How To Estimate Your Home Insurance Costs

Whether you’re shopping for your first home insurance policy or you just moved to your forever home and want to make sure it’s fully insured for the long haul, you want to know how much coverage to buy.

You might use a homeowners insurance calculator or ask your insurance agent for a home insurance estimate, but you don’t want to leave all of the legwork up to others. If you do, you could be left without enough coverage — only to find out just when you need it most, after disaster strikes.

To help yourself out, you want to know how to create an accurate homeowners insurance estimate. And that comes down to knowing what a typical policy covers, which additional coverages you might need and how your policy will pay out after a covered loss. With these things, which you’ll learn here, you’ll be a walking homeowners insurance calculator.

[ Read: The Best Homeowners Insurance Companies ]

In this article

Why it’s great to know how to estimate when shopping for homes 

Coming up with a home insurance estimate isn’t just a fun number-crunching exercise. It’s a critical component of knowing how much home you can afford — and where to buy it.

Your homeowners insurance payment won’t be as hefty as your mortgage, certainly, but it is an additional cost of homeownership that you need to factor in. And certain homes cost more to insure than others. Some things that could leave you with pricey premiums include:

  • A home in an area with a lot of crime
  • A home in an area prone to natural disasters
  • An old roof
  • Lackluster fire suppression systems
  • A pool (because of the increased liability that someone could drown)

Generally, if you want to keep your home insurance costs low, you should look for a home with limited risk. That means one located in a safe area that’s protected from natural disasters. It means choosing a home without aging systems — or planning to replace them right away. And it probably means skipping the pool.

Typical home insurance 

Aside from avoiding high-risk homes while you’re house shopping, the next biggest thing you can do to get an accurate home insurance estimate is understand the different types of available coverages — and roughly how much you’ll pay for each.

As a quick primer, home insurance policies generally cover:

  • Your house itself
  • The personal property you store in it (up to your policy limits)
  • Unattached structures like fences and garages
  • Your liability in certain instances, like if a neighbor slips at your home and sues you
  • Extra expenses you incur if you get displaced by a covered cause and have to stay in a hotel (i.e., loss of use coverage)

But the times when a home insurance policy will kick in to cover the above varies from policy to policy. Different types of home insurance policies cover different things.

An HO-1 policy, for example, only insures you against the perils specifically named in your policy (e.g., fire, theft), while an HO-5 policy will insure you against everything unless it’s specifically named as an exclusion in your policy.

As is true will all insurance products, the more protection you buy, the more you’ll pay for it. To get a solid homeowners insurance estimate, it can be helpful to decide which type of policy is right for you before house hunting. That way, you can compare the cost of that policy type across any homes you’re considering.

Additionally, you need to consider any additional coverages you might need for your home. Almost all home insurance policies specifically exclude earthquake and flood coverage. If you live in an area prone to either and want insurance for that risk, you’ll need to buy a separate policy. Factor that into your overall home insurance estimate.

[ Read: The Complete Guide to Homeowners Insurance ]

How home insurance varies by state

You can use a homeowners insurance calculator to get a rough idea of your home insurance costs, certainly. But there’s one key issue there.

Many calculators don’t take location into account. And insurance needs vary depending on where you live. We’ve already mentioned that you might need flood or earthquake insurance, depending on your location. But even standard homeowners insurance coverages can cost more or less, depending on your location.

Standard home policies include tornado coverage, for example. While homes are generally cheaper in Kansas than in, say, California, the cost of home insurance might not be too different from a coastal home if you’re house hunting in Tornado Alley.

All told, if you’re trying to come up with a homeowners insurance estimate, it’s important to understand how much coverage costs locally. Don’t worry: we’ve got you covered. Here’s a quick list of the average home insurance cost by state.

Replacement cost coverage: How does it work? 

Now you have a handle on some of the key components of an accurate home insurance estimate: high-risk factors that can raise costs, the type of policy you need and how your location affects your coverage and premium.

But there’s one final piece to consider. When you buy a homeowners insurance policy, you get either actual cost value (ACV) or replacement cost coverage. ACV factors in depreciation. So if your five-year-old couch gets destroyed in a fire, you’ll only get paid enough to buy what it was worth today. If you want enough money to replace the item with one of a similar quality, you’ll need replacement cost coverage.

When it comes to home policies, you’ll usually get replacement cost coverage automatically for your dwelling itself and the other structures on your property. That said, you can opt for extended or guaranteed replacement cost coverage, which offers money above your dwelling limits in case the rebuild costs more.

When it comes to your personal property coverage, you’ll generally need to elect to get replacement cost coverage. You’ll pay more for it, but it can help you rebuild your life the way it is now after a disaster.

[ Read: How to Find Cheap Homeowners Insurance ]

We welcome your feedback on this article. Contact us at inquiries@thesimpledollar.com with comments or questions.

Source: thesimpledollar.com

Chase Now Requires a 700 FICO and 20% Down to Get a New Mortgage

Last updated on April 17th, 2020

Following in the footsteps of many other mortgage lenders of late, JP Morgan Chase has upped its minimum requirements to get a home loan.

Once again, it has to do with COVID-19, which has led to a flood of unemployment filings and a general fear that many homeowners will begin to default on their mortgages.

This has forced many big banks and mortgage lenders to tighten their belts, focusing on extending new loans to only those they see as the most creditworthy.

In case you missed it, last week Wells Fargo said it now required $250,000 in a Wells bank account to get approved for a jumbo home loan.

Chase’s New Mortgage Guidelines

  • New customers will need to come with at least 20% down when purchasing a home
  • Will also need a minimum FICO score of 700 to get approved
  • Move is designed to limit exposure related to COVID-19 pandemic
  • Also allows Chase to focus on its refinance customers

Beginning this Tuesday, those who apply for a “new mortgage” will be required to make at least a 20% down payment and have a 700+ FICO score, per Reuters.

While it’s somewhat unclear what a “new mortgage” is, the down payment piece points to a home purchase application, as opposed to a mortgage refinance, which comes with a minimum loan-to-value ratio.

The “new” part refers to those who aren’t already Chase customers, such as a home buyer who doesn’t already have a Chase mortgage.

It might also include an existing homeowner with a mortgage owned by a bank other than Chase who is looking to refinance.

Regardless, it’s a pretty aggressive stance and a sign that the mortgage market lacks serious confidence at the moment.

Chase Home Lending’s chief marketing officer Amy Bonitatibus told Reuters it was “due to the economic uncertainty,” and a move that allows the company to serve its existing customers.

She also noted that it’s a temporary change, so the hope is once the dust settles, they’ll go back to more flexible underwriting standards.

New Rules Don’t Apply to Existing Chase Mortgage Customers

  • Only applies to new mortgage applicants at Chase
  • Existing customers can take advantage of old underwriting guidelines
  • Their 3% down home purchase loan known as “DreaMaker” is also unaffected by the changes
  • Move should be temporary but in the meantime simply shop with different lenders

Now some good news regarding the new rules – they don’t apply to existing customers with a mortgage from Chase.

That apparently covers some four million homeowners who can continue to enjoy the usual underwriting guidelines imposed by the bank.

Of course, there’s no need to refinance your mortgage with the bank that owns it.

In fact, it often pays to shop elsewhere and with multiple lenders to ensure you obtain the best deal.

So even if Chase or any other bank isn’t willing to lend, chances are another bank will be more forthcoming.

Lastly, Chase said the move wouldn’t affect its 3% down mortgage known as the “DreaMaker,” which is an agency-backed (Fannie Mae/Freddie Mac) loan program geared toward those with low- or moderate-income.

Aside from requiring just a 3% down payment, applicants need only a 620 FICO score to get approved.

In other words, Chase isn’t leaving the most in need behind, including its own customers and those with limited resources.

Of course, you have to wonder who’s buying a house right now given the complete lack of clarity regarding our collective future.

But it’s nice to know they’re at least leaving options on the table for some.

Chase Stops Accepting HELOC Applications

  • No longer offering home equity lines of credit due to COVID-19
  • Move is temporary but unclear how long home equity lending will be paused
  • Chase has recommended other options such as a cash out refinance
  • Those who already applied will continue to see application processed, current HELOC holders can still draw from their lines

To add insult to injury, Chase has also seized accepting home equity line of credit (HELOC) applications in the face of COVID-19.

The bank posted a message on its website saying, “Due to the economic uncertainty created by COVID-19, we’re temporarily not accepting applications for new home equity lines of credit (HELOC). This will protect both you and the bank.”

You are protected by this move, according to Chase. It’s unclear how you are protected, but rest assured you are protected.

They have recommended other mortgage refinancing options, such as a cash out refinance, assuming you want to access your home’s equity.

The good news is those with existing HELOCs can still tap them. And hopefully they don’t freeze the lines anytime soon.

Lastly, they will “continue to review” requests for those who already applied for a HELOC.

Read more: Why Do Mortgage Companies Want You to Refinance So Badly?

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for nearly 15 years.

Source: thetruthaboutmortgage.com

The Best Renters Insurance Companies in Washington, D.C.

If you’re lucky enough to rent an apartment or house in the Washington, D.C. area, you already know that it’s not exactly a bargain hunter’s paradise. But it is possible to find renters insurance in D.C. that is cost-effective and comes with a side dish of responsive customer service and extensive coverage.

Do you need renter’s insurance in Washington, D.C? We’d say so, unless you want to be stuck shelling out cash if you are faced with a fire, theft of your belongings, or other mishaps.

We’ve done some of the legwork for you to find the best renters insurance in D.C., using our SimpleScore Methodology. We looked at a number of qualities — accessibility, coverage options, support, customer satisfaction and discounts — to find the best options for D.C. renters, no matter where in the District they live.

America’s top-rated renters insurance

  • Policies starting at just $5/month
  • Sign up in seconds, claims paid in minutes
  • Zero hassle, zero paperwork
In this article

The best renters insurance companies in Washington, D.C. 

Best renters insurance overall – Lemonade

They may be the new kid on the block, but Lemonade knocks it out of the park when it comes to pricing and support.

J.D. Power Rating

5/5

AM Best Rating

N/A

Standard & Poor’s

N/A

SimpleScore

3.6 / 5.0

SimpleScore Lemonade 3.6

Discounts 1

Coverage Options 3

Customer Satisfaction 5

Accessibility 5

When Lemonade Insurance started writing policies in 2015, it unsettled the big insurers by doing business totally online, with excellent resources and near-instant claim satisfaction. Since then, it’s only continued to improve, and currently holds the top spot in J.D. Power’s Overall Customer Satisfaction Ranking for renters insurance. You can get a comprehensive policy for as little as $5 a month. Customizable options include higher coverage rates for jewelry, bikes, and more; water back-up; and pet or water damage. As an added perk, Lemonade donates a portion of its earnings every year to a charity you choose when you sign up.

Best renters insurance for customer service – Erie

Erie’s 12,000+ independent agents are on the job 24/7 to help you file and manage your claims and handle all your insurance needs cheerfully and professionally.

J.D. Power Rating

3/5

AM Best Rating

A+

Standard & Poor’s

N/A

SimpleScore

2.4 / 5.0

SimpleScore Erie 2.4

Discounts 1

Coverage Options 2

Customer Satisfaction 3

Accessibility 3

With nearly 100 years of policy-writing experience, Erie insurance is worth a look when you are purchasing renters insurance. This is especially true if you like working with a live agent, rather than an online chatbot (as you’d get with Lemonade). Erie has agents on the ground in the D.C. region who understand the needs of renters living in the metropolitan area. They can write you a policy that will cover your stuff, as well as provide liability coverage and living expenses if you should have to leave your apartment following a disaster. Bundle your renters policy with auto insurance from Erie and you stand to save money on your premium costs, which is never a bad thing.

Best renters insurance for military members – USAA

USAA’s policyholders sing their praises for the company — and they should, because it excels at pricing, customer service and more.

J.D. Power Rating

5/5

AM Best Rating

A++

Standard & Poor’s

N/A

SimpleScore

3.8 / 5.0

SimpleScore USAA 3.8

Discounts 2

Coverage Options 5

Customer Satisfaction 5

Accessibility 4

USAA may just be the best company you’ve never heard of — unless you’re in the military or are a veteran, in which case you’ve probably heard good things about it from your peers. And that’s the catch: USAA only sells policies to those in the military, veterans, and their family members. That demographic is well-represented in Washington, D.C., so if it fits you, USAA should be your first choice for a quote. In addition to competitive pricing, the company is known for its exemplary support of its customers. That support shows itself in everything from quick claims satisfaction to an excellent blog that is filled with information, financial and otherwise, with a military bent.

Most Customizable Policies – Capitol Benefits

A regional independent insurance agency, Capitol Benefit’s agents can write a policy for you that is geared exactly to your needs — at a price that works for your wallet.

J.D. Power Rating

N/A

AM Best Rating

A+

Standard & Poor’s

N/A

SimpleScore

3.5 / 5.0

SimpleScore Capitol Benefits 3.5

Disconts 4

Coverage Options 3

Customer Satisfaction N/A

Accessibility 4

Capitol Benefits is a regional supplier of renters insurance policies for residents of D.C. and its suburbs. The company works with a number of national and regional insurance underwriters to provide policies that can be tailored to your specific circumstances. Do you have expensive electronics, jewelry or art? Your policy’s pay-out for these items can be increased. Is your building particularly old or in a flood zone? The Capitol Benefits agents will be able to account for these factors when writing your policy. Since they don’t rely on a single insurer, you get the best from a range of suppliers, managed by an agent who knows the D.C. region intimately.

Most financially stable renters insurance – American Strategic Insurance

ASI offers the best of two worlds: the customer service that you find with smaller regional companies as well as the rock-solid financial stability that it earns through its partnership with Progressive.

J.D. Power Rating

3/5

AM Best Rating

A+

Standard & Poor’s

AA

SimpleScore

4.2 / 5.0

SimpleScore American Strategic Insurance 4.2

Disconts 5

Coverage Options 3

Customer Satisfaction 3

Accessibility 5

ASI offers standard renters insurance that covers theft, fire and smoke damage, wind and hail, and more, along with a handful of customizable options. It has feet-on-the-ground knowledge that comes with its agents’ presence in the D.C. metropolitan area. But it has an edge over other regional insurers: it is partly owned by national provider Progressive, and can tap into the benefits that come with having a mega-corporation standing behind you. One of these benefits is financial stability, as is seen with ASI’s A+ rating from AM Best. What does that mean to you? It means you don’t have to worry about your insurer’s ability to pay out on multiple claims following a large-scale disaster. With Washington squarely in the path of many summer hurricanes, that’s a nice reassurance to have.

America’s top-rated renters insurance

  • Policies starting at just $5/month
  • Sign up in seconds, claims paid in minutes
  • Zero hassle, zero paperwork

Choosing your provider 

We’ve included both regional insurers and large national corporations in our listing of the top renters insurance companies in D.C. No one company is right for everyone, and depending on your needs and wishes, the company that works for your neighbor might not be a good fit for you. Here are some pros and cons to help you determine where to start your search.

Local carrier 

Pros 

  • Agents knowledgeable about local area
  • Emphasis on friendly customer service and good agent relationships
  • May be less expensive

[ Read: What You Need to Know About Bundling Car and Renters Insurance ]

Cons 

  • Websites tend to be limited
  • Coverage options often not as extensive
  • Fewer discounts than national agencies

National carrier 

Pros

  • Often excellent websites, with online quote tools and more
  • 24/7 customer service
  • Broad range of coverage options and multiple discounts

Cons 

  • You’re one of thousands of clients: a number, not a person
  • Less coverage that is specific to your region

Additional renters insurance coverage in Washington, D.C.

Your renters insurance premium in Washington, D.C. will be determined by a number of factors. A few of these factors are common no matter where you live in the metropolitan D.C. area.

Weather

Washington’s weather is generally mild, with some snow in the winter and hot and balmy summers. But living this close to the Eastern seaboard leaves you vulnerable to hurricanes and tropical storms that sweep up the coast. In fact, depending on how close you live to the Potomac River, you may be in a flood zone — which means that it would be advisable to consider flood insurance coverage added to your policy.

[ Read: How much is Renters Insurance? ]

Crime

Unfortunately, some areas of Washington have fairly high crime rates. Your insurer knows what those rates are, and will adjust your premium accordingly. Since most renter’s insurance policies cover theft both from your apartment as well as items that are in storage or your car, you may find yourself paying more depending on your neighborhood.

High cost of living

Nobody lives in Washington to save money. In fact, the District lands on many listings of cities with the highest cost of living in the U.S. You’ll pay a premium rate for your apartment and you might pay a bit more for your renters insurance than you might if you lived in, say, Tulsa, Oklahoma. But that fact shouldn’t deter you from purchasing a policy. You can still get good renters insurance in Washington for $20 or $30 a month, and it will be more than worth it if disaster strikes and you need to replace damaged or stolen personal belongings.

How much does renters insurance cost in Washington, D.C.? 

The average cost of a renters insurance policy in the U.S. is $180, according to the Insurance Information Institute. Despite the high cost of living in D.C., the average renters insurance policy in the District is only $158. Your own rate, of course, will differ. Factors that play into that include the price you’re paying for rent, the amount of property coverage you purchase, and the neighborhood you live in. Each insurance company uses their own algorithms for determining premiums, which is why it pays to shop around and get several quotes when you’re looking for the cheapest renters insurance in D.C.

Washington, D.C. renters insurance FAQs

There is no law in Washington, D.C. that requires you to have renters insurance. However your landlord can require it as a condition of signing your lease. Your landlord should have their own policy to cover the building — but their policy will not cover your personal belongings. Even if it’s not a requirement, it’s a good idea to have a renters policy no matter where you live.

There is no one provider who always has the cheapest renters insurance in D.C. Each quote is unique, to reflect your own circumstances and location, and the insurer who gives your neighbor a great price may not do so for you. Your best bet is to get several quotes to find the cheapest policy for you.

Renters insurance averages $158 a year in Washington, which works out to about $13 a month. Your own premium may be more, but in general, renters insurance in Washington D.C. is fairly inexpensive.

We welcome your feedback on this article and would love to hear about your experience with the insurers we recommend. Contact us at inquiries@thesimpledollar.com with comments or questions.

Source: thesimpledollar.com

Identity Theft and Your Credit Score

  • Raise Credit Score

Fraudsters and security experts are engaged in a constant cat-and-mouse battle. As the latter creates more advanced security methods, the former develops new ways to exploit them. This means that while cyber security is more advanced than ever, identity theft and online fraud is more common than ever and becoming increasingly common with each passing year.

It’s also impacting the average citizen more than it ever did. In 2012, over $22 billion was stolen from over 12 million identity theft victims. Five years later, that sum had dropped to $17 billion, but the number of affected individuals had increased to 16 million.

Identity fraud can happen to anyone at any time. It’s not always something you can prevent, and it doesn’t always have an immediately obvious purpose. Fraudsters don’t simply want your bank balance or assets—they’re targeting your livelihood, your reputation, the thing that you have spent years building.

If you’re a victim of identity theft, you stand to lose much more than a few bucks. If you’re not careful, the damage done by one fraudster could take you years to repay.

How Identity Theft Can Affect Your Credit Score

The reason identity theft victims are more numerous than ever before is because fraudsters have cast their nets further afield, focusing on pretty much every creditworthy citizen they can get their hands on. 

You don’t need to be the victim of a phishing scam to have your identity stolen. In most cases, victims are not even aware they have been targeted until they’re rejected for a loan or mortgage. At this point, they realize their credit report is littered with accounts they didn’t create and derogatory marks that had nothing to do with them.

What is Identity Theft?

Identity theft occurs when criminals steal your personal information and use it to pose as you. They may steal your social security number to commit credit card fraud or apply for a loan they have no intention of repaying. After all, they’re not the ones who will suffer the consequences if the account defaults or enters collections.

Why Does Identity Theft Affect Your Credit Score?

If a criminal has assumed your identity, they can use it to apply for loans and credit cards, open new accounts, establish large lines of credit, and more. And don’t assume they will be refused applications just because you face a brick wall every time you apply. 

Criminals are much less discerning. Not only will they flood your credit report with applications and send your score plummeting, they’ll also apply to high-interest loans and credit cards. 

What are the Most Common Forms of Identity Theft?

Identity theft can occur in many forms, from social security theft to credit card fraud and more. Here are a few of the most common types of identity theft:

Credit Card Theft

If a scammer steals your credit card information, they can use it to make purchases in your name, running a high bill. This information can be stolen any number of ways, including:

  • Physical theft of your card
  • Theft of your number by a bank or retail employee
  • Online data breach
  • Retail card machine skimmer

Email Theft

If a fraudster accesses your email address, they can pose as you on a number of websites and gain access to a host of details. Many websites will send you an email if you have forgotten your password, and scammers can use this to recover passwords for payment services, retailers, and even credit reporting agencies.

Email passwords are some of the most unsecured passwords we have because they are often one of the first accounts we create, which means we still use the same password we used any years ago and have since used on dozens of sites. But they are also one of the most important accounts and should be secured with unique passwords.

Snail Mail Theft

In the old days, scammers would rummage through your mail to find bank details and credit card offers, before posing as you. These days most scammers employ the same tactics via email, but there are still those who prefer to go old school. Your mail contains very sensitive information and needs to be kept safe.

Data Breaches

Data breaches are very common and account for a huge percentage of the billions of dollars lost to identity scams every year. Scammers target sites that store a lot of customer data and then sell this data on the dark web. 

In most cases, the data basic, and includes passwords and email addresses to accounts that you may have forgotten about and accounts that don’t hold any sensitive financial information.

However, the vast majority of individuals use the same passwords and usernames across a host of sites. Scammers know this, so they’ll take that user data and try to log into more secured websites, from online banks and payment systems to retailers and more.

Data breaches can happen anywhere; no one is safe. If you’ve been using the internet for more than a few years and have joined countless sites in that time, there’s a good chance your details will have been stolen. Just take a look at some of the biggest victims of this crime:

  • Yahoo
  • Marriott/Starwood
  • Adult Friend Finder
  • Equifax
  • eBay
  • Uber
  • Target
  • PlayStation Network
  • Adobe
  • Home Depot
  • Capital One
  • DoorDash
  • Zynga
  • Google Plus
  • Facebook
  • British Airways
  • Reddit
  • WordPress

There’s very little you can do to prevent this, except to make sure that you use a different password for all secured and personal accounts. That way, if your details are stolen elsewhere, they won’t provide criminals with access to the stuff that matters.

Phishing

A phishing scam typically begins with a spoof email claiming to be from an official retailer or government organization. These emails often play on the victim’s fear or greed, asking them to click a link and claim a cash sum (such as a tax rebate) or warning them that their account has been hacked by criminals (we’re sure the irony doesn’t escape them).

However, these emails have also been known to cover simple, seemingly innocuous subjects. For instance, many Amazon and eBay scams send the user a confirmation email, the same emails they get when they place an order. It confirms that their order has gone through, states the total order amount (often a large sum of money) and then reminds them that if they click a link and login, they can cancel the order.

In any case, when the recipient clicks that link and enters their details, they are sent straight to the scammers. One of the cruel ironies of this scam is that you may receive confirmations for products you didn’t order if your identity has been stolen or your account has been hacked. If you receive such an email, therefore, you may assume that you’ve been the victim of identity fraud, in which case you’ll be quick to click the link and resolve the problem.

In such cases, we recommend always visiting the site directly by inputting the URL into the toolbar and then logging in. If you’re contacted by the IRS, don’t click any links and simply call them.

Wi-Fi Hacking

It’s important to always make sure you’re using a secured connection. If not, your online activity and all the data on your computer could be at risk. Hackers use software to hijack unsecured networks and capture all the data transmitted through that network.

This is true whether you’re using a home network (they have been known to drive around looking for unsecured networks, before parking outside and hacking their way in) or a public network. Avoid these networks when possible and if you absolutely can’t resist, then make sure you avoid visiting any sensitive sites or inputting any passwords or personal data.

How to Get Rid of Fraudulent Accounts in your Name

If someone is opening accounts in your name and making a mess of your credit report, there are a few steps to clear your name and return your credit score to its deserved range:

Place a Fraud Alert

Contact one of the three major credit bureaus and file a fraud report. The credit bureaus will then inform the others and place alerts that will remain in place for 90 days. 

Once these alerts are locked-in, lenders are required to take additional steps to verify your identity before agreeing to provide you with any new loans or credit cards.

Remove Fraud Accounts

If your cards or bank accounts have been used without your authorization then contact your provider’s fraud department and they will resolve the issue for you. They should refund you the money that was stolen, but only if you report them quickly and it’s obvious that you were not at fault.

File an Identity Theft Report

An identity theft report can be filed via the government’s official ID theft recovery plan and allows you to quickly and easily despite activity with creditors and credit bureaus.

File a Police Report

Take the identity theft report to your local police department. This is a common, widespread issue and it’s often something that law enforcement can do little about, but it’s still a crime and you still need to file a report. The police report will also help you if you encounter any issues when disputing charges and accounts.

Start the Dispute Process; Initiate a Credit Freeze

You can now use the police report to start disputing all activity that doesn’t belong to you. Send the credit bureaus a letter with this report attached and make a note of all the accounts that you had nothing to do with. They are required to send you a response within 30 days.

You can also place a security freeze on your account, which will prevent any new lines of credit from being created and will also stop lenders and creditors from accessing it. It doesn’t cost you anything and can provide you with an extra layer of security while you go through this process.

How to Protect Your Credit Score from the Effects of Identity Theft

Anyone can be a victim of identity fraud. It doesn’t matter how diligent you are, and, in some cases, an overly cautious attitude can do more harm than good. 

There is an entire generation of non-savvy internet users who refuse to process payments online because they’re worried that their details will be stolen. Instead, they choose to phone the company direct and give their details over the phone. 

The irony here is that the sales representative on the other end of the phone will simply input those details into the same system used by all online customers. The only difference is that you’re adding an extra middleman to the process, creating a chink in what is otherwise a solid chain.

You can be a victim of identity theft if you have ever given sensitive information through the internet or over the phone. Social media has proven to be a goldmine for fraudsters, because while they can’t steal your ID by mining basic data such as your name, address, and age, they can use this data to dig a little deeper and access bank accounts.

To prevent this from happening keep the following tips in mind:

  • Only give out your Social Security Number when absolutely necessary and don’t keep it in your purse or wallet.
  • Check your mail on a daily basis, looking for letters regarding accounts you didn’t create.
  • Use secure passwords online, preferably with a unique password for each account.
  • Don’t give anyone access to your email address.
  • Only use secure Wi-Fi connections and install a firewall on your computer.
  • Keep a close eye on your credit report and check with all major credit bureaus.

How to Repair Your Credit Score After Identity Theft

It’s not the end of the world if you have been the victim of identity theft. Providing you didn’t open those accounts or make those applications, then everything should be cleared in time and your credit report will return to normal.

It can be a very stressful period and depending on the extent of the damage and how long it takes you to notice it, this process could take days, months or years. But it will resolve in the end.

Source: pocketyourdollars.com

Value of U.S. Housing Market Hits Another All-Time High

Posted on October 29th, 2020

In the second quarter of 2020, the U.S. housing market hit an all-time high of $32.8 trillion, per The Federal Reserve’s Flow of Funds Report, as referenced in the latest Monthly Chartbook from the Urban Institute.

That was up from roughly $32.4 trillion in the first quarter of 2020, thanks to an increase in home equity from $21.1 trillion to $21.5 trillion.

Meanwhile, outstanding mortgage debt remained steady at $11.3 trillion, which tells us most borrowers are paying down existing mortgages and/or applying for rate and term refinances to lower monthly payments.

And that’s a good thing because it means most homeowners aren’t overleveraged like they were back in 2006, before the housing crisis ushered in the Great Recession.

Looking at it a different way, American homeowners have a collective loan-to-value ratio (LTV) of about 34%.

The Housing Market Appears to Be Healthy Despite Record Home Prices

value of housing market

  • U.S. property values continue to rise as mortgage debt keeps falling
  • American homeowners have a collective loan-to-value ratio (LTV) of about 34%
  • Mortgage debt is essentially unchanged from 2006 while home values have risen nearly $8 trillion
  • This means today’s homeowners are in good shape overall, but it’s harder for new buyers to enter the market

While one could always express caution when prices hit all-time highs, you’ve got to consider more than just the price.

More important is to look at housing affordability and the debt held by existing homeowners.

Fortunately, U.S. homeowners only carry a collective $11.3 trillion in mortgage debt, which appears to be flat or even lower than total housing debt back in 2006.

There are several reasons why today’s homeowners are carrying a lot less mortgage debt. For one, most haven’t tapped their equity.

Very few homeowners these days have applied for cash out refinances or pulled equity via home equity line of credit or home equity loan.

cash out share

Instead, they’ve been paying down their home loans each month, enjoying tailwinds propelled by record low mortgage rates.

Simply put, homeowners owe less and pay more in principal with each monthly payment, creating a housing market that is less leveraged.

This is a good thing for individual households and for the housing market as a whole because it means borrowers aren’t overextended, and have options if they’re unable to keep up with monthly payments.

A decade ago, mortgage payments often weren’t affordable because of so-called exploding ARMs that reset much higher after the borrower enjoyed an initial teaser rate.

And because they didn’t have any skin in the game, aka home equity, they couldn’t refinance to seek out payment relief.

That led to a flood of short sales and foreclosures, and eventually the creation of widespread loan modification programs such as HAMP and HARP.

Today, even if a homeowner falls behind due to COVID-19 or another setback, they could potentially sell for a tidy profit and move on.

This protects both that individual and their local housing market, which might otherwise suffer from declining property values due to the presence of distressed home sales.

In summary, this is why today’s housing market is very different than the one we experienced more than a decade ago, despite some economists seeing home prices in “bubble territory.”

But What About Housing Affordability Today?

  • Mortgage affordability has actually improved in recent years despite surging home prices
  • Existing homeowners typically spent 17.5% of household income on their monthly housing payments in September, down from 19.6% two years ago
  • Low mortgage rates are improving affordability, but rising down payments are hurting prospective buyers
  • Property values have grown at 2X rate of incomes over the past six years, and typical U.S. home now worth 3.08 times median homeowner household income

It’s great that existing homeowners are enjoying record low mortgage rates and equally affordable housing payments, but what about prospective home buyers?

Well, housing affordability has actually improved since 2018 due to the ultra-low mortgage rates available, per a new analysis from Zillow.

This is despite the fact that home values have grown at about double the rate of incomes over the past six years.

While households typically spent just 17.5% of income on monthly housing payments in September, down from 19.6% two years earlier, the typical U.S. property is now worth 3.08 times median homeowner household income, an all-time high per Zillow.

In other words, monthly payments are cheap for existing homeowners, but their properties are valued well above their incomes.

They remain affordable because many of these homeowners have small mortgage balances and super low mortgage rates.

But if these same folks were to buy their homes today, it might not work out, which brings us to those prospective buyers, or Gen Z home buyers.

Zillow noted that home values have increased a whopping 38.3% since September 2014, while homeowner incomes have gone up just 18.8% over the same period.

If a home buyer puts down 20% on a median-priced property they would have only needed about $36,600 at the start of 2014, or 6.4 months of income for a median homeowner household.

Today, they’d need a $52,000 down payment, which is 7.5 months of income for that 20% down payment to avoid PMI and obtain a more favorable interest rate.

Even worse for those still renting, Zillow expects home prices to rise a further 7% over the next year, which would increase that required down payment another $3,600 to about $55,600.

This is essentially going to steer more new home buyers into low down payment mortgages, such as FHA loans that only require 3.5% down, or Fannie Mae HomeReady and its mere 3% down requirement.

While it at least gives them an option, they’re going to have higher mortgage payments as a result, due to a larger loan amount, higher mortgage rate, and compulsory mortgage insurance.

Additionally, they’ll have very little skin in the game, which could present a problem if home prices take a turn for the worse, as they did a decade ago.

The good news is the bulk of homeowners are sitting pretty on mounds of equity, so assuming cash out refis don’t become the next big thing, the overall housing market should be relatively safe.

Could Existing Homeowners Afford to Buy Their Properties at Today’s Prices?

One last thing. We’ve basically got this weird situation where a lot of existing homeowners probably wouldn’t be able to afford their same properties if they were to purchase them today.

However, they’ve got a ton of home equity that is only growing each month thanks to regular payments of principal and rising home prices, meaning more money is essentially locked in their properties.

At the same time, it makes a move difficult because even a lateral purchase would be pricey from an affordability standpoint when you factor in stagnant incomes and higher property taxes.

Or the fact that some of these owners are retired or not making peak income.

In the end, it further exacerbates an already difficult situation in terms of housing inventory, which has been on the record low end of things for quite a while.

That just points to even higher home prices and lots of equity accrual, which buffers the housing market, but makes it increasingly difficult for new homeowners to get into the game.

Source: thetruthaboutmortgage.com

The Best Renters Insurance in Houston, Texas

Renters insurance in Houston is more expensive than renters insurance in other parts of Texas and the nation, so finding the cheapest provider can be a challenge. It’s often so high that many renters can’t help but ask themselves if they actually need it. Unfortunately, you do. You don’t just need it for property coverage, but you also need it for liability — especially if you often have a lot of people over.

America’s top-rated renters insurance

  • Policies starting at just $5/month
  • Sign up in seconds, claims paid in minutes
  • Zero hassle, zero paperwork
In this article

For all of the recommendations below, we used our SimpleScore methodology to find the best renters insurance companies in Houston. We analyzed coverage options, discounts, customer satisfaction, support and accessibility for renters insurance companies to assign a score that reflects our recommendations and review of renters insurance in Houston.

Here’s what we recommend for renters insurance in Houston, Texas.  

The best renters insurance companies in Houston, Texas

Most affordable – Progressive

Choose Progressive if you want cheap renters insurance in Houston.

J.D. Power Rating

3/5

AM Best Rating

A+

Standard & Poor’s

AA

SimpleScore

4.2 / 5.0

SimpleScore Progressive 4.2

Discounts 5

Coverage 3

Customer Satisfaction 3

Accessibility 5

Progressive has outstandingly low rates compared to other providers in the area, which you can make even lower if you can take advantage of Progressive’s discounts. Progressive currently offers the following discounts to its members:

  • Multi-policy
  • Quote in advance
  • Receive documents by email
  • Pay in full
  • Secured/gated community
  • Single deductible benefit

With so many options, it’s very easy to get an already low premium down even further.

Also worth noting is that Progressive has an A+ financial rating with AM Best. This is especially important living in Houston because the likelihood of many people filing claims after a natural disaster each year is high.

Best for bundling – Allstate

If you need auto insurance, Allstate could help you save big by bundling.

J.D. Power Rating

2/5

AM Best Rating

A+

Standard & Poor’s

AA-

SimpleScore

4.2 / 5.0

SimpleScore Allstate 4.2

Discounts 5

Coverage Options 5

Customer Satisfaction 2

Customer Satisfaction 5

If you also need car insurance, the best company to do both is Allstate. With Allstate, you’ll save 10% on your auto insurance and up to 25% off your renters insurance if you do both through them. That’s a lot of savings. When you consider that Allstate also offers numerous other discounts you can take advantage of for auto and renters, then it becomes clear that Allstate could likely save you the most money overall.

Most tech-savvy – Nationwide

If you like your insurance provider to be a 21st-century carrier, then Nationwide is for you.

J.D. Power Rating

2/5

AM Best Rating

A+

Standard & Poor’s

AA+

SimpleScore

3.8 / 5.0

SimpleScore Nationwide 3.8

Discounts 4

Coverage Options 5

Customer Satisfaction 2

Accessibility 4

The Nationwide mobile app, which is available for both iOS and Android devices, is one of the best insurance apps on the market today. With the app, you can file a claim, check on the status of a claim, make a payment, review your policy, update your policy, as well as make any changes to your coverages. Most insurance apps only cater to auto claims, but with Nationwide you can do renters insurance, too.

Best regional provider – Harris County Insurance Center, LLC

Get the benefits of working with a local carrier while feeling like you’re working with a national provider.

J.D. Power Rating

N/A

AM Best Rating

N/A

Standard & Poor’s

N/A

SimpleScore

2.8 / 5.0

SimpleScore Harris County Insurance Center, LLC 2.8

Disconts 2

Coverage Options 3

Customer Satisfaction N/A

Accessibility 3

Harris County Insurance Center has agents that speak both English and Spanish, and you can file a claim 24 hours a day. Unlike other regional providers, Harris County Insurance Center makes it possible to get a quote online without having to go to a brick and mortar shop or speak with someone over the phone. In fact, Harris County is getting so many things right we wouldn’t be surprised if they start servicing a larger area in the near future.

America’s top-rated renters insurance

  • Policies starting at just $5/month
  • Sign up in seconds, claims paid in minutes
  • Zero hassle, zero paperwork

Choosing your provider

When choosing which carrier you want to work with, you’ll have a choice between a national carrier and a regional carrier. There are pros and cons to both. Let’s talk about them.

Local Carrier

Pros

  • Support your local economy
  • Work with an agent that knows exactly what you need
  • Develop an ongoing working relationship with the same agents

Cons:

  • May not have as many coverage options
  • May not be as tech-savvy
  • May be more expensive than national providers

National Carrier

Pros:

  • More coverage options
  • Cheaper premiums that smaller providers 
  • More tech-savvy (smartphone apps, online presence)

[ Read: Defending Against Porch Pirates: What to Do about Package Thefts ]

Cons:

  • Agents likely will not know Houston, Texas, very well
  • Will not be able to develop an ongoing working relationship with an agent
  • You will likely have to do everything online or over the phone

Additional renters insurance coverage in Houston

Houston, Texas, has one of the highest rates of crime in the entire country. According to the Houston Police Department, the chances of becoming a victim of violent crime is about 1 in 18. It’s a trend that has only gotten worse (2020 was one of the worst years the city had seen in decades). Obviously, crime is a reason that renters insurance is so much in Houston

Another reason renters insurance is so high is because of natural weather disasters. Houston is subject to both flooding and hurricanes. As a resident in this area you should highly consider purchasing additional coverage with your insurance company.

Flood insurance

A regular renters insurance policy does not protect your belongings if they are damaged by floodwaters. For this type of coverage, you need flood insurance.

[ Read: Does Renters Insurance Cover Storage Units? ]

You may be able to purchase flood insurance through the insurance provider you purchase renters insurance, but most people usually get it through the U.S. government through Floodsmart. Living in Houston, you are likely in a flood zone, but you can see if your particular area is subject to flooding by inputting your address into FEMA’s flood map. Given Houston’s history with flooding, you should even consider purchasing flood insurance if you live in a high rise apartment.

Hurricane insurance

Hurricane insurance is actually called windstorm insurance. The likelihood of you needing to purchase it as a renter is small. This is because damages caused by wind, hail, fire and lightning are more than likely covered by your insurance provider. Just make sure that, when you do purchase a policy, you read the fine print about any exclusions. The only likely exclusion you’ll see is damage caused by floodwaters.

How much does renters insurance cost in Houston?

According to the latest study by Insurance Information Institute, the average cost of renters insurance in Texas is currently $225 a year. The average is $179. However, there are a lot of factors that influence the cost of renters insurance. These include:

  • Deductible
  • Type of policy you have
    • Actual cash value vs. replacement cost
  • Amount of property coverage
  • Amount of liability coverage
  • Where you live
  • Discounts (for example, many companies offer discounts for bundling policies)

Other factors that influence your final rate are whether you have any pets, and how much you estimate your personal property to be worth.

[ More: How Much is Renters Insurance? ]

Houston renters insurance FAQs

Yes, landlords can require renters insurance in Texas. Though you are not legally required to have it under state law, your landlord has the legal power to dictate the terms and conditions of the lease.

There are several factors that impact your renters insurance premium. The primary factors affecting the price of rental insurance in Houston include the size of the apartment or dwelling, how much liability you want to have, how much property coverage you want, as well as where your rental is located within the city.

Compared to the rest of the country, yes. The latest study from the Insurance Information Institute showed Texas to be the fourth most expensive state for renters insurance. This is because places like Houston are frequently exposed to natural disasters year after year, as well as high crime.

Don’t feel completely ready? For an extensive guide to purchasing renters insurance, check out our Ultimate Guide to Renters Insurance.

We welcome your feedback on this article and would love to hear about your experience with the insurers we recommend. Contact us at inquiries@thesimpledollar.com with comments or questions.

Source: thesimpledollar.com

6 First Time Home Buying Mistakes I Made When I Bought My First House

Are you thinking about buying a house? Do you want to avoid common home buying mistakes?

I bought my first house when I was only 20 years old. Even though that was a little over 11 years ago, I have looked back many times and wondered how I did it.first time home buying mistakes

first time home buying mistakes

I made so many first time home buyer mistakes!

Of course, I was young and had a lot to learn. But, I definitely could have done more research to avoid many of the home buying mistakes I made, like not comparing interest rates or understanding the total cost of buying a home.

I’m not alone in how I approached buying a house. There are many people who simply do not understand everything that goes into buying a house, and that’s something that can negatively impact your finances and cause stress. 

Over the years, I have received many emails about buying a house in your early 20s or when you’re young. I also get lots of questions from people who have been renting and are thinking about buying their first home.

I thought it would be interesting to look back on the home buying mistakes I made and explain how to avoid the same mistakes I made. Hopefully you can be a better prepared home buyer than I was!

The mistakes first time home buyers make can cost you money and may even lead to regret. Perhaps you’re wondering why you even bought your home!

One thing you may not know about me is that the first house I ever lived in was actually my own. Growing up, we always lived in small apartments and rented. I wanted to have a home of my own – moving so often as a child was tiring.

Buying a house and being a homeowner was a completely new thing for me.

I had never done yard work, had to deal with house maintenance, home repairs, or anything like that.

I was as new as could be when it comes to living in a house!

It was a buyer’s market when we started searching. It was back in 2009, so the housing market was coming down. This meant that a monthly mortgage payment wasn’t too much more than rent at an apartment.

I felt like I was ready to buy my first house, and I needed a place to live.

So, buying a house seemed like a logical decision.

I made many home buying mistakes, like I said. While I made it through everything, my mistakes could easily have led to major financial trouble.

Read on below to learn more about mistakes home buyers make and my first-time home buyer tips.

Related content on home buying mistakes:

Here were some of my home buying mistakes.

 

first-time home buyer mistakes

This was our first house.

I didn’t prepare.

I was only 20, so I didn’t really understand how things worked, even though I thought I did at the time.

I found an online mortgage lender, and back in 2009, that was kind of a new thing. The company ended up doing a bunch of odd things and made a bunch of paperwork mistakes. It almost seemed scammy because online mortgages were so new at the time.

While my realtor was great and a family friend, she recommended a mortgage loan officer to me, and I just used that person.

The loan officer was great and very friendly.

But, I didn’t compare interest rates at all, I didn’t try to raise my credit score before I started looking at homes, and more.

Instead, I should have been paying attention to my credit score and worked to increase it before I started looking at rates. Then, I should have applied with multiple mortgage lenders and found the best interest rate.

Basically, I didn’t prepare.

Had I spent time increasing my credit score and shopping around for better rates, I could have gotten a better interest rate and saved money on mortgage payments.

While a small percentage difference in interest may not sound like much, it makes a big difference in how much you pay each month and how much you pay over the course of your loan.

For example, here’s the difference in two 30-year mortgages on a $200,000 home (this is before annual taxes being added in to the monthly payment):

  • With an interest rate of 3.25% your monthly payment would be $870, and you would pay $313,349 over the course of your loan.
  • With an interest rate of 4% your monthly payment would be $955, and you would pay $343,739.

That’s a difference of $85 a month, and you will have paid $30,000 more once your mortgage is paid off.

Looking back, I would have done more research on the home buying process and the factors that impact interest rates.

One of the easiest things you can do to avoid this mistake is to start paying attention to your credit score. You can receive free credit reports and credit scores, and I recommend reading Everything You Need To Know About How To Build Credit to learn more.

I avoided adding up all of the costs because it was scary.

Okay, so I knew that having a house could/would be expensive, and luckily we were fine, but wow, are there a lot of costs!

I avoided adding them all up for a while because I knew they would be higher than I thought. Eventually I did, and I was right – adding everything all together was a doozy.

We didn’t start adding up these costs until we were farther along in the buying process, and this is one of the home buying mistakes many people make. 

There are lots of people who only think about their mortgage payment, but there are so many more costs associated with buying a home

Before we purchased a home, we should have gone through all of the typical costs of owning a house and compared it to our housing budget. Comparing your current budget to your new homeowner’s budget will tell you whether or not you can actually afford to buy a home.

Here are some of the homeownership costs you want to consider:

  • Gas/propane.  Many homes run on gas in order to have hot water, to use the stove, and so on.
  • Electricity. Generally, the bigger your home then the higher your electricity bill will be.
  • Sewer. On average, your sewer bill may cost around $30 a month from what I’ve seen.
  • Trash. This isn’t super expensive either, but it’s still a cost to include.
  • Water. Water bills can vary widely. I know many who live in areas where the average water bill is a few hundred each month.
  • Property taxes. Property taxes can vary widely from town to town. You may find yourself looking at two similar houses with similar price tags, but the property taxes may differ by thousands of dollars annually. That is a LOT of money. While it may seem small when compared to the actual home purchase price, remember that you have to pay property taxes annually and a difference of just $3,600 a year is $300 a month for life.
  • Homeowners insurance. Homeowners insurance can be cheap in some areas but crazy expensive in others. Don’t forget to look into the cost of earthquake, flood, and hurricane insurance as well as that can add up quickly depending on where you live – not thinking about these was one of the home buying mistakes I made.
  • Maintenance and repairs. Even if your home is brand new, you may have to pay for repairs, which is something that will come up eventually. No matter how old your home is, repair and maintenance costs will eventually come into play.
  • Homeowners association fees. This can also vary widely. You should always see if the house you are interested in is in an HOA because the fees can be high and there may also be rules you don’t like.
  • Home furnishings. Furnishing your home can be done cheaply, but I know some who buy huge homes but can’t afford to put anything in them, such as a table, a bed, and so on. Why own a $500,000 house if you don’t have any furniture?

 

I probably should have spent less on the actual house.

While the house we bought was less than the amount we were pre-approved for, I definitely think that we could have found a house for even less.

We bought at the top of our budget, and this is one home buying mistake that can really get you in trouble.

Thinking back on it, the amount that we were pre-approved for, as young 20 year olds, was pretty insane. I am very glad that we did not buy a house that was that expensive.

It’s not uncommon to be approved for much more than your budget realistically allows for. Just because the bank approves you for a $350,000 mortgage, for example, does not mean you can afford to buy a house at that price.

We bought at the top of our budget thinking that we would get better jobs eventually. While that worked out in our favor since we were each barely making above minimum wage, it was a decision that could have ended quite badly.

 

We were living paycheck to paycheck and didn’t have an emergency fund.

We were young and didn’t have high paying jobs when we bought our house. In fact, we were barely making more than minimum wage at our jobs.

While we never racked up credit card debt, I did accrue student loans and we were living paycheck to paycheck.

Had one major (or even minor) thing happened with our new house, the only option would have been taking on debt. This is not where you want to be if you have just taken out a big mortgage. 

The best way to avoid this first time home buyer mistake is to set some money aside for emergencies before you buy, and to buy a house that fits in your budget. You want to be able to continue saving while making your new monthly home payments.

 

Make sure your home insurance covers what you need.

While I never had to use my home insurance, there were a few things that it did not cover, and I should have at least thought about them beforehand.

One of the biggest coverage issues was flooding. Flooding is a common problem where we lived in Missouri, yet I didn’t realize until a few years after I had already lived in the house that flooding was not covered unless you signed up for an additional policy.

Now, we weren’t in a floodplain – your lender may require you to buy special flood insurance if you live in a floodplain – but basement flooding was still a fairly common issue where we lived. 

Another special insurance consideration are earthquakes. Many normal home insurance policies do not cover earthquakes.

You can avoid this home buying mistake by researching what is the best kind of insurance policy for where you live. Floods and earthquakes aren’t a problem everywhere, but in some places you may want to have that kind of coverage.

 

Have a larger down payment.

We were 20, and we didn’t have a lot of money saved up before we bought our house.

Therefore, we did not put down a 20% down payment. That might sound like a lot, but 20% is the recommended amount to put down if you want to avoid PMI (private mortgage insurance).

A lender charges PMI because putting less than 20% down makes the loan look like a riskier investment for them. PMI protects lenders from borrowers who default on their loans.

PMI is normally around 0.5% to 1% of the mortgage annually, and it’s added to your monthly payment. If you borrowed a $200,000 mortgage, you would likely pay between $1,000 to $2,000 a year until you paid down enough of your mortgage principal to remove PMI.

We put less than 5% down towards our house purchase, and this led to us having PMI.

I don’t remember exactly how much we paid each month for PMI, but looking back, I could have used that money to pay off my student loans faster, save more, and so on.

While having a larger down payment isn’t one of the home buying mistakes I could have easily changed back then, in general, just saving more money instead of frivolously spending it in the beginning would have been a good decision.

Related content: Can You Remove PMI From Your Mortgage?

 

So, what’s going on with the house now?

As many of you know, we sold our house over 5 years ago. We wanted to travel more, and selling our house made more sense than keeping it.

We actually sold it for quite a loss, as the market was further down than when we bought it.

I’m happy that we bought the house – it taught us a lot, gave us responsibility, and gave us a place to live! And, it taught us how to avoid home buying mistakes in the future.

One of the things I haven’t mentioned is what we paid each for our mortgage. Our monthly payments were just under $1,000. 

Where we lived in the midwest is known for being a low cost of living area. I can’t imagine how we would have bought a house in some other parts of the U.S.

But, the low cost of living meant that buying a house at 20 was more doable.

Is it normal to regret buying a house? Is it normal to have buyers remorse after buying a house?

I don’t know what the statistics are on home buyers remorse, but it does happen. Hopefully with the tips before buying a house above, you can avoid that as much as possible.

Also, being realistic when it comes to what to expect when buying a house can help greatly as well.

What home buying mistakes did you make when you purchased your home?

Related Posts

<!–
–>

Source: makingsenseofcents.com

Mistakes I Made When I Bought My First House At The Age of 20

Are you thinking about buying a house? Do you want to avoid common home buying mistakes?

I bought my first house when I was only 20 years old. Even though that was a little over 11 years ago, I have looked back many times and wondered how I did it.first time home buying mistakes

first time home buying mistakes

I made so many first time home buyer mistakes!

Of course, I was young and had a lot to learn. But, I definitely could have done more research to avoid many of the home buying mistakes I made, like not comparing interest rates or understanding the total cost of buying a home.

I’m not alone in how I approached buying a house. There are many people who simply do not understand everything that goes into buying a house, and that’s something that can negatively impact your finances and cause stress. 

Over the years, I have received many emails about buying a house in your early 20s or when you’re young. I also get lots of questions from people who have been renting and are thinking about buying their first home.

I thought it would be interesting to look back on the home buying mistakes I made and explain how to avoid the same mistakes I made. Hopefully you can be a better prepared home buyer than I was!

The mistakes first time home buyers make can cost you money and may even lead to regret. Perhaps you’re wondering why you even bought your home!

One thing you may not know about me is that the first house I ever lived in was actually my own. Growing up, we always lived in small apartments and rented. I wanted to have a home of my own – moving so often as a child was tiring.

Buying a house and being a homeowner was a completely new thing for me.

I had never done yard work, had to deal with house maintenance, home repairs, or anything like that.

I was as new as could be when it comes to living in a house!

It was a buyer’s market when we started searching. It was back in 2009, so the housing market was coming down. This meant that a monthly mortgage payment wasn’t too much more than rent at an apartment.

I felt like I was ready to buy my first house, and I needed a place to live.

So, buying a house seemed like a logical decision.

I made many home buying mistakes, like I said. While I made it through everything, my mistakes could easily have led to major financial trouble.

Read on below to learn more about mistakes home buyers make and my first-time home buyer tips.

Related content on home buying mistakes:

Here were some of my home buying mistakes.

 

first-time home buyer mistakes

This was our first house.

I didn’t prepare.

I was only 20, so I didn’t really understand how things worked, even though I thought I did at the time.

I found an online mortgage lender, and back in 2009, that was kind of a new thing. The company ended up doing a bunch of odd things and made a bunch of paperwork mistakes. It almost seemed scammy because online mortgages were so new at the time.

While my realtor was great and a family friend, she recommended a mortgage loan officer to me, and I just used that person.

The loan officer was great and very friendly.

But, I didn’t compare interest rates at all, I didn’t try to raise my credit score before I started looking at homes, and more.

Instead, I should have been paying attention to my credit score and worked to increase it before I started looking at rates. Then, I should have applied with multiple mortgage lenders and found the best interest rate.

Basically, I didn’t prepare.

Had I spent time increasing my credit score and shopping around for better rates, I could have gotten a better interest rate and saved money on mortgage payments.

While a small percentage difference in interest may not sound like much, it makes a big difference in how much you pay each month and how much you pay over the course of your loan.

For example, here’s the difference in two 30-year mortgages on a $200,000 home (this is before annual taxes being added in to the monthly payment):

  • With an interest rate of 3.25% your monthly payment would be $870, and you would pay $313,349 over the course of your loan.
  • With an interest rate of 4% your monthly payment would be $955, and you would pay $343,739.

That’s a difference of $85 a month, and you will have paid $30,000 more once your mortgage is paid off.

Looking back, I would have done more research on the home buying process and the factors that impact interest rates.

One of the easiest things you can do to avoid this mistake is to start paying attention to your credit score. You can receive free credit reports and credit scores, and I recommend reading Everything You Need To Know About How To Build Credit to learn more.

I avoided adding up all of the costs because it was scary.

Okay, so I knew that having a house could/would be expensive, and luckily we were fine, but wow, are there a lot of costs!

I avoided adding them all up for a while because I knew they would be higher than I thought. Eventually I did, and I was right – adding everything all together was a doozy.

We didn’t start adding up these costs until we were farther along in the buying process, and this is one of the home buying mistakes many people make. 

There are lots of people who only think about their mortgage payment, but there are so many more costs associated with buying a home

Before we purchased a home, we should have gone through all of the typical costs of owning a house and compared it to our housing budget. Comparing your current budget to your new homeowner’s budget will tell you whether or not you can actually afford to buy a home.

Here are some of the homeownership costs you want to consider:

  • Gas/propane.  Many homes run on gas in order to have hot water, to use the stove, and so on.
  • Electricity. Generally, the bigger your home then the higher your electricity bill will be.
  • Sewer. On average, your sewer bill may cost around $30 a month from what I’ve seen.
  • Trash. This isn’t super expensive either, but it’s still a cost to include.
  • Water. Water bills can vary widely. I know many who live in areas where the average water bill is a few hundred each month.
  • Property taxes. Property taxes can vary widely from town to town. You may find yourself looking at two similar houses with similar price tags, but the property taxes may differ by thousands of dollars annually. That is a LOT of money. While it may seem small when compared to the actual home purchase price, remember that you have to pay property taxes annually and a difference of just $3,600 a year is $300 a month for life.
  • Homeowners insurance. Homeowners insurance can be cheap in some areas but crazy expensive in others. Don’t forget to look into the cost of earthquake, flood, and hurricane insurance as well as that can add up quickly depending on where you live – not thinking about these was one of the home buying mistakes I made.
  • Maintenance and repairs. Even if your home is brand new, you may have to pay for repairs, which is something that will come up eventually. No matter how old your home is, repair and maintenance costs will eventually come into play.
  • Homeowners association fees. This can also vary widely. You should always see if the house you are interested in is in an HOA because the fees can be high and there may also be rules you don’t like.
  • Home furnishings. Furnishing your home can be done cheaply, but I know some who buy huge homes but can’t afford to put anything in them, such as a table, a bed, and so on. Why own a $500,000 house if you don’t have any furniture?

 

I probably should have spent less on the actual house.

While the house we bought was less than the amount we were pre-approved for, I definitely think that we could have found a house for even less.

We bought at the top of our budget, and this is one home buying mistake that can really get you in trouble.

Thinking back on it, the amount that we were pre-approved for, as young 20 year olds, was pretty insane. I am very glad that we did not buy a house that was that expensive.

It’s not uncommon to be approved for much more than your budget realistically allows for. Just because the bank approves you for a $350,000 mortgage, for example, does not mean you can afford to buy a house at that price.

We bought at the top of our budget thinking that we would get better jobs eventually. While that worked out in our favor since we were each barely making above minimum wage, it was a decision that could have ended quite badly.

 

We were living paycheck to paycheck and didn’t have an emergency fund.

We were young and didn’t have high paying jobs when we bought our house. In fact, we were barely making more than minimum wage at our jobs.

While we never racked up credit card debt, I did accrue student loans and we were living paycheck to paycheck.

Had one major (or even minor) thing happened with our new house, the only option would have been taking on debt. This is not where you want to be if you have just taken out a big mortgage. 

The best way to avoid this first time home buyer mistake is to set some money aside for emergencies before you buy, and to buy a house that fits in your budget. You want to be able to continue saving while making your new monthly home payments.

 

Make sure your home insurance covers what you need.

While I never had to use my home insurance, there were a few things that it did not cover, and I should have at least thought about them beforehand.

One of the biggest coverage issues was flooding. Flooding is a common problem where we lived in Missouri, yet I didn’t realize until a few years after I had already lived in the house that flooding was not covered unless you signed up for an additional policy.

Now, we weren’t in a floodplain – your lender may require you to buy special flood insurance if you live in a floodplain – but basement flooding was still a fairly common issue where we lived. 

Another special insurance consideration are earthquakes. Many normal home insurance policies do not cover earthquakes.

You can avoid this home buying mistake by researching what is the best kind of insurance policy for where you live. Floods and earthquakes aren’t a problem everywhere, but in some places you may want to have that kind of coverage.

 

Have a larger down payment.

We were 20, and we didn’t have a lot of money saved up before we bought our house.

Therefore, we did not put down a 20% down payment. That might sound like a lot, but 20% is the recommended amount to put down if you want to avoid PMI (private mortgage insurance).

A lender charges PMI because putting less than 20% down makes the loan look like a riskier investment for them. PMI protects lenders from borrowers who default on their loans.

PMI is normally around 0.5% to 1% of the mortgage annually, and it’s added to your monthly payment. If you borrowed a $200,000 mortgage, you would likely pay between $1,000 to $2,000 a year until you paid down enough of your mortgage principal to remove PMI.

We put less than 5% down towards our house purchase, and this led to us having PMI.

I don’t remember exactly how much we paid each month for PMI, but looking back, I could have used that money to pay off my student loans faster, save more, and so on.

While having a larger down payment isn’t one of the home buying mistakes I could have easily changed back then, in general, just saving more money instead of frivolously spending it in the beginning would have been a good decision.

Related content: Can You Remove PMI From Your Mortgage?

 

So, what’s going on with the house now?

As many of you know, we sold our house over 5 years ago. We wanted to travel more, and selling our house made more sense than keeping it.

We actually sold it for quite a loss, as the market was further down than when we bought it.

I’m happy that we bought the house – it taught us a lot, gave us responsibility, and gave us a place to live! And, it taught us how to avoid home buying mistakes in the future.

One of the things I haven’t mentioned is what we paid each for our mortgage. Our monthly payments were just under $1,000. 

Where we lived in the midwest is known for being a low cost of living area. I can’t imagine how we would have bought a house in some other parts of the U.S.

But, the low cost of living meant that buying a house at 20 was more doable.

Is it normal to regret buying a house? Is it normal to have buyers remorse after buying a house?

I don’t know what the statistics are on home buyers remorse, but it does happen. Hopefully with the tips before buying a house above, you can avoid that as much as possible.

Also, being realistic when it comes to what to expect when buying a house can help greatly as well.

What home buying mistakes did you make when you purchased your home?

Related Posts

<!–
–>

Source: makingsenseofcents.com

6 Things You Should Never Say When You’re Selling Your Home

You know that expression about loose lips sinking ships? It holds true for selling your home as well. Sure, there are some things you have to disclose to buyers—such as if your home has lead paint or is located in a flood zone. But there’s plenty more you might volunteer when you would be truly better off keeping your mouth strategically shut.

We’ve already revealed the things buyers should never say to sellers. Now, let us share some things that sellers should never let slip to buyers, or the agents representing them.

To help hone your “less is more” attitude when it comes to talking with prospective buyers, here are a few doozies that agents recommend never, ever saying.

‘Our house is in perfect condition’

Your home is your castle, and in your eyes it may seem perfect—but don’t make claims that aren’t true, says Cara Ameer, a Realtor® with Coldwell Banker.

“The home inspection may reveal otherwise, and, as a seller, you don’t want to wind up putting your foot in your mouth,” she explains. Bottom line: “There simply is no such thing as ‘perfect condition.’ Every house, whether it is brand new or a resale, has something that needs to be fixed, adjusted, replaced, or improved upon.”

If you’re not sure what to disclose, talk to your agent about the history of the house. Together, you can figure out what is important for buyers to know. Don’t have an agent yet? Here’s how to find a real estate agent in your area.

‘It’s been on the market for X…’

Never, ever discuss how long the home has been on the market with prospective buyers, says Pam Santoro, a Realtor with Berkshire Hathaway HomeServices. This info is often listed and available on the home’s information sheet, but bringing it up—especially if the home has been available for eons—can send sellers the wrong message. No one wants to buy a white elephant—and, if they do, it’s probably because they think they’ll be getting it dirt-cheap.

‘We’ve never had a problem with…’

If you’re hoping to move quickly, you may be tempted to tell a few little white lies. So you never had a problem with weird neighbors, eh? Or flooded basements? Or vengeance-seeking poltergeists? Realtors agree that your mistruths—however insignificant they might seem—could come back to you with teeth.

“You’re setting yourself up for potential liability,” explains Ameer. “You may not even be aware of the problem at first, but it could  translate into an embarrassing moment upon inspection.” So come clean with what you know and admit what you don’t.

‘We always wanted to fix/renovate that, but…’

Tempted to mention, “We always thought about knocking this wall down and opening the space for more light?” How about “We planned on renovating this bathroom but ran out of cash”? Mum’s the word when it comes to fixes you intended to address. Nobody cares about good intentions.

“When sellers point out things they might change, this only alerts the buyer of more upcoming costs for them,” says Maryjo Shockley, a Realtor with Keller Williams. Who knows? Your buyers may not even want to knock down that wall or redo the bathroom. So why plant those ideas, along with those dollar signs?

‘We spent a ton of money on X, Y, and Z’

Just because you love the Brazilian koa wood flooring you installed throughout the first floor, that doesn’t mean prospective buyers will be willing to shell out for it.

“The buyer doesn’t care whether you spent $10,000 or $100,000 on your kitchen,” says Ameer. “They are only going to offer what they feel the home is worth in relation to area comparable sales.” So, save your breath, or else you’ll risk sounding like you’re trying too hard to justify your price. Desperation isn’t cool.

‘I’m not taking less than X amount for my home’

When it comes time to sell, it makes sense that you want top dollar. We get it! But at the same time, it’s important to be realistic and open to offers within a reasonable range.

“If you send a message that you are inflexible or not open to negotiating, it may not invite buyers to even try to work out acceptable price and terms as they will feel defeated from the start,” says Ameer. “Word may spread that you have this sentiment as a seller, and people may start to avoid the house.”

Source: realtor.com