Insurance 101 for First-Time Homeowners

If you’re thinking of becoming a homeowner, you’ve likely spent time budgeting for additional expenses – property taxes, lawn care, a big-screen TV to fill up that extra space…you get the idea. But have you factored in protection for your new home?

While you’re crunching numbers, remember to include homeowners insurance. A standard policy will cover exterior and interior damage from incidents like vandalism, fire, wind and lightning. It also covers loss of use expenses, damage to structures like sheds or gazebos, and liability and medical costs if someone is injured on your property. Personal property is covered, too – good news if you really do have your eye on that big-screen TV.

Still, standard policies aren’t comprehensive. To help you estimate how much you’ll spend on insurance, keep these points in mind:

  • Standard policy coverage can be for the cash value of your home and possessions (which may depreciate over time), repair or rebuilding costs based on the original value of the home, or replacement costs that exceed your limit if necessary. Coverage does not equal the sale price of your home.
  • Projects like building a porch or another bathroom can add significant value, so you may need to adjust your policy if you’re planning to renovate your new home. Upgrades (like a new roof) can lead to discounts if they mitigate risks, but potentially hazardous features (like a pool) may require up to $500,000 in coverage.
  • 90% of natural disasters result in some form of flooding – that’s a risk insurers just don’t want to take. Even if your home isn’t in a flood area, you may want coverage anyway if you have a finished basement. You can obtain a separate flood insurance policy through the National Flood Insurance Program (NFIP). And don’t delay – it takes 30 days for new policies to go into effect.
  • Residents in earthquake-prone areas might also want to supplement their standard policy, which doesn’t cover damage directly resulting from seismic activity. However, if a quake leads to further damage, such as a burst gas line causing a fire, your standard policy will cover it.

It may seem costly, but protecting what’s likely the largest investment you’ll make in your lifetime is worth it – and peace of mind is priceless.


Should You Paint or Stain Your Kitchen Cabinets?

So you’ve got new kitchen cabinets. Congratulations! But now what? For those wondering how to finish their brand-spanking-new cabinets, we run down the pros and cons of painting vs. staining—the two most popular finishing avenues. The kitchen is one of the most important factors in your home’s value, so consider how the following information impacts your real estate investment.

Pros for paint
– It’s flawless. Regardless of the color you choose, painting your cabinets covers up any quirks or blemishes in the natural wood, which can often be magnified by staining.

– Your color choices are endless. When it comes to picking a paint, the world is your multi-colored oyster. Get crazy and really customize the look and feel of your cabinets.

– Paint sticks to lower quality materials. If your cabinets are not made of wood (think particle board), paint is your BFF. It sticks to these materials just as well as higher grade wood options, and no one but you will know the difference.

Cons for paint
– It looks more uniform.
 Remember those natural quirks we mentioned? Well you may not want to cover them up. If you’re looking for a more natural, country vibe that highlights those stunning features like grain and knots, opt for a stain over paint.

– It’s pricey. While not too expensive in the grand scheme, paint is more expensive than a stain, so if budget is a concern, take heed.

– Harder to touch up. Even if you can’t find an exact match for your cabinet color, when you’re working with stain, odds are you’ll have better luck blending touch-ups in stain than with picky paint.

Source: Houzz


Who Pays for Title Insurance and How Do I Find a Company?

Buying title insurance is a pretty straightforward process. A title company will walk you through the process and will do almost all of the work itself. Still, there are some things to know about how to find a good title insurance company and how much the service costs.

When buying title insurance, look to your lender for the best recommendation. Its interests intersect with yours because it’s guaranteeing a large loan based on the property you’re using as collateral. Also, your lender will likely require you to get title insurance. Never rely on a seller’s recommendation as it could be biased.

The Real Estate Settlement Procedures Act, or RESPA, prohibits a lender, real estate agent, attorney or other person or entity involved from requiring the buyer to use a particular company. Homebuyers can shop for title insurance and a provider that best fits their needs.

The price of title insurance is regulated in many states, so there shouldn’t be much of a price difference between companies. The average title insurance policy has a one-time premium of about $1,000, covering all upfront work and ongoing legal and loss coverage. However, premiums can range from $200 or so to more than $2,000.

You want to find a title insurance company that has been around for a long time and will continue to be around. Verify that the underwriter is financially sound by checking financial solvency ratings at companies such as Demotech Inc. and A.M. Best Co. Also, research the underwriter and title company, or the attorney, to see what other customers have said about their service.

Homebuyers often pay for title insurance, so it’s in their interest to shop around for it. Some jurisdictions may require sellers to pay for it. Even if the buyer pays, title insurance is still an expense that can be negotiated by a real estate agent and split by both sides or paid entirely by the seller. If you’re not paying for title insurance but still want to choose the company, you may have to share some of the costs.

If the seller is pushing their title company, you may want to avoid it because it could lead to the same results from when they originally bought the house. A new title insurance company could find new records or summaries that a previous search didn’t unearth. This will give you a better chance of fixing any problems before you buy the home.


The Fiduciary Rule Explained

Asking a financial expert if they’re working in your best interest when giving you advice on your retirement account seems like a simple enough question. That question is now getting a little more complicated.

Known as the fiduciary rule and set by the Labor Department to take effect in April 2017 — but then delayed by the Trump administration until at least June 2017 and some parts until January 2018 — the rule simply requires people in the financial services industry to put consumers’ best interests ahead of their own.

Without this rule, financial advisers could steer clients to mutual funds with excessive fees or have other conflicts of interest such as higher bonuses or prizes. The Obama administration put the loss at $17 billion a year from retirement accounts for such conflicts.

The fiduciary rule would prohibit advisers from concealing any potential conflict of interest, and required that all fees and commissions must be clearly disclosed in dollar form to clients. It also expanded the definition of a financial adviser not just to someone giving ongoing advice, but to any professional making a recommendation or solicitation.

President Donald Trump has delayed the rule, which is now under review. Some groups have said they may sue the administration if the rule is weakened or killed.

The fiduciary rule is necessary, supporters say, because most financial advisers aren’t held to a legal standard requiring them to put a client’s interests first — much like a doctor or lawyer must do.

Instead, financial advisers can legally act in their interests first and can earn bigger commissions for more expensive products that they sell. They can earn more by giving bad advice, and it’s legal.

To avoid this problem, consumers can look for “fee-only” advisers who charge a one-time fee for financial advice. They don’t earn a commission for steering customers into one investment product over another.

Before the rule was scheduled to be implemented, some investment firms had changed their prices on funds to appeal to consumers. Some high-fee products were removed and some companies eliminated commission-based sales practices entirely. Some also created new products that are less expensive for consumers.

If you work with a financial adviser, ask them if they’re a fiduciary and if they’re obligated to act in your interests above their own. If not, you may want to switch advisers.

Hope you found these tips helpful! Contact me for more insights and info.


5 Home Insurance Myths That Could Cost You

Whether you’ve owned a home for years or are buying your first home, purchasing insurance can be confusing. Some of that confusion can come from policy myths that are often not true.

If ignored, these five home insurance myths could cost you in the long run.

  1. Flood coverage is standard. Flood insurance isn’t usually part of a standard homeowner’s insurance policy. You might think it is, or should be if you live in an area prone to flooding. However, homes in flood zones are typically required to have separate flood insurance. FEMA’s National Flood Insurance Program and private insurers can provide you with flood insurance. Just remember that the cost will be separate from your home insurance costs. Even if you live near a flood zone, it may be worthwhile to buy the extra insurance.
  2. Everything I own is covered. Home insurance has its limits, and is meant to protect your home from disasters such as fire and hurricanes, or as protection from burglars and accidents. It isn’t meant to replace all of your personal property, such as expensive jewelry or artwork. Those should be covered by a scheduled personal property policy separate from your standard home insurance policy, which should clearly state what’s covered and what isn’t.
  3. Base coverage on market value. If you think you need to buy enough insurance coverage based on your home’s market value, think again. A better way to think about it is to buy enough insurance to cover the cost of rebuilding the house, which is different from the home value at the time you buy an insurance policy. In fact, you may need less coverage than the market value to rebuild the home
  4. My home business is covered. Running a business out of your home requires a separate type of insurance coverage that isn’t typically included in a standard homeowner’s policy. A business rider added onto your existing home insurance policy shouldn’t cost too much and will protect your office items if they are stolen or damaged.
  5. All injuries are covered. If a guest is injured at your house or on your property, the liability coverage in a home insurance policy will typically pay for any claim filed. This isn’t the case if you or a family member is injured in your home. If you fall down the stairs, don’t expect a home insurance policy to pay for your doctor’s bills. Instead, look for help from your health insurance.

Energy-Saving Methods from Around the World to Adapt at Home

Germany leads the world in energy efficiency, followed by Italy, Japan, France and the United Kingdom, according to an international scorecard. The United States is tied for eighth with South Korea.

What are other countries doing so much better than the U.S.? Can the big steps that Germany, for example, is taking to be more green be broken down for individuals to do?

The 2016 International Energy Efficiency Scorecard from the nonprofit American Council for an Energy-Efficient Economy, or ACEEE, looked at performance in buildings, industry, transportation and overall national energy efficiency efforts.

Those are broad areas and apply to entire countries. But there are plenty of small things that an individual or a family can do to save energy that are more widely used around the globe. Here are a few:

Build better: If you’re adding on to your home or remodeling, consider green building materials that will make your home more energy efficient. Forty percent of all energy is consumed in buildings, and most of that is used for heating.

Buy green: When choosing a refrigerator or freezer, pay a little more money upfront if you have to for the one that’s more energy efficient. Products with the Energy Star certification clearly make it easy to see how much energy something uses and how much it costs per year to power it. Look for the most energy efficient product you can when shopping, such as light bulbs and consumer electronics.

Ride a bike: Germany has extensive bicycle transportation networks, with more than 200 long-distance bicycle paths. Riding a bike to work every day may be difficult, but try riding on errands a few miles from home to see if it improves your health and lowers the gas bill for your car.

Take public transportation: The German public transportation system is so large that 88 percent of Germans live near a bus or train stop. Share your car or take the bus to work and save money and help the environment.

Recycle: If your city’s garbage collector doesn’t have a recycling program, ask for one. Germany has a complicated recycling system where items must be sorted and recycled properly. Recycling helps reduce pollution, conserve resources and save energy. For example, about 95 percent of the energy used to produce an aluminum can from virgin materials can be saved by using recycled aluminum instead.


Some Home-Closing Costs Are Worth Negotiating

Closing costs are 2-5 percent of the purchase price of a home, resulting in an average of $3,700 in fees for paperwork required to buy a house. That’s a lot of money to come up with when you may have already put everything toward a down payment.

Some fees from mortgage lenders are required by federal law to be the same, and there isn’t much you can do to change these costs listed in a HUD settlement statement — origination, underwriting, administrative and doc-preparation, among others.

Other closing costs, however, can be negotiated. Here are some to check into:

Lender fees: All customers must legally be charged the same lender fees by a lender, so you can’t negotiate them. But you can shop around for a lender with low fees, as seen in their good faith estimates, which shouldn’t differ from the HUD statement.

Higher loan rate: If you’re willing to pay a higher loan rate, then lenders will discount the fees. Those can be added to the loan and are seen through a slightly higher monthly mortgage payment.

Title insurance: This type of insurance is required to protect the lender and you if there are undiscovered liens against the property. Shop around for lower title insurance or negotiate the fee.

Home insurance: Lenders require a home insurance policy, which can cost from $300 to $1,000 a year, depending on where you live and the type of home. Shop for an insurer that offers discounts for certain factors, such as having multiple policies, a new roof or specific home improvements.

Negotiate with the seller: If you’re in a buyer’s market, ask a home seller to cover part of your closing costs. The worst that can happen is they say no.

Add costs to the loan: If none of these tactics work and you still have difficulty paying closing costs, ask your lender to add them to the loan. Instead of paying these costs all at once, you’ll be able to pay them over 30 years or however long your home loan is for; you won’t feel the financial pain as much over time.


The Hidden Costs of Owning a Home

Financially, there’s more to buying a home than the purchase price—sometimes much more.

After the down payment, and once your closing costs and monthly mortgage payments are added up, it can be easy to forget some of the costly and hidden costs of owning a home. Take these added charges into consideration:

Property Taxes
Property taxes are set and collected by the state, county and local agencies. Sometimes multiple agencies collect funds through a property tax for services such as water, sewer, schools and fire and police departments.

The taxes can go up annually in some areas, depending on a city’s services, so the following year’s cost may be difficult to predict. You’ll still want to find out what the current property taxes are on a home before buying. A real estate agent should be able to help you calculate estimated taxes for the following year.

Home Insurance
Since home insurance is required by mortgage lenders, this is one cost that you’ll be reminded of quickly. It can protect your home from natural disasters, accidents and thefts. Extra insurance for natural disasters, such as floods and earthquakes, can cost more but may be worthwhile.

Maintenance and Remodeling
A leaky roof, cracked foundation or other home problem can be found during the inspection or long after you’ve moved in. Home repairs can be expensive and something you don’t want to put off. Experts recommend putting aside 1 percent of your home’s value for maintenance each year.

Along with repairs, take into account any remodeling you want to take on. Kitchens, bathrooms and bedrooms are the most common areas for remodeling, which can cost thousands of dollars. Put some money aside each month in a savings account dedicated to maintenance and remodeling to make your life easier.

The same goes for home insurance, property taxes and other costs you may not think of when buying a home. Contribute regularly to a bank account to pay for the costs of owning a home, and you’ll be ahead of the game when the bills come due.


Where Parents Can Find Money to Help Their Kids Buy a Home

There are many ways parents can help their children purchase a home: contributing to a down payment, helping with closing costs, co-signing a mortgage or allowing their kids to move back home so that they can save money.

While most of these avenues involve giving your children money, deciding where that money should come from is an important decision. For parents nearing retirement, pulling money from a savings account or a 401(k) retirement account can be problematic if the money is needed for retirement. Without it, they could end up moving into the house they helped their children buy.

A poll by loanDepot found that more parents are planning to help their millennial children buy their first home. Sixty-seven percent said they planned to pull the money from their savings account.

Here are the percentage of poll respondents who planned to use other sources of parental support:

  • Refinancing their own home: 8 percent
  • Taking out an unsecured personal loan: 8 percent
  • Selling equities: 5 percent
  • Borrow from 401(k): 4 percent
  • Sell primary home: 2 percent

For the parents who do pull money from their savings account to help with a down payment, there’s some disagreement with their children over whether the financial support is a gift, loan, inheritance or something else, the poll found.

Most parents (68 percent) view it as a gift, while more millennials (36 percent) viewed the financial support as a loan to be repaid (29 percent).

A down payment on a home is the most common form of assistance from parents, with half of those polled planning to help in that way on future purchases. The other methods were:

  • Allowing their kids to continue living at home to save money: 33 percent
  • Paying other expenses so the children could save money: 30 percent
  • Kids moved back home: 22 percent
  • Help with closing costs: 20 percent
  • Co-sign the mortgage: 20 percent
  • Help pay down student loan debt: 18 percent
  • Help pay their rent for a period of time: 8 percent

Allowing an adult child to move back home so they can save money may be the least costly option for parents wanting to help their children buy a home, as it shouldn’t require parents to pull money from their savings or retirement accounts that they will surely need down the road.


Low Credit Score? Your Mortgage Options

Having good credit won’t get you a mortgage by itself, but it definitely helps. A good credit score can result in a lower interest rate and better loan terms, while poor credit can lead to a higher interest rate for a mortgage. 

But it’s not impossible to obtain a home loan if you have poor credit and are working to improve it. Here are some options:

Wait a Few Months

Work on improving your credit score for a few months, and then try to get a home loan. The wait may be worth it and could boost your credit score just enough to qualify for a loan.

There are several ways to improve a credit score. Reducing debt is the best way, so do all you can to pay off your credit card bills. If you have a history of late payments, or just a few of them, stop that bad habit and start paying all of your bills on time. 

Also, check your credit reports for errors and fix them, and don’t apply for new credit cards when shopping for a home loan.

FHA Loan

A loan backed by the Fair Housing Administration (FHA) is usually the easiest type of mortgage loan to qualify for.

It’s aimed at first-time homebuyers and requires a low down payment of 3.5 percent for people with credit that isn’t very high. Borrowers with credit scores as low as 500 can qualify for FHA loans. 

However, FHA loans do have an additional expense—you’re required to purchase mortgage insurance. This protects the lender if you default on the loan.

Are You a Veteran?

A Veterans Affairs mortgage, or VA loan, is a low-cost home loan for veterans. It doesn’t require a down payment in most cases, has lower rates than conventional loans, and doesn’t require paying a monthly mortgage insurance premium, among other benefits.

Most VA-approved lenders require a credit score of at least 620, according to the Veterans United Network.

Have a Higher Down Payment

The interest rate a lender offers on a mortgage is partly based on risk. A poor credit score can mean you’re a higher risk for not repaying the loan than someone with a high score.

To offset some of that risk and qualify for a lower interest rate, you can make a higher down payment. Putting 20 percent down instead of 5 percent may get you a better rate on a loan.

Whatever loan option you choose for a home purchase when trying to improve your credit, you should continue working to boost your credit score after buying a home. When it gets high enough, it may be worthwhile to refinance your home loan.


Put a Little Life into Your Lights

When’s the last time you paid attention to your lights, switches and fixtures?

They may seem like little things, but when selling a home, everything counts, so putting some thought into your home’s lighting can go a long way toward sprucing up your home without emptying your wallet.

Here are some easy things that you can do:

Install new bulbs. This is an affordable way to set the right mood in rooms throughout your home. New bulbs also mean they won’t burn out while potential buyers look over your home.

Choose the right bulbs for each room. Bright lighting in the kitchen and softer lights in the living room, for example. If you have a ceiling fan with more than one bulb, avoid high-wattage bulbs, and install those of equal wattage.

Replace outlet covers. This is another economically-friendly step that can make a difference. Pick the right colors for each room, and make sure plates match. Another advantage to doing this—you’ll make sure all outlet covers are tightly screwed on and secure. Be sure to take any necessary safety precautions before changing any plates.

Dust and clean. Lighting on the ceiling can collect dust, especially on globes that cover bulbs, exposed bulbs or chandeliers. Built-up dust in these areas is unsightly, so take a few minutes to dust these. Be sure to do it in the afternoon while the lights aren’t on and hot to the touch. Then, take a look at the covers of your light switches. Hands are all over these, so there’s a good chance they’re marked by fingerprints or food stains. Clean these with a window cleaner; use very little cleaner and be careful because you don’t want liquid getting into the switch area.

Check your switches. A lot of houses have switches that just don’t work or are backward, turning lights off when in the up position and vice-versa. These are little things, but any imperfection can be a distraction to visitors. It may well be worth the time and expense to hire an electrician to repair or replace any broken switches or outlets that don’t function properly.

Remember exterior lights. Outdoor lights are also important. If people visit the house at night, you want walkways to be well lit, and if outdoor lights aren’t working because of burned-out bulbs, it could be a sign that other areas of the house are being ignored.

Taking these steps can help you sell your home faster.


House hacking is a strategy for buying a multi-family property, such as a duplex, triplex or quadplex, and living in one unit while renting out the other units to help offset the cost of ownership. This can be a good way to get started in real estate investing, as it allows you to build equity in a property while also earning rental income.

Here are a few things to consider if you're interested in house hacking a multi-family property:

  • Financing: When you buy a multi-family property, you'll need to take out a mortgage to cover the purchase price. You may be able to qualify for a larger mortgage if you can show that the rental income from the other units will help offset the cost of the mortgage.
  • Location: Look for a multi-family property in a location that is attractive to renters. This could include areas with a strong job market, good schools, and access to public transportation.
  • Management: As the owner of a multi-family property, you'll be responsible for managing the units and finding tenants. You may need to set aside time to handle maintenance and repairs, as well as to advertise and screen potential tenants.
  • Legal considerations: Make sure you understand any legal requirements or restrictions that apply to rental properties in your area. This could include zoning laws, landlord-tenant laws, and building codes.

If you are just getting started in real estate investing and your circumstances can allow it, this is always my first suggestion to people on where to start if they haven't defined where they would like to start. It is one of the fastest ways to build wealth, especially when just getting started. 

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