66 Questions to Ask When Buying a House

As a first-time homebuyer, it’s easy to feel overwhelmed even before you begin your homebuying journey. After all, this is a new process for you and, simply put, you don’t know what you don’t know. First off, there are no silly questions you can ask during any stage of the homebuying process. So always feel free to ask a question, no matter how trivial you think it might be. You owe it to yourself – and your family – to find out everything you can about a home, especially since it will most likely be the largest investment you’ll ever make. To help you get started, we’ve created a list of 66 questions to ask when buying a house, broken down into each stage of the homebuying process to help keep you informed.

11 questions to ask before you go house hunting

As you well know, buying a house is a significant investment. Before you start house hunting, think through your goals for homeownership. Why do you want to buy a house? 

  1. Do you want to earn equity and build wealth by owning a house? 
  2. Do you expect you might need more space for a future family? 
  3. Do you have a pet or see one in your future and you want a backyard? 
  4. Do you want to live in a quiet, established area or somewhere more lively? 
  5. Do you enjoy yard work, gardening? How much backyard space do you require?
  6. Have you considered the local schools and neighborhoods? 
  7. Have you looked at crime rates around the neighborhoods you’re interested in? 
  8. Is it essential for you to live close to your work? Or, is a commute ok? 
  9. Have you narrowed down a range of purchase prices you can afford?
  10. How much money do you need for a downpayment? 
  11. Are you pre-approved for a mortgage

When you’re wrapped up in the excitement of house hunting, you may forget which questions to ask when buying a house.. If you are a pet owner looking at condos, you’ll have to be sure the homeowners’ association allows pets. Or, let’s say you want to live in a popular downtown neighborhood, but plan to have children in a few years – will this neighborhood still suit your needs? It’s always worth giving some thought to the type of home and area to help focus your search. 

Also, be aware that being approved for a home loan saves time for everyone by ensuring that you, as the buyer, can actually afford the home and be able to follow through an offer. 

7 questions to ask when you interview agents

Contacting the agent listed on the for-sale sign of a house you’re interested in may not be the best way to protect your interest as a buyer. When you work with your own agent, that agent’s job is to represent your interests. They help research the house, find answers to all of your questions, and serve as your professional intermediary for communicating with the seller’s agent and homeowner.

Naturally, you will want to choose a great real estate agent that you are comfortable with and feel like they have your best interests in mind. Most real estate experts recommend that you interview at least three agents identified by recommendations from friends and family who have bought or sold a house recently. Here are some questions to ask potential agents to see if they are the right agent for you.

  1. How long have you been a real estate agent? 
  2. What kind of experience do you have in this specific market area?
  3. Do you usually work with buyers or sellers? 
  4. How do you usually communicate with clients? What should I expect for response time? 
  5. How will you help me search for homes? 
  6. What days and times are you typically available for showings? 
  7. How will you ensure transparency about any issues you see with a house? 

When you set your expectations for communication, home tours, and other information you count on your agent to provide, you have a good chance to establish a productive relationship from the start – which will help you through your homebuying journey.

stylish living room

stylish living room

37 questions to ask when touring homes

This is an extensive list, and not every question applies to every situation. For example, if your goal is to purchase a single-family home, questions relating to condominiums don’t apply. However, this list of questions to ask when touring a house should give you an excellent start in making well-informed decisions when buying your first home. 

  1. What’s the reason for the sale? How long have the sellers lived there?
  2. How long has the house been on the market? 
  3. What is the neighborhood like?
  4. When was the house built? 
  5. What are the property taxes?
  6. Are there any upcoming condo or homeowners association fees?
  7. What are the average utility costs? 
  8. Have there been any major repairs to the property? If so, do you know if they provided a warranty?
  9. Are there any boundary disputes with neighbors?
  10. Are there any shared driveways or communal spaces?
  11. Are there any public rights of way passing through – or near – the property? 
  12. How old are the major appliances and systems?
  13. Are the appliances included in the sale?
  14. What is the sales history of this house, and how would it affect my offer?
  15. Is there enough storage space? Room to grow? 
  16. Is there any evidence of water problems? Can you see damp drywall, basement floors, or open leaks? Can you smell mildew? Or is there a smell of fresh paint that might be intended to cover up a water issue?
  17. Are the walls structurally sound? Look for cracks and look for evidence of cracks covered over by wallpaper that doesn’t look right or paint applied over filler.
  18. Is the chimney in good condition?
  19. Are the windows sound? Will any of the glazing need to be replaced?
  20. Do the ground floor windows have working latches to lock the windows? 
  21. Is the attic insulated? If so, when was the insulation installed?
  22. Is there any soundproofing in the house? (Try viewing the home at different times to hear road noise or neighbors.)
  23. Are there working smoke alarms and carbon monoxide alarms?
  24. Is there adequate cell phone reception indoors? How’s the broadband service in the area?
  25. What type of system is used to heat and cool the house? 
  26. Ask to see the circuit box – does the wiring look up to date?
  27. How is the condition of electrical outlets and switches? (You can bring something to plug into try outlets.) 
  28. Do all of the lights work? If not, why not?
  29. Does the property have any lead pipes? Do you see any issues with pipes in need of repair?
  30. What kind of drainage system does the property have? Is it on the city sewer, or is there a septic tank? 
  31. Is there any asbestos in the property, or has there ever been an asbestos survey completed?
  32. What kind of roof does the property have? When was it last replaced, and what is its current condition? 
  33. Do you see any gutter leaks? Are the gutters cleaned out, or do they need work? 
  34. Are there any trees growing within 15 feet of the property? Can you discern if roots are likely to be a problem? 
  35. Which way does the yard face, and is there any part of the yard that doesn’t receive sunlight throughout the day? 
  36. Would the real estate agent buy this house? If not, why not?
  37. What’s the lowest price you think we could offer for this house and still close the transaction?

You can ask these questions when buying a house – and others as applicable – to understand your likely overall costs to own this home. When you understand all of your costs, you’ll confidently be able to make an offer you can afford

open concept new kitchen

open concept new kitchen

11 questions to ask when making an offer and closing on a home

Real estate agents make offers on homes every day. Their job is to help you make the best offer while protecting you against potential risks with the transaction. 

  1. How does the offer work? Do we communicate with the seller or seller’s agent? 
  2. What contingencies do you recommend including in the offer? 
  3. How much earnest money should we put in the offer? 
  4. When do we need to provide earnest money? 
  5. When should we expect to hear back from the seller? 
  6. If we receive a counter-offer, when do we need to reply? 
  7. How can we sign the paperwork? Digital? In-person? 
  8. If the offer is accepted, what are the next steps? 
  9. How far out is the potential closing date from an accepted offer? 
  10. What are our next steps once the offer is accepted?
  11. What do we do at closing? 

Your real estate agent wants to make the home buying transaction as smooth as possible. If they do not provide this information upfront, be sure to ask. 

You should prepare a list of your own questions to ask when buying a house. It can include any given here, or others that represent your own interests and concerns. Answers to these questions will ease your mind and help you understand what you can expect during each stage of the homebuying process. Completing your research is perfectly acceptable, but don’t skip asking questions of your mortgage broker, real estate agent, and title company. When you gather enough information, you can make the best decision buying your first home. 

Source: redfin.com

5 Ways to Win a Real Estate Bidding War without the Highest Bid

You may shortly find yourself in a real estate bidding war if you’re one of the many first-time homebuyers looking to buy in competitive markets like Austin, TX or Denver, CO. You may also think the only way to win the house is by putting in the highest offer. While this sounds like the right and possibly only strategy, you might be surprised when a homeowner selects a lower bid. 

Winning a real estate bidding war doesn’t always come down to price – there are actually many other tactics that are extremely effective. All-cash offers, pre-approval letters, and flexible timelines are all strategies that can beat out the highest offer. When you’re planning your bidding strategy, consider the following tactics to help make your offer stand out amongst the competition.

1. Get pre-approved for a mortgage

One of the first steps you should take towards purchasing a house is obtaining a pre-approval letter. A pre-approval letter states that a lender is willing to lend money up to a certain amount. These are typically acquired from a mortgage company or a bank. 

Getting pre-approved is almost always beneficial when buying a house, but especially if another buyer puts in a large offer during a real estate bidding war, but isn’t pre-approved. By having this letter, you can show the seller that you’re a qualified and serious buyer, even if you don’t have the highest bid. Pre-approval letters typically have an expiration date of 30 to 60 days, however, they can be updated with reverification of your information.

2. Go in with an all-cash offer

We’ve all heard the term “cash is king,” and when it comes to real estate bidding wars it’s no different. Having cash on hand means that mortgage companies don’t need to get involved, escrow closes faster, and you don’t have to worry about appraisals. All-cash offers show the seller you mean business and are ready to buy the house today.

3. Provide a flexible timeline

Flexibility around specific details in real estate transactions is nearly as good as offering the highest bid. Sometimes sellers need more or less time in the home than the typical 30-day closing period. If you are not in a rush to move, be flexible with your closing timeline and let the seller decide when works best for them. This can go a long way in a real estate bidding war especially if competing offers come in with hard deadlines. 

4. Eliminate contingencies during a real estate bidding war

Of course, there will always be contingencies when buying a house. Home inspections, financing, and appraisals are all important, however, you want to make sure that you aren’t overwhelming the seller by asking for too much. If you want to be the victor in a bidding war without the highest offer, you should remove as many contingencies as possible. However, it’s important to note that as you eliminate contingencies, you’re effectively taking risk off the home seller (which is why it’s a winning strategy) and putting it instead on yourself. 

5. Write a personal letter about why you are the perfect homeowners

Almost all sellers want to make sure their home is going to people that will take care of it and love it as much as they do. Including a personal offer letter, complimenting recent renovations, stating why you would be the perfect caretakers, and sharing what you love about the home, will help you stand out. It won’t always make a major difference, but this personal touch can help compliment an offer even if it’s not the highest bid. 

Real estate bidding wars can be extremely competitive, but implementing these five strategies can help your offer stand out. You should also consult with your real estate agent, as they may have additional insight on how to make your offer more attractive. In the end, the sellers are going to choose the offer that’s most attractive to them, so do whatever you can to make your offer the best on the table.

Source: redfin.com

How Much Does a Home Appraisal Cost?

Congratulations, you’ve found a home that you’re ready to buy. From the days of saving for a down payment, searching the housing market for your dream home, homeownership is almost in sight. So whether you’re a seasoned homebuyer or a first-time homebuyer, you’ll need to plan for a home appraisal before you can get final approval for your mortgage. 

You may be wondering just what is a home appraisal and how much does a home appraisal cost? Before heading into the final steps of the homebuying process, find out about the different types of home appraisals and what factors can change the price of a home appraisal.

home-appraisal-cost

home-appraisal-cost

What is a home appraisal? 

A home appraisal is a prerequisite for most mortgages, whether you’re living in Houston, TX or looking to buy a house in Philadelphia, PA. It determines a home’s value and your lender will use the house appraisal to generate an appraisal report. The report helps lenders decide an appropriate amount to lend to a potential homebuyer to purchase that property. State-certified professionals conduct appraisals to safeguard both buyers and lenders against inflated property valuations.

Who chooses the home appraiser? 

Your mortgage lender will often recommend from a list of preferred appraisers, chosen for their track records as reliable, high-integrity professionals. As the buyer you’ll have to pay the appraisal cost, which usually is a fee added to your closing costs. However, your lender should inform you how much the appraisal will cost when you begin the pre-qualification process, so you’ll know just what to expect.

How much does a home appraisal cost? 

A typical home appraisal can range from $200 to $450. However, the cost of your home appraisal will depend on the type of appraisal you need. Here are the four types of home appraisals you might run across:

1) Uniform Residential Appraisal Report (URAR)

This is the most common type of home appraisal out there and lenders typically require a URAR before approving your mortgage.

During a URAR, a trained and certified appraiser carefully reviews both the home’s interior and exterior. The home appraisal process takes two to four hours — and costs between $300 and $400. At the end of the evaluation, the appraiser will give you a detailed report breaking down your home’s value. This is the most extensive, and therefore most expensive, type of home appraisal.

Note: The remaining three types of appraisals are generally not considered sufficient to obtain a conventional loan, but there are reasons why you may want one of these appraisals.

2) Restricted-Use, Short-form Report, or Drive-by Appraisal: 

As you might expect, this type of appraisal provides less information than other types. Therefore, this home appraisal cost is generally less expensive, around $100 to $150. However, lenders generally do not accept this type of appraisal for mortgage approval. More likely, homeowners and real estate agents may use it to help determine a home’s listing price. For this type of house appraisal, a trained and certified appraiser evaluates only the outside of the house and relies on the owner to provide information about the home’s condition and other details inside. 

3) Comparative Market Analysis (CMA): 

Real estate agents use a CMA to value a home, considering factors like nearby home values, ratings for school districts, and the home’s general condition for their analysis. CMAs provide a reasonable estimate for a home’s value when setting a listing price. While this report is more likely used as a tool for sellers rather than buyers, you can always ask your real estate agent for a CMA if you’re looking to buy. It’s important to note that lenders do not consider a CMA as a valid appraisal to determine loan value. 

4) Online appraisals: 

Numerous online sites offer home appraisals directly to buyers who want to know how much their house is worth. An online home appraisal can be free or have some cost depending on how much information you request. Lenders do not accept this type of home appraisal as a valid appraisal. 

home-with-land

Factors that affect home appraisal cost

Before you have a home appraised, know the four important factors that can affect the cost of your home appraisal. 

Type of property

The type of property you plan to buy will influence the cost of your home appraisal. For example, an appraisal for a two-bedroom home will be less expensive than one with multiple bedrooms, a finished basement, and an attic. Additionally, if you plan to set up your home as a rental property to generate income, the appraiser will require a rent survey and an income statement, which may increase the cost.

The home’s value

The general value of the home affects the cost of the appraisal. As a rule of thumb, the larger the home, the more expensive the appraisal. A larger home will take more time to evaluate and results in a more extensive report. As a general reference point, properties priced at or less than $500,000 will typically result in an appraisal cost at the lower end of the range.

The home’s location 

How far does the appraiser need to travel to conduct the appraisal? Driving times and mileage are all accounted for these days, so you should expect to pay more for your home appraisal if the house is located out of town.

Type of mortgage you’re applying for

Depending on the type of mortgage you’ve applied for, it may result in a more costly home appraisal. For example, mortgages that involve a federal agency, such as the Federal Housing Administration (FHA), require an appraisal to include additional safety inspections, resulting in a higher cost. 

If you plan on getting a mortgage loan to purchase your new home, getting an appraisal will most likely be a non-negotiable requirement from your lender. Make sure to ask your lender ahead of time what to expect for the home appraisal cost, so you can be sure to set aside that amount to be paid as part of the home closing process. The more prepared you are throughout your homebuying journey, the more likely you’ll find yourself at ease and ready to become a homeowner.

Source: redfin.com

What is PMI and Do You Need to Pay it?

If you’re a first-time homebuyer you’ve surely been putting pencil to paper to estimate what your future mortgage payment, taxes, insurance, and maintenance will be on a new home. However, before finalizing your list of new homeowner expenses, one of the often-forgotten costs to consider adding is private mortgage insurance (PMI). But what is PMI and how does it work?

What is PMI insurance? It's an extra cost that protects a lender when buying a home like this.

What is PMI insurance? It's an extra cost that protects a lender when buying a home like this. 

What is PMI? 

When you apply for a mortgage, your lender may ask if you’re going to put up 20% of the home’s sale price as a down payment. Depending on your local housing market, this can be a significant amount that not every homebuyer can afford. If a 20% down payment is too much for you to swing, your lender can look for other loan products that work with a smaller down payment. 

However, if your down payment is less than 20%, private mortgage insurance (PMI) most likely will come into play. PMI is insurance you pay that protects the lender in case you default on your mortgage payments. PMI will cost between 0.5% and 1% of your annual mortgage and is added to your monthly payment. The money you put towards PMI does not go against your home loan and is considered an extra cost.

What PMI is not

To clarify, while you pay for PMI, it does not protect you as the homeowner. It’s a standard requirement to mitigate the additional risk a lender takes when extending a loan with a smaller down payment. 

Do you need to pay PMI? 

If your down payment is less than 20%, PMI is non-negotiable for most loan types. The good news is that you can discontinue this payment when you have paid off 20% of the loan’s principal amount – the equivalent of that 20% down payment. At that point, you can ask the lender to remove the PMI from your mortgage payments. 

How to calculate PMI

The amount of your downpayment is the most significant factor in determining how much PMI you’ll pay. As you might expect, your PMI payment will be higher if your down payment is smaller. 

If you’ve built a strong credit history that shows you responsibly pay your bills on time, you may qualify for a lower PMI premium. Your loan type can also affect PMI requirements. For example, a fixed-rate mortgage carries less risk than an adjustable-rate mortgage and usually has a lower PMI premium. 

If your PMI comes in at a rate of 1%, here’s how you’d calculate for a mortgage of $300,000:

          $300,000 x 1% = $3,000 per year

          $3,000 ÷ 12 monthly payments = $250 per month 

This amount you pay in PMI would be added to your regular monthly mortgage payment.

How to avoid paying PMI

The first (and easiest) way to avoid paying PMI is to make a downpayment of at least 20%. If that’s not an option, consider whether any of these six strategies could work for you:

1) Look for a lender who doesn’t require PMI

Some credit unions or lending institutions may not insist on PMI for individual applicants. For example, they may waive the PMI requirement if the borrower moves all savings and checking accounts to the lender’s institution. A lender may also waive PMI if the borrower has a stellar credit profile.

Other lenders offer portfolio loans – a direct private loan issued in-house, rather than sold to a third party lender, like Fannie Mae or Freddie Mac. Terms for this type of loan may involve smaller down payments (10-15%) with no PMI requirement.

2) Piggyback the loan

In this scenario, you’d take out a separate small loan for the 20% down payment and proceed with a conventional mortgage. The downside is that the smaller loan will typically have a higher interest rate than the mortgage loan. On the upside, you can deduct the interest on your tax return. 

3) Apply for the Affordable Loan Solution

This loan partnership between Self-Help Ventures Fund and Freddie Mac makes loans available to low- to moderate-income homebuyers and allows for a 3% down payment with no PMI. 

4) Pursue a VA loan if you qualify

Qualified veterans can finance 100% of their home purchase with no PMI requirement. However, it’s good to note there may be additional upfront fees involved.

5) If you are a physician, you may qualify for a particular physician loan

Some lenders offer specific loans to physicians with new practices and no extensive work history. These borrowers often carry large student debts, which skew their debt-to-income ratio. These loans don’t require PMI, even with a downpayment of less than 20%. 

6) Look into first-time homebuying programs in your area

Take advantage of first-time homebuyer programs that vary by state, territory, county, and city. These programs assist first-time homebuyers with down payment assistance and closing costs that can in turn help them avoid paying PMI.

It’s worth shopping around with different lenders and homebuying programs that will work with your financial situation and hopefully not require you to pay for PMI.

Source: redfin.com

Am I Ready to Buy a House? 8 Questions to Help You Decide

So lately you’ve found yourself asking, “am I ready to buy a house?” Homeownership is a major milestone that many people dream of reaching one day. However, there are a variety of factors to consider when making one of the biggest financial decisions of your life. 

So, if you’ve been thinking about becoming a homeowner, but aren’t sure if you’re prepared, you’ve come to the right place. We’ve laid out 8 questions to help you decide if you’re finally ready to buy a house. See how many you can answer yes to and if now is the right time for you to begin your homebuying journey.

am I ready to buy a house

am I ready to buy a house

1. Do you have money for a down payment?

Although the common perception is that first-time homebuyers need to have a 20% down payment to purchase a home, that’s simply not the case. Typically you’ll need a minimum down payment of 3.5% to 10% for an FHA home loan, and a minimum of 3% to 5% for a conventional loan. 

For example, let’s assume you’d like to purchase a home that costs $300,000. Your lender will require a downpayment of at least 3% of the sale price of the home, depending on the type of loan you choose and qualify for. In this example, 3% of $300,000 equals a $9,000 down payment.

It’s important to remember that the larger your down payment, however, the lower your monthly payments will be and the less interest you will pay during the life of your loan. Another drawback to a low down payment is that you’ll have to pay private mortgage insurance (PMI), which protects your lender in case you can’t pay your mortgage. If you put down less than 20%, you’ll probably have to pay for PMI, which is added to your monthly mortgage payment.

2. Do you have a solid savings and emergency fund?

While you may have saved enough for your down payment, don’t forget to account for closing costs which include legal fees, lender fees, taxes, etc., and usually total 2% to 5% of the home’s purchase price. Also, during the home inspection, you may find a few home maintenance items that you’ll want to take care of sooner rather than later, such as a leaking septic tank or cracks in the walls or ceilings. This is when additional savings will come in handy.

You should also make sure you have some emergency funds set aside. When you’re renting, you have the wonderful luxury of calling up a landlord whenever there are issues with the property. So when the heater stops working in the middle of winter, you don’t have to spend thousands of dollars to fix it. Or, when your washing machine breaks during a cycle, you won’t be responsible for calling a repairman to take a look. But once you become a homeowner, all of that responsibility falls on you. So, if you’re going to burn through your savings on a down payment, hold off on buying a house until you have a larger safety net. 

3. Is your credit score in pretty good shape?

Many potential homebuyers worry that they won’t be able to buy because of a low credit score. However, you actually don’t need perfect credit to buy a home and there are many loans and first-time homebuyer programs available for buyers without perfect credit. That being said, a higher score will help you qualify for a lower mortgage rate, saving you money in the long run.

One of the most common questions first-time buyers ask is, “what credit score is needed to buy a house?” While there’s no hard-and-fast rule for this, you’ll likely need a minimum credit score of 600 for approval. To qualify for the most favorable rate, however, work on improving your credit score and wait until you have a score of 700 or higher.

4. Do you have a handle on your debt?

Don’t panic – you don’t have to be completely debt-free to buy a home. Between student loans, car payments, and other bills, most mortgage companies know that it is unrealistic to expect borrowers to be totally debt-free these days. They primarily want to know that you’ll be able to afford your mortgage payment based on how much money you have coming in versus what you need to pay out to other debts. 

To figure this out, lenders will look at your debt-to-income ratio, which is an estimation of how much of your monthly income goes towards debt payments. To find your current ratio, you can use a debt-to-income ratio calculator. So long as your debt ratio is at least 43% you can still qualify for a mortgage.

facts about va loans

5. Have you crunched the numbers to make sure you can afford the monthly expenses?

To figure out if you can afford the monthly expenses, you’ll first need to calculate your mortgage payment. An online mortgage calculator can estimate this for you, however, affording a home is so much more than just the mortgage payment. Other financial aspects of homeownership may include:

  • Property taxes and insurance
  • Home Owner Association (HOA) fees, if applicable
  • Home expenses (sewage, garbage, internet, etc)
  • Utilities (water, electricity, etc.)

Before you decide to make the transition from renting to buying a house, make sure you’ve done the math and can afford all of the monthly expenses that come with being a homeowner.

6. Do you have a steady job?

Stable employment and income show lenders how much house you can afford and are important indicators for qualifying for any mortgage. But even if you can demonstrate financial stability on paper, you should only buy a house if you think your income will remain steady for the foreseeable future. 

A nightmare scenario for most homebuyers is losing their job just after they close or move into a new home. So if there’s any uncertainty about your income or employment, wait until things settle down before buying a house.

7. Do you need more space?

While money is obviously an important consideration, there are many other factors to think about when asking, “am I ready to buy a house?” One of which is the thing we all seem to need more of currently – space. 

With so many of us spending most of our time at home, maybe you desperately need a designated home office or an extra room for a home gym? You may want a larger backyard or an area for a garden. Do you have kids or are you expecting a baby soon and you need more room? If this sounds like you, then now may be the time to consider buying a home.

8. Are you planning on staying put for a while?

There’s no rule barring you from moving shortly after buying a home. But as a homeowner, you’ll have a chance to build equity. The longer you own your home, the more equity you build, and the more money you’re likely to make when you sell it. Ideally, you should live in a house long enough to make a profit. So, if you can’t commit to an area, continue renting until you’re ready to put down roots.

Figuring out if you are ready to buy a house is a personal decision and one that means taking a hard look at different aspects of your life: finances, lifestyle, job situation, and long-term goals. But if you’ve answered yes to all of the above, you might just have an answer to the big question, “am I ready to buy a house?”  If you’re still unsure or you have specific questions relating to your situation, reach out to a mortgage lender or real estate agent who can give you professional advice. 

Source: redfin.com

6 First Time Home Buying Myths Debunked

Buying your first home is often a dream for many renters out there. But with all the information about how to buy a home, it can be easy to believe some of the home buying myths. Whether you’re looking to buy a house in Seattle, WA, or a condo in Miami, FL, you’ve probably heard some of the myths surrounding how much you’ll need for a down payment or how high your credit score should be. 

Before you set your sights on your dream home, make sure you know just what separates the home buying myths from the facts. You may realize that you’re able to buy your first home sooner than you think.

home-buying-myths

home-buying-myths

MYTH 1: You need a 20% down payment

The biggest home buying myth for any first time homebuyer is that you need a 20% down payment to buy a home. In many cases, your down payment can be as low as 3.5%. Common types of loans with low to no down payments include FHA, VA, and USDA loans. With FHA loans – loans designed for individuals with a low-to-moderate income level and credit score- your down payment could be as low as 3.5%. For veterans and current service members, VA loans offer no down payment mortgages, and those looking to buy a home in a rural area may qualify for a no down payment USDA loan. 

Aside from loans, down payment assistance programs can help you lower the cost of your down payment. These programs are available nationwide, statewide, or locally in your county or even city. Down payment assistance programs provide a wide range of assistance types such as second mortgages, forgivable loans, or grants covering partial to full costs of your down payment. Your real estate agent or mortgage lender can help you determine what down payment assistance you qualify for. 

If you do have the means to purchase a home with a 20% down payment, there are benefits to consider. For starters, you won’t need to factor in private mortgage insurance (PMI) to your budget. PMI is an additional cost your mortgage lender may require if your down payment is below 20% and the cost is factored into your monthly mortgage payment. However, it’s always a good idea to talk with your financial advisor or wealth manager to determine your finances and whether a 20% down payment is the right option.

MYTH 2: Renting is cheaper than buying a home

One of the most common home buying myths is that renting is cheaper than buying a home. If you’re deciding whether to make the transition from renter to buyer, you might believe that renting is the less expensive option. However, in some cities the cost of renting a home may be less than or equal to a monthly mortgage payment.

If you’re serious about buying a home, you may end up saving money in the long run if you buy a house rather than continue renting. To compare the costs of renting versus buying a home, you can use a rent vs buy calculator to determine which option works best for your circumstances.

MYTH 3: Your credit score needs to be perfect

Home buying myths centered around credit scores often run rampant, specifically the myth that you must have a great credit score to buy a home. Luckily, that’s not always the case. If your credit score is at least 580, you may qualify for a 3.5% down payment FHA loan. For those looking at USDA loans, your credit score should also be a minimum of 580. VA loans actually have no minimum credit score, but instead require lenders to look at the whole loan profile of a homebuyer.

Generally speaking, if your credit score is higher you’ll likely have more options when it comes to qualifying for a conventional loan. With a higher credit score, you may also find that the terms of your loan or interest rates are better. However, just because your credit score isn’t great doesn’t mean your homeownership dreams need to come to a halt.

MYTH 4: All mortgage lenders offer the same rate

First time home buyers may have the belief that every mortgage lender will offer you the same rate no matter where you go. When shopping for a mortgage, it’s always a good idea to get more than one quote. Not every mortgage lender will offer you the same – or even the best- loan terms. To avoid making this mistake, it’s important to get quotes from several mortgage lenders and find the one that’s best suited for your finances and homeownership goals. 

MYTH 5: Home inspections are optional

Especially if there are bidding wars, it can be tempting to skip a home inspection to make your offer stand out. However, home buying myths like these may cause more issues down the road. More often than not, mortgage lenders will require a home inspection before you buy the home, so you may not even have the chance to consider passing on a home inspection.

In the case that your lender does not require an inspection, this doesn’t mean you should skip it. It’s important to know the condition of the home you’re looking to buy. That way you’ll be aware of any damage or issues the house may have before becoming the owner. If a home inspection does find any significant damage, you may be able to negotiate with the seller to repair the issues or lower your asking price. 

MYTH 6: The listing price is non-negotiable

A home buying myth that some first time homebuyers believe is that the listing price is set in stone. Depending on the housing market, you may need to be prepared to spend more than the home’s list price or negotiate for a lower price. If you’re buying in a seller’s market– where there are more buyers than homes available- you should be prepared to make an offer that’s higher than the listing price.

If it’s a buyer’s market- where there are more homes available than buyers looking to purchase- you may be able to negotiate for a lower price than what’s listed. Either way, believing the home buying myths about listing prices may cause you to lose out or even overspend on the home of your dreams.

Source: redfin.com

Buying in a Seller’s Market: 9 Ways to Win

What is a Seller’s Market?

A seller’s market is when there are more homebuyers in a particular area looking to purchase a home than actual houses listed for sale. A seller’s market usually results in rising home prices and stiffer competition among homebuyers. Also, home sellers will have the upper hand when it comes time to negotiate. However, even if the U.S. housing market is indicating a seller’s market and the competition is fierce, rest assured that you can still buy a home.

How has the pandemic affected the market?

The pandemic has affected the housing market in many ways. Because of the shortage of available homes, and the high amount of buyers still looking for a house, the market has been in favor of the sellers. Although eventually there will be more homes listed in 2021 than there were in 2020, the market will likely still favor the home seller and there may still be considerable competition. However, if you are ready to buy a house don’t let a seller’s market deter you. According to Redfin’s Chief Economist Daryl Fairweather, “mortgage rates are as low as they may ever get, so if you are able to buy a home now, you can take advantage of low rates before they rise.” If you are interested in buying a house this year, here are nine of the best tactics to follow when you are ready to make an offer. 

Be Ready to Act Instantly in a Seller’s Market

1) Get Pre-Approved for a Home Loan

If you’re a first-time homebuyer, one of the smartest things you can do to ensure your chances of buying the home you want is to apply for a pre-approval on a mortgage. Applying for a mortgage after making an offer on a house tells home sellers you may not be as motivated to buy as others. An underwritten pre-approval for a mortgage usually takes about 24 hours and is strongly recommended for those looking to buy and want to be competitive in a seller’s market.

Furthermore, you’ll receive a pre-approval letter from your lender indicating how much of a mortgage you’ve been approved for. Sharing this letter with home sellers shows them you won’t be wasting their time and that you’re motivated to buy their home.

2) Get a Great Real Estate Agent

The home buying process can be stressful and sometimes overwhelming. Having a great real estate agent by your side throughout this process can help make everything go more smoothly and aid you in making an offer quickly when the time comes. This is particularly true if you are moving to a new area or a larger housing market and looking at houses in Atlanta or New York. Your buyer’s agent can provide you with keen insights into specific neighborhoods, such as walkability, schools, and other local amenities. They will also help you when it comes time to make an offer, since they know what’s happening in the local markets and will use that knowledge to negotiate effectively on your behalf. 

eco-friendly green house

eco-friendly green house

How to Make Your Best Offer 

Once you have gone through the pre-approval process, connected with a real estate agent, and found the home you want to buy, you’re ready to make an offer. The following are things you can do to make your offer stand out among the competition.

3) Write an Offer Letter Catered to Each Home Seller

Letters to home sellers have become more and more common in a seller’s market and especially true with competitive neighborhoods. So, how do you write a real estate offer letter that will grab the home seller’s attention? First of all, don’t just tell the home sellers you want to buy their house, tell them why you want it. Home sellers are people too and will be appreciative to hear what you love about their home. Additionally, if you notice that you share something in common with the home sellers, mention it in your offer letter. If you both have kids or dogs, referencing this in your letter is a great way to make yourself more relatable, and will also show you wrote it specifically for them.

4) Make an Offer in Cash if You Can in a Seller’s Market

For sellers, an all-cash offer is very appealing and can lead to a higher likelihood of you winning the house. If you don’t have to use a lender, there’s no financing contingency, which shows the sellers that you will most likely not pull out of the deal due to financial issues. If you pay in cash the sale can also happen quickly and, overall, lead to a smoother home sale. Of course, many of us can’t afford an all-cash offer and will need to rely on other tactics.

5) Put More Earnest Money Down

Earnest money is the amount of money you put down to show how serious you are in purchasing a home, also known as good faith money. Earnest money protects the home seller in case a buyer backs out of a home sale after the offer was accepted. Unless a homebuyer backs out due to something coming up in a home inspection or appraisal, the seller will get to keep the earnest money. Earnest money can also be a great tactic to use if you’re shopping in a seller’s market or competitive neighborhood. Home sellers tend to favor buyers who put down a larger installment of earnest money because it shows that you are serious about your offer and giving you a leg up on the competition.

6) Add an Escalation Clause

An escalation clause is inserted into your purchase offer for a home and is intended to make sure you get the chance to be the highest bidder. This clause states that if the seller receives another offer that is higher than your initial bid, you are willing to increase your offer to a higher price, usually a predetermined amount. Want to give yourself the best chance at calling home in a hot neighborhood your own? Then add an escalation clause to your offer.

7) Waive Extra Contingencies

In a seller’s market, you may want to submit an offer without certain contingencies as a way to stand out among competing offers. Waiving contingencies gives the sellers an advantage by taking away protections for the buyer and should only be done with the recommendation and oversight of your agent. Waiving either the inspection contingency, the appraisal contingency, or both can be an effective way to win a bidding war. In a seller’s market, refrain from asking for high-maintenance contingencies such as only buying the house if your current one sells or that you can knock down a wall. Essentially, keep your contingencies to a minimum so the home seller has fewer hurdles to complete in selling their home.

8) Don’t Restrict the Sellers to a Timeline

Limiting the home seller to a timeline can cause them extra stress when they are likely already overwhelmed. Give the home seller the gift of time, allowing them the flexibility to move out whenever it is best for them. A rent-back agreement is a great option for buyers to purchase the home and then rent it back to the seller to give them time to find a new place to live. Something as simple as time might give your competitive offer the edge it needs to win the home.

9) Be willing to make concessions during negotiations

During the negotiation process, you may have a better chance of closing the deal if you are willing to make compromises. There may be some things that you are not willing to budge on such as a home inspection, but maybe you don’t ask the home seller to redo the back deck or paint the house before you move in. This will allow for a smoother closing process and for you to move into your new home more quickly.

Buying a home can be difficult, especially if you are buying in a seller’s market. Use any or all of the recommended tips to stand out from the competition to help you purchase your next home.

Source: redfin.com

The Top 9 Contingencies to Consider in Your Offer When Buying a Home

If you’re a first-time homebuyer, buying a home is an exciting time in your life — not to mention a little anxiety-inducing. But after touring dozens of homes and finally finding “the house,” you’re ready to make an offer. Before you do, take time to consider all the potential risks and home-buying contingencies that will help protect you as a buyer. Such as being able to back out of your offer if a significant repair issue is discovered, like a crack in the foundation or leaking roof. Though you can technically add any contingency you want to an offer, here are the 9 most common homebuying contingencies to consider.

homebuying contingencies

homebuying contingencies

1) Home inspection contingency

As the buyer you should always order a home inspection. A trained and certified home inspector will look for issues with the structure and home systems (like plumbing, electrical, and HVAC) that may not be obvious to the buyer. When you purchase a house that ends up in need of a major repair, you could take a significant financial hit. The inspection contingency can protect you from purchasing a poor property investment because it allows you to back out of the deal if a major issue is discovered.

2) Appraisal contingency

An appraisal contingency protects lenders more so than the homebuyer, and is almost always required by your lending institution if you’re taking out a home loan. It confirms to your lender that the home is worth the price you’re paying for it, and if you default on your loan they will be able to recoup their expenses by selling the house. 

A favorable home appraisal, however, may offer you peace of mind, knowing that you are buying a home with instant equity because the value is more significant than your purchase offer. With an appraisal contingency in place, you can also back out of the purchase of the home if it’s appraised value isn’t as high as it’s listing price.

3) Financing contingency

A financing contingency is a clause in your offer that allows you to back out if you cannot secure a mortgage to buy the home. The financing contingency protects both the bank and the homebuyer. It gives the bank the opportunity to verify your financial history, income levels, and what you can actually afford, while also allowing you to walk away from an offer you can’t afford it.

4) Home sale contingency

This contingency is common for buyers who need the equity from the sale of their current home to purchase the next one, usually going toward the down payment and closing costs. Even if you have funds available for a downpayment, not every homebuyer can afford to pay two mortgages while waiting to sell their current home. This gives buyers the option to back out of the deal if they cannot sell their current home by a specified date.

5) Clear title contingency 

The property title shows ownership and any mortgages against the house. In every real estate transaction, the title company runs a title report on the property to ensure no contractor liens or judgments are outstanding against the property. If the report finds liens or judgments, the buyer can require the seller to satisfy them before the closing date. If these items are not cleared before closing, this contingency allows the buyer to walk away from the deal.  

6) Kick-out contingency

The kick-out contingency benefits the seller by allowing them to continue marketing their house even if the house is under another contingent contract. For example, if a home seller accepted an offer from a buyer that has a home sale contingency, the kick-out contingency would allow the seller to accept another offer and kick out the previous buyer’s offer. This way the home seller does not have to wait around for someone else’s house to sell before theirs can be sold. Usually, the homebuyer with the initial offer gets a specified amount of time – roughly a few days – to either remove their home sale contingency and move forward with the purchase or choose to walk away.

7) Home insurance contingency

As a requirement for financing, lenders require homebuyers to start a home insurance policy before the final loan is approved. This covers the house if something happens after the seller moves out, but before the buyer moves in. This contingency protects the lender and allows them to recover the mortgage amount. If the buyer can’t get insurance on the property, either party can walk away from the purchase.

modern living room condo

modern living room condo

8) Homeowners association (HOA) contingency

The HOA contingency applies to homes or condos under a homeowner association’s supervision. It gives the buyers the right and time to review any HOA agreements and documentation applicable to them as the home’s new owners. If they don’t receive the documentation in time or don’t agree with HOA obligations or restrictions, this contingency can help them get out of the deal. So, if you’re moving to an area like Miami, FL where most condos are a part of an HOA, this would be a contingency worth considering.

9) Move-in early contingency

This contingency allows a buyer to move into a property before final closing – if the seller agrees. If a buyer moves in early, it’s harder to walk away from the deal if other contingencies are not satisfied. If the deal falls through, the seller can evict the buyer. Most real estate agents will advise the seller not to accept an offer with an early move-in contingency. 

Contingencies provide useful protection to both homebuyers and sellers. The buyer’s contingencies protect them from various unknowns about the house itself and the actual purchase transaction. While sellers may view them as potential obstacles, they create an escape hatch if the buyer runs into difficulties selling their current house or obtaining financing. As you prepare your offer, be sure to ask your real estate agent for advice about which contingencies are best for your situation and the current housing market.

Source: redfin.com

Podcast: Insurance For Homeowners and Real Estate Investors

Insurance For Homeowners and Real Estate Investors

For this podcast about insurance I chatted with Matt Kincaid of Meridian Captone.  In the podcast we discussed insurance for homeowners and real estate investors.  Topics included first time homebuyer tips for arranging insurance, insurance for real estate investors with long term tenants and insurance for investors working in the short term rental space.

I hope you enjoy the podcast and find it informative.  Please consider sharing with those who also may benefit.

Listen via YouTube:

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You can connect with Matt at LinkedIn,  You can reach out to Matt for more information on their insurance products by emailing him at mkincaid@meridiancapstone.com.

You can connect with me on Facebook, Pinterest, Twitter, LinkedIn, YouTube and Instagram.

About the author: The above article “Podcast: Insurance For Homeowners and Real Estate Investors” was provided by Luxury Real Estate Specialist Paul Sian. Paul can be reached at paul@CinciNKYRealEstate.com or by phone at 513-560-8002. If you’re thinking of selling or buying your investment or commercial business property I would love to share my marketing knowledge and expertise to help you.  Contact me today!

I work in the following Greater Cincinnati, OH and Northern KY areas: Alexandria, Amberly, Amelia, Anderson Township, Cincinnati, Batavia, Blue Ash, Covington, Edgewood, Florence, Fort Mitchell, Fort Thomas, Hebron, Hyde Park, Indian Hill, Kenwood, Madeira, Mariemont, Milford, Montgomery, Mt. Washington, Newport, Newtown, Norwood, Taylor Mill, Terrace Park, Union Township, and Villa Hills.

Transcript

[RealCincy.com Insurance Podcast]

[Beginning of Recorded Material]

Paul S.:             Hello everybody, this is Paul Sian with United real estate home connections. Real estate agent licensed in the state of Ohio and Kentucky. And with me today is Matt Kincaid with Meridian. Hi Matt, how are you doing today?

Matt K.:            I’m doing great, Paul, thanks for having me.

Paul S.:             Great to have you on here, and looking forward to our podcast today. Where we’re going to discuss insurance for homeowners, for investors as well as looking in-depth into the insurance policies and how that’ll help out buyers and investors, so why don’t you tell us a little bit about your background? When did you get started in insurance?

Matt K.:            Yes. It really started in junior/senior year of college. I went to NKU, graduated in 2015. My best friend actually dropped out of school and started selling commercial trucking insurance to long-distance truckers. So he thought it might be a good part-time job for me to do, do some customer service work.

So that’s what I did my senior year mostly. And picked up on it pretty quickly, and after I graduated, I started selling full-time, and it just happened to be when I stuck with. Ended up transitioning to more personal lines. So I still do a lot of commercials, but our main focus is personal. So we’re typical home auto landlord insurance that sort of thing, so that’s kind of how I got started.

Paul S.:             Great. And you’ve been with Meridian ever since?

Matt K.:            Yes. I’ve been with Meridian. It’ll be four years in September; I’ve been in the industry for about six years now.

Paul S.:             Nice. So I understand a lot of people don’t know that you’ve got your insurance brokers, which I believe Meridian is an insurance broker, and then you got your insurance agents. Can you explain a little bit the difference between an insurance broker and an insurance agent?

Matt K.:            Yes. So in the insurance world, there’s independence and captives; captives are just what it sounds are captive to one product, one company. Whereas with independence Meridian particular, we have about 15 different companies that we’re able to shop around through. So one of our companies is, for example, is Allstate. A lot of captives also have Allstate, but we have the same exact product.

But we also have 12 other companies that we can shop around through, to make sure that you’re getting the best. So it’ll really benefit to the customer and me as an agent, or I’m not if I was just one company, I know I have to stand behind that product 100% no matter what. Whereas being a Meridian, I can just do whatever is best for the customer.

Paul S.:             Yes. So the ideal then I guess is that you can shop around from multiple policies. Just like going into the store, you can compare different types of bread, and whatever price works best for you, whatever flavor works best for you. That’s similar to what you’re able to provide.

Matt K.:            Yes, that’ll be a good example. For like your typical, this may not be what we’re talking about but, but for like your home and auto, most of time, it’s best to be with one company, but not all the time. So I’m able to mix and match if need be, whatever is going to save the customer most money, whatever they’re company is having.

Paul S.:             Great. So let’s move on to first-time homebuyers. Insurance is a, especially for homeowners, insurance is the new thing for first-time homebuyers if they don’t really know what they’re looking for. When’s a good time for them to start having that conversation with their insurance person?

Matt K.:            So I think whenever you get in contract is a good time to start looking. Getting a quote is never going to hurt, you’re not bound to any coverage, or you’re not going to be paying. 90% of time, you’re not going to be paying the full 12 months up front.

So it’s good to start getting your quotes shops around, getting some final numbers to give to your lender if you have one. So they can finalize numbers and give you a good picture of what you might be looking at going forward. So it’s never too early in my opinion, but once you get into contract, I think is an ideal time.

Paul S.:             Yes. That’s something I agree with too. And it should be pointed out for those first-time homebuyers who don’t know, I mean insurance is required if they’re financing the purchase, and the lender is going to require homeowners insurance.

Matt K.:            Yes. A lot of people know that it’s not a law that have home insurance, but the lender can make that stipulation that you have to have it upon closing.

Paul S.:             Great. And when a homebuyer first time, whether homebuyer existing or first-time homebuyer. What exactly is the insurance company looking at when they’re pricing out policies?

Matt K.:            So a big one is, you’ll hear this term going out a lot, insurance score. It’s a credit-based score; you don’t need a social to run it. But they’re able to calculate a similar score based on the amount of claims you’re turning in, your payments.

Are you making your payments on time? That sort of thing. So they’re able to get a good a good picture of the type of risk that the insurance company is taking on so that I mean if you’re looking at the property itself, the construction of the property, how old it is, the exterior that sort of thing.

Paul S.:             So does that involve a hard credit pool or a soft credit pool?

Matt K.:            It’s soft; you won’t see it on your credit at all.

Paul S.:             Okay, great. So that’s something that doesn’t have, even though during the home shopping process there’s going to be a bunch of credit pools, whether from a couple of lenders. But insurance it’s not one of those things that the buyers have to look at.

Matt K.:            No, absolutely not. Especially, that would be a big pain. Especially if I’m shopping through 15, and I’m running NVR and insurance score. But no, it won’t even show up on your score.

Paul S.:             Okay. So what are some of the best ways that homebuyers can improve their chance of getting a better insurance rate?

Matt K.:            Right. So prior insurance history is a big one, making your insurance payments on time. The area that you are in is going to be a big factor. The zip code, there’s different what’s called protection classes based on where the home is. So that’s based on how far you are from the fire hydrant, and also how far you are from the fire department.

So the highest protection class you can have is ten, that’s a maximum risk. You’re over five miles away from the nearest fire department, and your insurance rate is going to be higher. Simply do the fact if there was a fire or total catastrophe, it’s going to take longer for them to reach you.

Paul S.:             Okay. Let’s talk about the risk; you mentioned risk in there. How does risk play into it? Let’s say whether of the buyer themselves and if they’ve had past history of claims or the house even if they’ve never been in the house before what about the risk associated with that.

Paul S.:             Yes. So like I said before pass to insurance, history is big. With these landlord policies, it’s hard to tell what the price is exactly going to be. Because obviously, they’re going to rate it based off the buyer’s insurance score.

But they don’t know who’s going to be living in there. They don’t know the type of risk for who’s going to occupy that home. So it’s very limited; there’s more of a baseline price just based off the buyer’s insurance score and the protection class and the age and the property itself.

Paul S.:             Okay. In terms of the property itself, there’s a CLUE report which a lot of buyers probably have not heard about. Can you explain what the clue report is, what does it stand for, and what does that exactly provide?

Matt K.:            Yes. So I kind of describe it as a moto vehicle report for your home.  So it stands for the comprehensive loss underwriting exchange. So a lot of times, LexisNexis, you’ll get your reports from there. It’s just a big aggregate of claims that are turned in by insurers, and obviously, when I’m running your clue report, it’s going to pull up based off your name, your date of birth and the address if there are any claims that correspond to you, the insurance company can grade it importantly.

Paul S.:             Okay, great. Is there any cost for you pulling a clue report for a buyer?

Matt K.:            No, absolutely not. So for a personal policy, so if we’re talking landlord, that’s four units, four family and under. Most of the times, the company can run that itself. If it’s a commercial policy, it’s a little bit more different.

For example, if this is not a new purchase, maybe you’ve had this property for a few years, and you’re shopping right around, you may have to order that from your prior insurance company. But if it’s a new purchase, a lot of times it’s not going to be necessary, if it’s a commercial risk.

Paul S.:             Okay. Let’s talk about a homeowner who’s been in their house for a few years now, and they had a policy in place with an insurer. Do you have any recommendations or suggestions for them? I mean, do the rates get better? Do the rates get higher if they get another quote?

Matt K.:            So it’s kind of a cache one to it. It’s almost impossible to know what the insurance company is going to do. Obviously, you want to find a company that is A-rated or higher, that means they have a good financial stability, so they’re not just going to raise your rates for no reason.

But insurance is kind of like the stock market in some ways. If a company is taking big losses a certain year, they may try to recoup by raising rates, and that’s just going to be across the board based on your zip code. But I always just say just keep track of your rates. I know Meridian we have somebody who’s dedicated to be shopping if your policy goes up a certain percentage. So I think that’s great to have. But just pay attention to it, and re-shop it every couple of years if need be.

Paul S.:             Okay. By the fact of them, somebody re-shopping it, that’s not necessarily going to increase their rates, will it?

Matt K.:            No, absolutely not. Companies like to see that you’ve been insured, they don’t want to see you bounce around all the time, because that means they’re probably going to lose that risk in a year. But to answer your question, there’s no harm in re-shopping. I have customers that will call me each and every year to make sure that we have the best rate, that’s totally fine by me.

Paul S.:             Okay, that’s great and helpful information. To move on to investment real estate, can you talk about the differences in commercial versus residential investment real estate insurance?

Matt K.:            Yes, so kind of hard to describe the four. Commercial is going to be the five units and above, personal is going to be four and under. Coverages on that, the only differences that you’re going to see with commercial, instead of having a one hundred thousand or three hundred thousand liability limit, most of the time they’re going to include a general liability policy, which is going to include one million in liability.

A bunch of different other things that fall under that, so that might look different. Other than that, the forms are fairly similar. You just want to make sure that you have replacement cost, or if you want actual cash value, deductible, loss of rent. So those things are going to be similar, it’s just a matter of how many years you have, that sort of thing.

Paul S.:             Okay. In terms of investors who are owner occupying, they’re buying a duplex or four-unit, and they want to live in one unit. Are the insurance rates generally better for that type of situation?

Matt K.:            There’s not a clear answer for that, I mean it’s still going to be written on the same type of form. There might be some discounts being that the insurance company is able to calculate their risk, maybe a little bit more accurately. I mean, that could be a good thing or a bad thing for the customer.

But really, you just want to make sure that you’re asking those questions, make sure the agent is writing the policy correctly. So down the road, if there are any changes or let’s say the insurance company audits you and that information is inaccurate, that could then raise your rate.

Paul S.:             Okay. So I guess the answer is it depends?

Matt K.:            Yes. With a lot of insurance, it just depends, unfortunately.

Paul S.:             That’s still good to know. So let’s talk a little bit about insurance riders, I guess insurance riders applies both to regular homeowners as well as investors. What can you tell me? I guess first, let’s explain what’s an insurance rider, and why would somebody want one or need one.

Matt K.:            Yes. So with any insurance policy, there’s going to be a lot of things that are automatically included. Like if we’re talking landlord policy wind, hail, fire, that sort of thing. And then if you want to have personal property protection, let’s say you’re furnishing some of the items may be the appliances in the home can have that. Otherwise, the writers are going to look fairly similar to what you’re going to see on a typical homeowner’s insurance policy.

Or do you want water and sewage backup? Do you want replacement cost on your belongings or the roof? So those are going to look fairly similar. If the agent is asking the right questions and going over it thoroughly, there should be no question on how you want it covered. Some other things that might be on there is earthquake that’s not included; flood insurance it’s a totally separate policy, so there’s always that misconception that flood is included in the homeowners; it’s never included.

Whether it’s a landlord policy or homeowner’s policy, the way to differentiate that with water coverage is where the water is originating from. If the water originated from outside the house, that is flood. If the water is originating from inside, let’s say you have a pipe that burst, or a toilet that overflows or some pump that’s water inside the house and that’s something that could be covered either automatically or with a rider.

Paul S.:             Okay. And just look a little further into flood insurance that applies to both regular buyers and investors, but that’s also like you said this based on external factors close to a river, close to the lake. Where would somebody find out if their property falls under that, or requires flood insurance?

Matt K.:            So a lot of the times, the lender may have an idea if it’s required or not. Otherwise, just asking your insurance agent. There’s not like an automatic identification that is going to tell you. In the loan process, it will probably come up that flood insurance is required, and then at that point, the insurance agent can find out what flood zone you’re in, what kind of rate impact that’s going to have on you, and that sort of thing.

Paul S.:             And then flood insurance too is not something you provide directly, I believe that’s provided from the government, correct?

Matt K.:            Yes. So it’s a FEMA based product, but we do also have a private flood company if your loan accepts that, which can be up to 40% off of a FEMA back product, and it’s the same exact coverage.

Paul S.:             Okay. So let’s talk a little bit more about the private insurance coverage you said for flood insurance, as opposed to FEMA. That’s something you said the lender would have to allow it. Otherwise, they have to go through the government program?

Matt K.:            Yes. So I mean the laws are changing for this all the time, most of the time if it’s a Government loan, they’re not going to allow private flood insurance. But that could depend on a bunch of different factors.

So the best thing to do is just ask your lender if private flood is acceptable because if it is, that’s going to save you a ton of money. I just did one a couple of weeks ago, where FEMA wanted 1,500 bucks, and my private flood carrier came back at like 700. So that could be a big difference, especially if you have a certain down payment you need to make for the home, and just cut cost in general.

Paul S.:             That’s 1500 versus 700 is that a yearly cost?

Matt K.:            Yes, flood is always going to be a 12-month policy, just like your homeowners.

Paul S.:             Okay. Is it worth it? Let’s say somebody’s not listed as a; the property is not listed in flood zone, so they don’t require flood insurance. Is it worth it for them to maybe they happen to live behind a, there’s a small lake behind them? Is it worth it to get flood insurance for them?

Matt K.:            I think it’s at least worth having that conversation, you know everybody’s different. You know there are some customers they’re going to want all the bells and whistles, they are going to want earthquake even if you’re not even close to a fault, that sort of thing.

So it’s just having that conversation, I mean you can never be too covered. It’s never a bad idea to cover all your paces, but it’s just a matter of what the insured is willing to spend, and if they think it’s worth taking that risk or not.

Paul S.:             Okay. Most of the insurance policies we’re talking about, and I shouldn’t say most, I should say all the policies we’re talking about right now are generally applied to like long term whether you as a long term owner-occupant or as a long term investment property, where you have a one continuous tenant may be staying a year after a year or long-term leases basically.

Let’s talk a little bit about short term tenants like your Airbnb, your VRBO, I mean, are there different insurance requirements for that, different insurance policies? What would you recommend? And what have you seen for other people who are looking for that type of insurance?

Matt K.:            Yes. So honestly, I’ve ran across it a few times. The one thing you want to make sure of is most companies will either not write it, or they’ll have an endorsement done for a short-term rental. So that’s going to be a surcharge for you. Other than that, it’s going to be fairly similar. You just want to make sure if you’re going through air Airbnb or VRBO make sure what they are going to cover.

They’re going to include an insurance policy, so you don’t want to have any overlaps, we also don’t want to have any gaps in the insurance. I know Airbnb will, for example, not cover bodily injury or property damage, so that’s something that’s going to fall under your insurance policy. So it’s just making sure that you understand the verbiage. So if you do have an Airbnb home that you want to get insured, take a look at that policy, send it to your insurance agent. Have them write over it, and make sure that you’re fully covered.

Paul S.:             Okay. That’s something that you’d provide if somebody’s coming to look for a policy through you for a short term rental that you would be able to assist them with too?

Matt K.:            Yes, absolutely. I did one last week; the customer was very concerned about the pricing. He was coming from USAA; they wanted like 2,500 bucks on the year for a single-family Airbnb.

I have a great company called Berkshire Hathaway; they have a product specifically for Airbnb or VRBO. I was able to cut his price almost in half. So we definitely have products for it; off the top of my head I probably have three or four that I can quote through.

Paul S.:             Okay, great. And just to go back to your company’s footprint, Meridian, basically, are you able to offer insurance all 50 states? Are you limited anywhere?

Matt K.:            So yes, we’re not available in all 50 states, but we are available in the Tri-State as well as Tennessee, Illinois, a lot of the southeast. So if you have any questions about that, please give me a call.

That being said, I have a lot of property investors that are coming from either across the country or overseas. That is totally fine, as long as the property that they’re buying is within our scope, we can definitely accommodate.

Paul S.:             Okay, great. And what’s the best way for somebody to reach out to you if they want to get some more information?

Matt K.:            So you can reach me either by phone or email. I’m also very active on Facebook. My phone number is 513-503-1817. Or you can reach me by email that is MKincaid@Meridiancapstone.com.

Paul S.:             Okay, great. That’s all the questions I have for you today, Matt, thanks for being on.

Matt K.:            Yes, thanks for having me.

[End of Recorded Material]

Source: cincinkyrealestate.com

Should You Schedule a Pest and Termite Inspection for the Home You’re Buying?

Whether you’re an aspiring first-time homebuyer and about to make your first offer or you have just purchased your second or third home, you’re probably excited to enjoy your new space. But wait, is that a little critter by the backdoor? Maybe it’s just an ant… nothing to worry about, right? Just to be sure there aren’t any other pests lurking about your new house, you might want to consider getting a pest and termite inspection. Here are five reasons you should schedule a termite and pest inspection before any unwanted visitors wreak havoc on your dream home.

house-pest-termite-inspection

house-pest-termite-inspection

Why should you get a pest and termite inspection?

As a new homeowner, it’s always a good idea to cover all your bases and have a pest and termite inspection performed. Homes in more humid climates – think homes in Miami, FL or houses in Houston, TX – are more susceptible to termite infestations due to the increased moisture in the surrounding environment. If you’ve seen any signs of a termite infestation, it might be a good idea to have a termite inspection. These signs can include buckling floorboards, creaky floors, or damaged wood.

For those still in the homebuying process, if you see signs of termite damage in the house, you should consider adding a termite contingency when making an offer on a home. A termite contingency may give you the option to back out of the sale if there’s been significant damage found. Otherwise, you can try to negotiate with the seller to pay for the repairs. 

What if you’re planning on just getting a regular home inspection? Your home inspector likely won’t look for specific types of pest or termite damage. However, if your home inspector does find damage, contacting a pest or termite inspector should be your next step. A pest or termite control specialist can help you determine what the best course of action is, likely scheduling an inspection to determine the extent of the damage.

Is a pest and termite inspection required before closing on a home?

If you’ve already purchased your home, then you didn’t miss out on any required inspections. For most homebuyers, termite and pest inspections are not required before closing on a home. However, certain types of loans such as FHA and VA loans may require you to pay for a pest inspection before your mortgage approval, so it’s best to check with your mortgage lender or real estate agent. Your real estate agent will also know if your particular state or county requires a pest inspection before purchasing a home.

patio-pest-inspection

patio-pest-inspection

5 benefits of having a termite or pest inspection

There are several benefits of having your home inspected for termites or pests.

1) Negotiating power. If the home you’re looking to buy ends up having damage from termites or pests, you’ll likely have better negotiating power. Your real estate agent can help you decide what negotiations to make. These negotiations may include asking the seller to reduce the price so you can pay for pest control services or asking the seller to pay for any repairs or fumigation services before you close on the home.

2) Peace of mind. These inspections will be able to tell you if there’s any structural damage from pests or termites. Your inspector will disclose any issues they find. Then you’ll have an idea of what kind of maintenance you might need as the home’s future owner. 

3) Save money. Moving into a new home can feel like the dream, but it’s always a good idea to know what you’re getting yourself into. Without a pest or termite inspection, you may be foregoing a critical type of home inspection that may end up costing you more money down the road if a problem is left untreated.

4) Prepare for future expenses. If your pest or termite inspector finds certain types of pests in the home you’ll have a better idea of what to look out for as a homeowner. That way, you will know if your new home or the area you’ve moved to is susceptible to specific pests. It will also help you to plan ahead for any costs associated with keeping these pests away.

5) Find a local pest control company. Say your home is more susceptible to termites because you’re buying a house in a more humid area, or that spiders or mice are more common in your county. The good news is you’ve found a local pest control company to help you schedule regular maintenance. You’ll know just who to call for help if any critters start appearing in your house.

What to expect during a pest inspection

The inspection will take roughly 30 minutes but can vary based on the size of the home and whether there’s a basement, crawl space, or any extra areas. The inspector will examine the interior and exterior of the home for any signs of damage, infestation, or specific areas that might be more susceptible to pests. They’ll check for any signs of moisture. Damaged wood or buckled paint indicate the presence of wood-destroying insects like termites. They are more likely to be found in these areas vulnerable areas.

The inspector will check for a variety of different bugs such as carpenter ants, fleas, mosquitos, and moths, among others. Where you are located may also play a role in the types of pests your inspector will look for. Some pests are more likely to be found in certain areas or are local to your region. If these types of local pests are found during the inspection, your pest inspector may recommend regular pest control to keep these critters at bay. 

Source: redfin.com