage at the death of the insured) and disability (to provide income for paying the mortgage in case of the disability of the insured) use the same criteria to price the premiums.

The age and health of the insured is of paramount importance to the insurance company, since that will determine for its actuaries what the chances of paying off the insurance are. A great many mortgage insurance policies do not even require a physical. Just because a physical is not needed, don’t think you can hide a grave health condition or the fact that you are a smoker. Don’t think you can claim that you are a non smoker and then collect on the policy because the insurance company didn’t know. But if the cause of death or disability can be related to the hidden condition, the policy can be voided, and the insured would have paid premiums for nothing.

Recognizing this limitation, many companies now have Regular (for smokers) and Non-tobacco, which is for applicants who do not currently use tobacco or have not used it within the prior twelve months period. Of course, a smoker’s risk is already calculated into that policy.

Bear in mind that insurance policies that are writable without a physical have previously priced the additional risks into the premium. If you are in good health, you may be better off asking a quote for a policy that requires a medical exam; you may quality for substantially lower premiums.

Age and health are such important components of the calculations that a 50 year old with 18 years left on his $210,000 mortgage will pay more than twice as much as a 38 year old using the same conditions. Lowering the mortgage amount insured does not change the premium that much. None of this is surprising, since the insurance business is based on increasing the collection of premiums and delaying paying of policies.

The mortgage figure has an affect at a given level, however. Up to about $250,000, the amount insured will not change the premium a great deal and will probably fall within the quick quote easy application classes. But once the value of the property insured starts to go up, the insurer will require a full application and an individualized quote, and of course, the property itself will need to be assessed.

Buying a home can be a serious businessaffair. In a flash, you are responsible for an asset which is worth hundreds of thousands of dollars. You have most likely already started considered protecting it via mortgage life insurance.

That is fine if you pass on, but the more likely situation is that you will be disabled, and neither you nor your family will be able to stay in your residence since you cannot work.

The best way to determine how much you will require in terms of disability insurance is to consult with a financial planner or a life insurance agent. If done correctly, you can have a full analysis of the total costs of maintaining your home compared to your expected income if you should not be able to work.

Just because you already possess disability insurance from your job or a government program, don’t expect that to cover what is most likely your single largest cost, your mortgage. You have to look at all of your debt when you think about being disabled. Other consumer loans, such as your car or credit cards, as well as other insurance policies, all have to be kept current. You will quickly realize that your stand alone disability policy is not going to be enough to cover your mortgage and other home related expenses, in addition to these other expenses.

There are a number of features to be aware of when shopping for mortgage disability insurance such as the benefit period, the elimination period and optional riders.

The benefit period is the amount of time the benefit will be paid. In most policies, the benefit period goes to age 65, but if you can shorten it because you can count on some supplementary income before then, you can save a lot of money. For instance, if your spouse starts to collect retirement benefits before then, or if you can start taking out your own retirement benefits without penalty.

The next area of concern is the elimination period, how long your disability must exist before you can receive a benefit. Again, if you can extend this waiting period, your premiums will be lower. If you have saved for a rainy day, this may be the rainy day, and you can save a lot of premium expense if you have these funds to cover you for a period of time.

A rider is an added coverage that you can choose to add onto your policy. A common rider is a cost of living rider, that will increase the benefit according to recognized cost of living increases.

Before you can make the right decision about your mortgage disability, be sure you understand what it covers, and how much each feature costs. Make sure you choose the policy that will save you the most in premiums and be best for your needs.

As you start the process of applying for a mortgage, you will probably get into discussions about mortgage insurance.

There is frequently some confusion among homeowners about the kinds of insurance they are discussing when they are talking to their bank.

Banks feel they have to protect themselves when a lender has a very little down payment. The concept is that the buyer does not have enough equity, or enough of his own money invested in the property to make walking away from it a less attractive prospect. These small or no down payment mortgages worry banks since the temptation to default is more than normal.

The bnak then requires that the buyer take out an insurance policy on the mortgage, but the beneficiary of the policy is not the buyer, but the bank. Note that the bank is the beneficiary, not the borrower or his family.

If you are concerned, as a responsible homeowner and family man, that your family will not be able to continue to pay the mortgage and live in their home if anything occurs to stop your flow of income, you may be interested in taking out mortgage life or disability insurance.

With this type of insurance, your family will not have to worry about keeping up the mortgage payments in case anything happens to you, the primary breadwinner.

If you want to protect your family in the event of your death, you would subscribe to mortgage life insurance, which would pay down the outstanding balance on your home in the case of your death. The most popular type of mortgage life insurance is decreasing term insurance, in which the policy amount decreases over time, just as the mortgage is decreasing. In other words, you would not have to pay the premium on a $200,000 policy as the outstanding balance on your home gets lower.

In the instance of mortgage disability insurance, the amount of the monthly home loan payment will be guaranteed for the allowable period of the disability.

It is very important to understand which types of insurance your bank is talking about when you discuss mortgage insurance. Some lenders may be anxious to sign you up for mortgage life or disability insurance since they can make a commission from it, but if you are in a situation with a low down payment loan, your bank may only be talking about protecting his interests, not yours, when he discusses mortgage insurance with you.

Understand what you purchase before you buy is always important, but no more so when it is disability insurance. In order to compare the different policies that will be offered to you, you have to be aware of and understand each aspect and its impact on the policy premium.

First of all, make sure you understand the policy’s definition of disability. This is a critical component, especially if you have a highly specialized career. Make sure the policy is clear about whether it covers “own occupation” or any occupation”. Own occupation means it is what you are trained to do, and if you can no longer do it, your income will be severely curtailed. An any occupation limitation says that you are unable to work in any job. A pilot who could no longer fly, for example, may be able to perform some other job for his airline company.

This is a veritable possibility if you pick the Any occupation choice. It is important to make sure you amply insured to substitute your former salary.

The next area of concern should be the benefit period. Normally this extends to 65, but some people might have income expected before this age, and therefore can be sure of not needing the benefit all the way until that age. For example, you may have retirement funds that are available or perhaps your spouse starts to collect social security and that income can be used.

The next area to look at is the benefit amount of the mortgage disability policy. The actual mortgage payment should be insured. But there are ancillary costs involved with maintaining a home, that you may not be able to afford unless you cover them with your disability policy: real estate taxes, fire or other hazard insurance, maintenance costs. You have to calculate if the additional premium makes it worth while to cushion the benefit.

Those are the basic components that will determine the coverage and premiums of your mortgage disability insurance. There are many other features, most of which are optional additions to your policy, otherwise known as riders.

The inflation protection rider is a useful rider. Your monthly benefit will increase as the cost of living increases. Many people consider it important to protect against these cost of living increases. There are two kinds, simple, whereby a percentage is added to the amount received, or compound, which compounds previously granted increases.

Various riders you may see are non cancelable policy, guaranteed renewable policy, guaranteed future insurability or waiver of premium.

Homeowner’s insurance usually means fire or damage insurance to the majority of homeowner’s. These policies, known as hazard policies, cover some real tragedies that may happen to your home, but they do not cover one of the most likely: that you will not be able to pay your mortgage for reasons beyond your control, such as disability or death.

Home life or disability insurance is the kind of policy that protects against this occurrence. When you think about it, there is probably a greater eventuality that likely you cannot pay your mortgage because you are laid up for a while than that your home is lost in a fire.

Most lenders will offer a plan to insure your house under a lenders group policy. But you can also contact your own or other insurance companies to find out about this kind of insurance. Shopping around for a policy, instead of just taking the cookie cutter one your lender offers, is probably a good idea.

Individual policies can offer a wider range of choices that the lender’s policy probably will not be able to. The lender’s policy will be a “boiler plate” policy, with only the principal amount (the amount of your mortgage or mortgage payments) differing. You cannot alter it in any way to your own needs.

For example, if you want the policy to be for more than the amount of the mortgage to allow for contingencies, you cannot do this. If you wanted to add kind of comfort margins, this would not be permitted.

This is one of the important reasons to shop for your own policy: the amount of control you have over it. You can change the amount, or have it remain stable or go down. (Most bank’s insurance policies go down in coverage amount). Since the lender is in control of the policy, he can cancel it if the mortgage is paid off or assumed or if the group policy terminates. You can carry the policy from home to home when it is your own policy; the lender’s policy is tied to the mortgage.

There is no convertibility factor in a lender’s mortgage insurance policy, while an individual policy can be converted, and cash values will not accrue with group policies whereas an individual policy can provide a return of premiums over time.

A final caveat is that lenders are not in the business of insuring, they are in the business of lending. The expert in the area of insurance is an insurance company, not a bank, so for the best choice and quality of product, you should work with an insurance company.

You may be familiar with disability insurance, which is an insurance plan that assists you in case you cecome disabled and unable to work. This type of insurance may be provided by state governments, or by an employer. The concept is similar to unemployment insurance in that if your salary is cut off, in this case because you cannot work, not because you have lost your job, you will still receive an income.

There are workman’s compensation disability policies, which are related to loss of job due to accident or illness on the job, but many policies cover all disabilities, job related or not. Disability insurance is frequently a benefit given by employers at a low rate since it is part of a group package, and employees always have the right to subscribe to more if they want to.

Disability insurance normallyusually only replaces a part of one’s full income, many times as little as half. As we all know, making the mortgage payment each month is difficult enough with 100% of your salary; imagine the burden if you were only receiving 2/3rds of your salary. To protect what is probably your biggest asset, you may want to make sure you can manage your mortgage payments when you are sick for a while.

This is the role that where mortgage disability insurance is meant to play. When you carry this kind of insurance, your mortgage is paid by the policy, even if you have other disability insurance.

If you have life insurance of sufficient size, or mortgage life insurance, your family would be in a position to pay off the mortgage should you pass on. But a disability can create a great deal of havoc, and life insurance will of course not help here. Can your family continue to afford the mortgage if you couldn’t work for a while? This is the problem mortgage disability insurance addresses.

In addition, as is the situation with so many of today’s households, both breadwinnrs can be covered if they both contribute to the payments. If you or your spouse is injured, and they are covered under the policy, you would still be able to make the mortgage payments for a few years. These payments are done in addition to any other disability insurance you may be receiving.

The terms for which the policy can be called differ from company to company and even from policy to policy. It is important to understand all of the features of the policy before you commit to an insurance policy, for example what illnesses and accidents will it cover and if there a time lapse before the insurance will “kick in”. Once you understand and compare a number of policies, you will be in the best position to choose the best one for your needs.

As soon as you begin to look for a mortgage, you will find yourself looking for a way to protect it. Many lenders will offer mortgage insurance, but you dont have to take your insurance from the same place that you get your mortgage. (An exception is purchase mortgage insurance, the kind the lender requires you to take out to protect them when you have a low down payment.)

Whatever offers you receive regarding life or disability insurance on your home loan, make sure you read them all and compare them, since the cost and the benefits can vary greatly from one insurer to the next.

Like almost any other product around today, you can also shop for your mortgage insurance online. When you shop this way, it is really easy to compile a chart of costs and benefits for each policy. In addition, online sales are often cheaper because the processing costs are less. Offers you may do receive by mail or on the phone may be there on the internet.

Some internet sites will even offer a worksheet to permit comparisons between policies. Make a few copies as you call around or scroll around, and you will design the perfect mortgage insurance coverage for your particular case.

The amount of coverage is almost as important as the premium you will have to. Another feature to look for is policies that have more than one coverage. Many times, these kinds of policies turn out to cheaper per feature.

All this work is necessary once you see how many various policies there are, and the differences in price. This is a long term choice, one you will be paying for over many years.

This is why it is important not to automatically take the policy your lender offers. It is important to review one or two others to make sure they are in the ballpark. Buying a policy without looking into the costs and coverages can prove a very expensive proposition. In addition, you will have the opportunity to be offered a number of different features and you can pick and choose among them.