Nearly 4 Million Homeowners Now in Mortgage Forbearance Plans, Servicers May Get $500 Payments

Posted on May 5th, 2020

The mortgage forbearance rate worsened yet again compared to last week, though as expected the increase has slowed as the pool of borrowers grows larger.

As of April 26th, some 3.8 million homeowners were in forbearance plans, per the Mortgage Bankers Association’s (MBA’s) most recent Forbearance and Call Volume Survey.

The forbearance rate increased from 6.99% to 7.54%, a mere eight percent rise from a week earlier, but still more bad news for loan servicers.

And I should note that we’re about to begin a new month, so those on the fence last month could request forbearance this week, creating a new surge.

Forbearance Rate Tops 10% for FHA/VA Loans

  • Ginnie-backed loans have a forbearance rate of 10.45%
  • Fannie/Freddie loans have forbearance rate of 5.85%
  • Private-label securities and portfolio loans have rate of 8.30%
  • Depository banks have rate of 8.41%, independent mortgage bank (IMB) servicers have rate of 7.13%

In terms of loan type, government-backed home loans continue to fare worst, with Ginnie Mae mortgages (FHA loans and VA loans) seeing forbearance rates climb to 10.45% from 9.73%.

Meanwhile, the Fannie Mae and Freddie Mac forbearance rate rose from 5.46% to 5.85%.

Other mortgages, such as private-label securities and portfolio loans, which can include jumbo loans, increased from 7.52% to 8.30%.

With regard to institution type, depository banks saw their forbearance rate go up from 7.87% to 8.41%, and independent mortgage bank (IMB) servicers saw their rate move from 6.52% to 7.13%.

It’ll be interesting to see what happens in the second week of May once the next wave of borrowers request forbearance.

It seems we’ve kind of plateaued for the month of April, but a new month means new layoffs, business closures, losses of income, etc.

And regardless, the numbers are already way above what was originally forecast, perhaps because the forbearance offered via the CARES Act is very attractive to homeowners.

MBA Senior Vice President and Chief Economist Mike Fratantoni noted that the millions of additional Americans filing for unemployment throughout the week will likely make matters worse, “particularly as new mortgage payments come due in May.”

$500 for Each Mortgage in Forbearance?

  • More relief for mortgage servicers may be on the way
  • Via a $500 credit paid by Fannie/Freddie for each loan in forbearance
  • Unclear if the same would be extended to Ginnie Mae servicers
  • Or if it’s enough to offset the massive losses some servicers are experiencing

That brings us to how loan servicers will fare in all of this, especially nonbanks that might not have as much access to capital.

We know that Fannie Mae and Freddie Mac have agreed to buy mortgage loans in forbearance, and only require servicers to advance the first four months of missed payments.

But those enormous costs could still put enough strain on some servicers to wipe them out.

To further ease the situation, it has been reported that Fannie Mae and Freddie Mac will pay servicers $500 per loan in forbearance to ease the pain.

This is according to Jack Navarro, president of Shellpoint Mortgage Servicing, who spoke about the developing situation during a Tuesday morning conference call, per Inside Mortgage Finance.

The so-called “$500 deferment fee is scheduled to take effect on July 1,” assuming it’s approved by the Federal Housing Finance Agency (FHFA).

That fee would obviously offset some of the cost associated with the forbearance advances, at least partially.

But if the forbearance rate keeps climbing higher in May, it still might prove to be too little too late.

Navarro also spoke to what happens after forbearance, saying the plan is “to allow borrowers to very quickly go from the forbearance process to a current loan with payments deferred to the end of the mortgage.”

That backs up the Fannie/Freddie partial claim I spoke about last week, which would make it relatively painless for borrowers who regain their job/income to continue making mortgage payments and put this all behind them.

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

Contingencies: How They Work and Why They’re a Buyer’s Friend

Like pretty much all of life, real estate is filled with “what ifs.” What if the inspection uncovers major structural problems? What if my financing falls through? What if the bank appraisal comes in low? When you’re buying a home, the “what ifs” are handled, or at least mitigated, through contingency contracts.

What are contingencies? They are the clauses in your contract that give you an out if something unforeseen arises. They protect you from losing your earnest money and give you leverage to get the seller to help you deal with whatever comes up. As a buyer, contingencies are wonderful. They aren’t quite “get out of jail free” cards, but they can be close and they always work to the buyer’s advantage. So naturally, sellers aren’t so fond of them. That’s why, in a particularly competitive market, you’ll likely need to minimize them.

Timing is everything

Contingencies always come with a time frame. A “hard contingency” requires you to sign off physically, but a “soft contingency” simply expires at a certain date. If you need to cancel the contract because of a contingency, your offer to purchase will include the precise method you need to use to notify the seller. In any case, you should mark your calendar with contingency dates for your contract, along with how they are to be met. It’s wonderful to trust your real estate agent and escrow company to keep track of these things and most times they will. But this is your home and earnest money on the line so be your own backup.

Primary contingencies

Disclosure: The first contingency will be your acceptance of the seller’s disclosure form. Exactly what has to be disclosed varies from jurisdiction, but when the seller accepts your offer they will have a short time period to give you a form on which they disclose any material facts about the property.

Even if it’s not required by law, many real estate companies require their sellers to do this simply to protect them from potential litigation. If they don’t disclose within the allotted time frame or the disclosure makes you want to bolt, you are free to rescind your offer.

Just because you got a clean disclosure form doesn’t mean you can safely forego inspection. A seller may suspect something is wrong but not “know” it. In fact they may be purposely not looking too closely for fear that they will find something they legally need to disclose. There’s no penalty for inattentiveness.

Inspection: This contingency gives you the right, within a specified time frame, to have full access to the home to conduct a professional inspection. Once you get the inspection, you have a choice. If there isn’t much of note found, you may simply sign off on it and move on.

If there are some repair items you’d like the seller to attend to or give you a credit for, you will ask for that. They will either agree to everything or, if the list is long, counteroffer to fix some but not all of the issues. In short, you negotiate the repairs. If you find something truly frightening during the inspection, you may want to cancel the deal altogether. You’re out whatever you paid the inspector, but you should get your earnest money back.

Loan approval and home appraisal: Just because you are pre-approved for a loan doesn’t mean the bank is ready to wire the money. They will want to hire a professional, independent appraiser to walk through the home, take pictures and measurements, and note its condition. The appraiser will then make a written report with an “appraised value” attached. If the appraisal comes in at or above the sales price, smooth sailing. If the appraisal comes in low, you’ve got trouble.

In case of a low appraisal, you have options. First, if the purchase price is in line with CMA (comparative market analysis) numbers, you could ask the mortgage lender to have another appraisal done or to override the appraisal value and issue the original amount you requested.

If that doesn’t work, a properly written appraisal contingency clause would allow you to renegotiate the purchase price so that it matches the appraisal. If the seller is unwilling to do that, you’re down to two options. You can add the difference between the appraisal and the sales price to your down payment or you can walk away, cancel the contract and get your deposit back.

The appraisal isn’t the only thing that can go wrong with financing, which is why you will usually have an overall financing contingency, not just a standalone appraisal contingency. The lender will do a title search to search for outstanding liens on the title. If that doesn’t come back clear, your financing won’t go through and you can cancel your contract.

Likewise, job loss or something truly financially catastrophic could put the brakes on your loan. A tight financing contingency will protect against that. But again, remember the timeline. If the financing contingency expires before your loan goes through, your earnest money is on the line.

Tier-two contingencies

In a hot market or a multiple-offer scenario, it’s unlikely you’ll get to these contingencies and still have hope of getting the nod from a seller. But if it’s a buyers market, these tier-two contingencies could come into play.

Sale of your current home: If you already own a home and need the proceeds from selling it in order to close on your new home, you can make your offer contingent on the sale. Even if you have a buyer and your existing home is in escrow, you may want to insert this contingency. Sales can and do fall through and if you can get away with it, this contingency insures you from losing your earnest money if that happens with your existing home. However, this contingency makes your offer much weaker to the seller, especially in a competitive market.

Homeowners insurance: To get your loan, you will have to obtain homeowners insurance. It’s not optional. However that insurance could cost far more than you expected. You can protect against this by making the purchase contingent upon a satisfactory Comprehensive Loss Underwriting Exchange (CLUE) report, or upon your being able to obtain affordable insurance. (Your agent may need to attach a rider or an addendum to the purchase contract.) A complete guide to coverage can be found here.

Homeowners associations: Essentially if there is anything that would make you not want the home, you can write a contingency. If there is a homeowners association (HOA) that only allows exterior colors you hate, or there’s a fence between the neighboring property that is in the wrong place or any host of things that might be deal breakers, there’s a way to write a contingency that covers it. The key is to make sure it’s really important to you, or only truly desperate sellers are going to want to deal with it.

Source: zillow.com

EarnUp Nabs $25M to Help Lenders Spot At-Risk Mortgages

EarnUp, a “consumer-first payments platform,” has announced a $25 million funding round that it plans to use for a platform that helps homeowners and mortgage providers get a handle on at-risk loans. So reports The Fintech Times.

EarnUp said it will put the money toward expanding its GetAhead platform, which automatically provides lenders with advance notice on loans that might go into forbearance or qualify for a refinance.

The Series B round was led by Bain Capital Ventures. SignalFire, Blumberg Capital and Flourish Ventures also participated.

Read the full article from The Fintech Times.

Source: themortgageleader.com

The Average New Car Payment Is Inching Closer to $500 a Month

According to Kelley Blue Book, the average price for a light vehicle in the United States was almost $38,000 in March 2020. Of course, the sticker price will depend on whether you want a small economy car, a luxury midsize sedan, an SUV or something in between. But the total you pay for a vehicle also depends on a number of other factors if you’re taking out a car loan.

Get the 4-1-1 on financing a car so you can make the best decision for your next vehicle purchase.

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Decide Whether to Finance a Car

Whether or not you should finance your next vehicle purchase is a personal decision. Most people finance because they don’t have an extra $20,000 to $50,000 they want to part with. But if you have the cash, paying for the car outright is the most economical way to purchase it.

For most people, deciding whether to finance a car comes down to a few considerations:

  • Do you need the vehicle enough to warrant making a monthly payment on it for several years?
  • Does the monthly payment work within your personal budget?
  • Is the deal, including the interest rate, appropriate?

Factors to Consider When Financing a Car

Obviously, the first thing to consider is whether you can afford the vehicle. But to understand that, you need to consider a few factors.

  • Total purchase price. Total purchase price is the biggest impact on how much you’ll pay for the car. It includes the price of the car plus any add-ons that you’re financing. Depending on the state and your own preferences, that might include extra options on the vehicle, taxes and other fees and warranty coverage.
  • Interest rate, or APR. The interest rate is typically the second biggest factor in how much you’ll pay overall for a car you finance. APR sounds complex, but the most important thing is that the higher it is, the more you pay over time. Consider a $30,000 car loan for five years with an interest rate of 6%—you pay a total of $34,799 for the vehicle. That same loan with a rate of 9% means you pay $37,365 for the car.
  • The terms. A loan term refers to the length of time you have to pay off the loan. The longer you extend terms, the less your monthly payment is. But the faster you pay off the loan, the less interest you pay overall. Edmunds notes that the current average for car loans is 72 months, or six years, but it recommends no more than five years for those who can make the payments work.

It’s important to consider the practical side of your vehicle purchase. If you take out a car loan for eight years, is your car going to still be in good working order by the time you get to the last few years? If you’re not careful, you could be making a large monthly payment while you’re also paying for car repairs on an older car.

Buying a Car with No Credit

You can buy a car anytime if you have the cash for the purchase. If you have no credit or bad credit, your options for financing a car might be limited. But that doesn’t mean it’s impossible to get a car loan without credit.

Many banks and lenders are willing to work with people with limited credit histories. Your interest rate will likely be higher than someone with excellent credit can command, though. And you might be limited on how much you can borrow, so you probably shouldn’t start looking at luxury SUVs. One tip for increasing your chances is to put as much cash down as you can when you buy the car.

If you can’t get a car loan on your own, you might consider a cosigner. There are pros and cons to asking someone else to sign on your loan, but it can get you into the credit game when the door is otherwise barred.

Personal Loans v. Car Loans: Which One Is Better?

Many people wonder if they should use a personal loan to buy a car or if there is really any difference between these types of financing. While technically a car loan is a loan you take out personally, it’s not the same thing as a personal loan.

Personal loans are usually unsecured loans offered over relatively short-term periods. The funds you get from a personal loan can typically be used for a variety of purposes and, in some cases, that might include buying a car. There are some great reasons to use a personal loan to buy a car:

  • If you’re buying a car from a private seller, a personal loan can hasten the process.
  • Traditional auto loans typically require full coverage insurance for the vehicle. A personal loan and liability insurance may be less expensive.
  • Lenders typically aren’t interested in financing cars that aren’t in driving shape, so if you’re buying a project car to work on in your garage during your downtime, a personal loan may be the better option.

But personal loans aren’t necessarily tied to the car like an auto loan is. That means the lender doesn’t necessarily have the ability to repossess the car if you stop paying the loan. Since that increases the risk for the lender, they may charge a higher interest rate on the loan than you’d find with a traditional auto loan. Personal loans typically have shorter terms and lower limits than auto loans as well, potentially making it more difficult for you to afford a car using a personal loan.

Steps You Should Follow When Financing a Car

Before you jump in and apply for that car loan, review these six steps you should take first.

1. Check your credit to understand whether you are likely to be approved for a loan. Your credit also plays a huge role in your interest rate. If your credit is too low and your interest rate would be prohibitively high, it might be better to wait until you can build or repair your credit before you get an auto loan. Sign up for ExtraCredit to see 28 of your FICO scores from all three credit bureaus.

2. Research auto loan options to find the ones that are right for you. Avoid applying too many times, as these hard inquiries can drag your credit score down with hard inquiries. The average auto loan interest rate is 27% on 60-month loans (as of April 13, 2020).

3. Get your trade-in appraised. The dealership might give you money toward your trade-in. That reduces the price of the car you purchase, which reduces how much you need to borrow. A few thousand dollars can mean a more affordable loan or even the difference between being approved or not.

4. Get prequalified for a loan online. While most dealers will help you apply for a loan, you’re in a better buying position if you walk into the dealership with funding ready to go. Plus, if you’re prequalified, you have a good idea what you can get approved for, so there are fewer surprises.

5. Buy from a trusted dealer. Unfortunately, there are dealerships and other sellers that prey on people who need a car badly. They may charge high interest or sell you a car that’s not worth the money you pay. No matter your financial situation, always try to work with a dealership that you can trust.

6. Talk to your car insurance company. Different cars will carry different car insurance premiums. Make a call to your insurance company prior to the sale to discuss potential rate changes so you’re not surprised by a higher premium after the fact.

Next to buying a home, buying a car is one of the biggest financial decisions you’ll make in your life, and you’ll likely do it more than once. Make sure you understand the ins and outs of financing a car before you start the process.

Source: credit.com

What Is High-Risk Car Insurance? A Guide

  • Car Insurance

High-risk car insurance is reserved for drivers who fall into the high-risk category, which includes anyone with multiple traffic violations, at-fault accidents, and other issues that result in higher costs for car insurance companies.

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If you’re in the high-risk category, your auto insurance quotes will be higher, and it may take several years for things to return to normal.

When are You Considered a High-Risk Driver?

You’re considered to be high-risk as soon as the statistics suggest that you’re more likely to make a claim.

For instance, you’ll be given the high-risk label if you are responsible for a major car accident or receive a DUI conviction. You’ll be given the same treatment if you have speeding tickets, run a red light, make an illegal turn, or fail to stop at the scene of an accident.

But that’s not all.

You also fall into the high-risk category if you’re a teenage driver who has just passed their test. Young drivers are significantly more likely to be involved in an accident and the same is true for male drivers and inexperienced drivers.

As a 16-year-old male getting behind the wheel for the first time, you’re considered to be just as much of a liability, if not more so, than an experienced driver who has previously been convicted of a serious driving offense.

The same is true for drivers over the age of 70, as the rate of accidents and claims increase after this milestone. That’s why many states insist on regular renewals along with vision tests, reaction tests, and letters from physicians.

How will Offenses Increase my Premiums?

Traffic violations can increase your car insurance rates and those increases will remain for several years. A DUI works in the same way, although, in this case, you may face an immediate suspension, as well as fines, and it could be some time before you’re allowed behind the wheel again.

The following price increases are based on national averages, but all auto insurance companies have different underwriting processes and take several other factors into consideration.

  • Driving Under the Influence = 70% to 80%
  • Reckless Driving = 75%
  • Racing = 70%
  • Speeding (30mph or more over the limit) = 30%
  • Texting While Driving = 22%
  • Distracted Driving = 21%
  • Speeding (15 to 30 mph over the limit) = 20%
  • Illegal Passing = 20%
  • Speeding (up to 15 mph over the limit) = 18%
  • Illegal Turn = 15%
  • Failure to Yield or Stop = 15%
  • Talking on Phone = 15%
  • Driving without Car Insurance = 10%
  • Not Wearing a Seatbelt (in New York) = 3%

Cost of High-Risk Insurance in Every State

Your location is one of the biggest factors determining the cost of your car insurance quotes and this is true whether you have a clean driving record or several moving violations.

In the list below, we have included the average cost of car insurance in each state, followed by the potential increases from speeding tickets and DUI/DWI convictions.

  • Alabama – Statewide Average Car Insurance Cost = $1,300; Cost with One Speeding Ticket = $1,670; Cost with One DUI = $2,500
  • Alaska – Statewide Average Car Insurance Cost = $1,200; Cost with One Speeding Ticket = $1,500; Cost with One DUI = $2,800
  • Arizona – Statewide Average Car Insurance Cost = $1,450; Cost with One Speeding Ticket = $1,780; Cost with One DUI = $1,800
  • Arkansas – Statewide Average Car Insurance Cost = $1,550; Cost with One Speeding Ticket = $1,900; Cost with One DUI = $2,400
  • California – Statewide Average Car Insurance Cost = $1,850; Cost with One Speeding Ticket = $2,400; Cost with One DUI = $4,000
  • Colorado – Statewide Average Car Insurance Cost = $1,780; Cost with One Speeding Ticket = $2,500; Cost with One DUI = $2,400
  • Connecticut – Statewide Average Car Insurance Cost = $1,650; Cost with One Speeding Ticket = $2,300; Cost with One DUI = $3,200
  • Delaware – Statewide Average Car Insurance Cost = $1,850; Cost with One Speeding Ticket = $2,200; Cost with One DUI = $2,600
  • D.C. – Statewide Average Car Insurance Cost = $1,900; Cost with One Speeding Ticket = $2,200; Cost with One DUI = $2,600
  • Florida – Statewide Average Car Insurance Cost = $1,230; Cost with One Speeding Ticket = $3,000; Cost with One DUI = $3,700
  • Georgia – Statewide Average Car Insurance Cost = $1,800; Cost with One Speeding Ticket = $2,200; Cost with One DUI = $3,000
  • Hawaii – Statewide Average Car Insurance Cost = $1,300; Cost with One Speeding Ticket = $2,400; Cost with One DUI = $4,200
  • Idaho – Statewide Average Car Insurance Cost = $1,050; Cost with One Speeding Ticket = $1,300; Cost with One DUI = $1,500
  • Illinois – Statewide Average Car Insurance Cost = $1,300; Cost with One Speeding Ticket = $1,400; Cost with One DUI = $1,900
  • Indiana – Statewide Average Car Insurance Cost = $1,180; Cost with One Speeding Ticket = $1,300; Cost with One DUI = $1,500
  • Iowa – Statewide Average Car Insurance Cost = $1,050; Cost with One Speeding Ticket = $1,280; Cost with One DUI = $1,700
  • Kansas – Average Premiums for Most Drivers = $1,400; Cost with One Speeding Ticket = $1,650; Cost with One DUI = $2,200
  • Kentucky – Average Premiums for Most Drivers = $1,600; Cost with One Speeding Ticket = $2,100; Cost with One DUI = $3,600
  • Louisiana – Average Premiums for Most Drivers = $2,300; Cost with One Speeding Ticket = $2,700; Cost with One DUI = $4,200
  • Maine – Average Premiums for Most Drivers = $850; Cost with One Speeding Ticket = $1,000; Cost with One DUI = $1,500
  • Maryland – Average Premiums for Most Drivers = $1,550; Cost with One Speeding Ticket = $1,800; Cost with One DUI = $2,600
  • Massachusetts – Average Premiums for Most Drivers = $1,250; Cost with One Speeding Ticket = $1,900; Cost with One DUI = $2,350
  • Michigan – Average Premiums for Most Drivers = $2,600; Cost with One Speeding Ticket = $3,400; Cost with One DUI = $5,800
  • Minnesota – Average Premiums for Most Drivers = $1,380; Cost with One Speeding Ticket = $1,700; Cost with One DUI = $2,350
  • Mississippi – Average Premiums for Most Drivers = $1,400; Cost with One Speeding Ticket = $2,000; Cost with One DUI = $2,300
  • Missouri – Average Premiums for Most Drivers = $1,280; Cost with One Speeding Ticket = $1,400; Cost with One DUI = $1,900
  • Montana – Average Premiums for Most Drivers = $1,600; Cost with One Speeding Ticket = $1,800; Cost with One DUI = $2,100
  • Nebraska – Average Premiums for Most Drivers = $1,300; Cost with One Speeding Ticket = $1,650; Cost with One DUI = $1,750
  • Nevada – Average Premiums for Most Drivers = $1,550; Cost with One Speeding Ticket = $1,900; Cost with One DUI = $3,000
  • New Hampshire – Average Premiums for Most Drivers = $1,100; Cost with One Speeding Ticket = $1,450; Cost with One DUI = $1,850
  • New Jersey – Average Premiums for Most Drivers = $1,520; Cost with One Speeding Ticket = $1,800; Cost with One DUI = $3,000
  • New Mexico – Average Premiums for Most Drivers = $1,400; Cost with One Speeding Ticket = $1,800; Cost with One DUI = $2,000
  • New York – Average Premiums for Most Drivers = $1,800; Cost with One Speeding Ticket = $2,450; Cost with One DUI = $3,000
  • North Carolina – Average Premiums for Most Drivers = $1,100; Cost with One Speeding Ticket = $2,200; Cost with One DUI = $4,400
  • North Dakota – Average Premiums for Most Drivers = $1,170; Cost with One Speeding Ticket = $1,350; Cost with One DUI = $2,200
  • Ohio – Average Premiums for Most Drivers = $1,180; Cost with One Speeding Ticket = $1,250; Cost with One DUI = $1,700
  • Oklahoma – Average Premiums for Most Drivers = $1,500; Cost with One Speeding Ticket = $1,900; Cost with One DUI = $2,500
  • Oregon – Average Premiums for Most Drivers = $1,300; Cost with One Speeding Ticket = $1,450; Cost with One DUI = $1,850
  • Pennsylvania – Average Premiums for Most Drivers = $1,200; Cost with One Speeding Ticket = $1,600; Cost with One DUI = $1,850
  • Rhode Island – Average Premiums for Most Drivers = $1,850; Cost with One Speeding Ticket = $2,500; Cost with One DUI = $3,350
  • South Carolina – Average Premiums for Most Drivers = $1,440; Cost with One Speeding Ticket = $1,600; Cost with One DUI = $2,200
  • South Dakota – Average Premiums for Most Drivers = $1,270; Cost with One Speeding Ticket = $1,500; Cost with One DUI = $2,200
  • Tennessee – Average Premiums for Most Drivers = $1,300; Cost with One Speeding Ticket = $1,550; Cost with One DUI = $2,100
  • Texas – Average Premiums for Most Drivers = $1,800; Cost with One Speeding Ticket = $1,900; Cost with One DUI = $2,300
  • Utah – Average Premiums for Most Drivers = $1,200; Cost with One Speeding Ticket = $1,450; Cost with One DUI = $1,900
  • Vermont – Average Premiums for Most Drivers = $1,100; Cost with One Speeding Ticket = $1,350; Cost with One DUI = $2,050
  • Virginia – Average Premiums for Most Drivers = $1,070; Cost with One Speeding Ticket = $1,200; Cost with One DUI = $1,550
  • Washington – Average Premiums for Most Drivers = $1,400; Cost with One Speeding Ticket = $1,600; Cost with One DUI = $2,000
  • West Virginia – Average Premiums for Most Drivers = $1,480; Cost with One Speeding Ticket = $1,750; Cost with One DUI = $2,100
  • Wisconsin – Average Premiums for Most Drivers = $950; Cost with One Speeding Ticket = $1,450; Cost with One DUI = $1,950
  • Wyoming – Average Premiums for Most Drivers = $1,600; Cost with One Speeding Ticket = $2,000; Cost with One DUI = $2,200

High-Risk Insurance Options

Many insurance carriers will still offer you a policy if you are in the high-risk category, you’ll just be quoted much higher prices until you clean up your driving record.

Try the following tips to ensure you get the best car insurance even when you are considered to be a higher risk.

1. Improve Your Credit Score

Underwriters look at your credit score to determine your risk. They know, for instance, that someone with bad credit is more likely to make a claim on their policy. As a result, bad credit drivers are charged much higher rates than those with good credit.

There are a few likely scenarios here. The first is that people with good credit are more financially responsible. Not only are they less likely to drive fast or recklessly, but they are also more likely to pay for small accidents out of pocket.

Perhaps more importantly, a good credit driver is more likely to pay for their premiums on time, thus causing fewer problems for the insurer. 

Maintain a good credit history by meeting all your monthly payments on time; avoid applying for any new loans or credit cards; increase your credit limits where possible, and clear as much of your current debt balances as you can.

All of these simple methods will ensure your credit score stays strong.

2. Take a Defensive Driving Course

A defensive driving course can undo some of the damage done by a traffic violation and give you the experience and skills you need to stay safe behind the wheel. A knowledgeable driver is a safe driver, which is why defensive driving certificates can save you money.

​3. Buy a Suitable Car

If you’re a new driver or you’re making a transition from one vehicle to the next and have the luxury of, then you’re in a very strong position. 

Many young drivers, for instance, will get the fastest and most powerful car they can afford. Either that, or they save every cent they can and purchase the latest trendy new vehicle. But neither of these options will result in an affordable car insurance policy.

A new car typically costs more to insure than an older car, as the cost of replacing it and repairing the electronics will be much higher. As for sports cars and luxury cars, they have much lower safety ratings and, as a result, will almost certainly drive those insurance premiums sky-high.

The ideal car is one that has a high safety rating, is affordable, comes with numerous safety features and anti-theft features, and doesn’t have many custom parts or hard-to-replace parts.

Not only will car insurance companies look more fondly on vehicles that fit this mold, but you can also take more liberties with regards to the deductible and the coverage options.

For example, a brand-new car will need New Car Replacement coverage, as well as collision cover and comprehensive cover. That way, if you hit a wall, a tree or an animal, or your car is stolen, vandalized or damaged following an extreme weather event, you don’t stand to lose all of your investment.

If the car is cheap, you can dismiss those potentially expensive options, knowing that you can cover all minor repairs yourself and write off the vehicle entirely if anything major happens to it.

4. Compare and Contrast

Hundreds of insurance companies operate in every single state and you can sign up over the phone, online or via an insurance agent. With so many choices and possibilities, you have no excuse not to shop around.

A car insurance policy is like any other big purchase you make. You wouldn’t buy a brand new $2,000 computer after visiting just one store, nor would you drop several grand on the first car you see.

With car insurance, you need to consult many reps from many major insurance companies (Allstate, GEICO, State Farm, Progressive, Nationwide) as well as a few local and specialized ones (The General, USAA).

It’s the only way to guarantee the best rates and this applies whether you have a clean driving history, or one filled with violations and insurance claims.

5. Get Some Car Insurance Discounts

Reduce your car insurance premiums by checking all possible discounts and getting as many of them as you can. Car insurance discounts differ from provider to provider and from state to state, but generally, they include:

  • Good Student Discount: Many state authorities require insurance carriers to offer discounts for students who maintain a high-grade point average. This is also true for high-risk auto insurance providers and for all qualifying applicants, the discounts can be incredibly generous.
  • Safety Features Discount: The addition of front-and-side airbags could save you as much as 40% on comprehensive insurance coverage. The risk of serious injuries and fatalities drops considerably when these basic safety features are installed. Discounts are also offered for anti-lock brakes, car alarms, and other features designed to keep drivers safe and prevent the vehicle from being stolen or vandalized.
  • Multi-Car Discount: Add multiple vehicles to the same policy to qualify for a discount. If you have multiple cars and drivers in your household, this discount is a must.
  • Multi-Policy Discount: Insurers use this discount to encourage policyholders to sign up for additional services. For instance, most major standard and non-standard auto insurance carriers will give you a discount if you purchase homeowners insurance along with auto insurance.
  • Student Away Discount: If you’re a young driver who lives and studies on campus, you may qualify for this discount, which takes advantage of the fact you will spend much less time on the roads.
  • Senior Discount: Some states offer discounts to senior drivers, and those drivers could save even more if they have a long and clean driving record behind them. Bear in mind, however, that many states also require additional vision/reaction tests to ensure you’re still capable and responsible.
  • Low Mileage: Mileage based car insurance providers charge you by the mile. You may pay more if you drive a lot but could save yourself a few dollars if you drive very little. The major providers offer something similar, installing apps that monitor your driving habits and use the data gathered to tweak your insurance premiums.
  • Married Homeowner Discount: Although it’s not a discount as such, you will receive a much cheaper auto insurance policy if you own your home and are married. Insurers covet married policyholders as they are more responsible, less likely to claim, and they can also get a two-for-one deal.

Bottom Line: Higher Premiums but Still Affordable

Receiving the high-risk label doesn’t mean you’re doomed forever, nor does it mean you’ll be paying through the nose for the most basic of car insurance policies. 

You’ll pay more than you would for a standard insurance policy, but by doing a little research and a lot of comparison shopping, and by keeping a clean driving record from this moment on, you’ll save yourself thousands of dollars and avoid concerning rate increases in the future.

Source: pocketyourdollars.com

Homie’s Greater Phoenix, AZ Housing Market Update July 2020

It’s hot outside and so is the market!

“Hottest Summer ever in Phoenix recorded history and also the hottest July ever for real estate sales in the Greater Phoenix area. Our market is smoking! In the last 20 years, monthly sales have topped 10,000 only four previous times. July 2020 has reached this milestone with 10,303 sales!” -Wayne Graham, Head of Real Estate Operations at Homie Arizona.

Monthly Sales

chart showing number of home sales in AZ from July 1 to July 31, 2020

Data via ARMLS® from July 1, 2020 to July 31, 2020.

According to the data from the ARMLS® from July 1, 2020 to July 31, 2020, real estate sales are up +8.4% month-over-month . The year-over-year comparison is up +12.1% at 10,303 compared to 9,192 in 2018-19.

List Price

*Data from the ARMLS® from July 1, 2020 to July 31, 2020.

Average new list prices are up +15.7% at $418.2K compared to $361.3K in 2018-19. The year over-year median is up +12.9% at $325K, compared to $287.9K in 2018-19.

Sale Price

chart comparing july 1-july 31 2020 to last quarter 2019.

*Data from the ARMLS® from July 1, 2020 to July 31, 2020.

Home values are staying strong. The average sales price is up +14.6% year-over year at $391.6K, compared to $341.6K in 2018-19. While the year-over year median sales price is also up +12.5% at $315K compared to $280K in 2018-19.

Days on Market (DOM)

chart comparing average days on market in july 1 to july 31 2020 to 2019

*Data from the ARMLS® from July 1, 2020 to July 31, 2020.

We saw the Average Cumulative Days on Market decrease in July 2020-19, averaging 55 days on market versus 63 Average Cumulative Days on Market in 2018-19. At Homie, we are continuing to see sellers getting multiple offers on their homes.

July Breaks Records in 2020

A message from our Associate Broker, Jennifer Hull:

For Buyers

It’s a jungle out there for buyers! Despite recent appreciation rates the Home Opportunity Index* measure for the Greater Phoenix market increased to 64.8% for the 2nd Quarter in 2020; the previous measure was 63.0%. This means that a household making the current median family income of $72,300 per year could afford 64.8% of what sold in the 2nd Quarter of 2020. By comparison, the HOI measure for the United States was 59.6%.

Historically, a normal range for this measure is between 60-75%. During the bubble years of excessive appreciation between 2005-2006, the HOI plummeted from 60.1% to 26.6%. Typically if it falls below 60%, the market should start to see a drop in demand. With the most recent increase however, Greater Phoenix is still within normal range and experiencing demand 20% above normal for this time of year.

What makes this market significantly different from the infamous bubble and crash is the relation between resale housing growth and population growth. In the early 2000’s, housing was growing faster than the population and creating a surplus. This surplus went unnoticed due to excessive speculator (i.e. “false”) demand fueled by loose lending practices. When loans tightened up, the surplus came roaring into focus as vacant inventory soared to over double the normal levels. However since 2006, the population has grown faster than housing. It has taken 14 years, but the population growth fueled by job growth has finally consumed the surplus of resale housing created during the bubble years and now the market is facing a shortage of homes for sale.

This type of market and appreciation is not sustainable long term, however it’s here now and properties purchased today are expected to continue appreciating over the next 6-12 months.

For Sellers

So much for the summer slowdown, July had a record number of closings go through the Arizona Regional MLS; surpassing every July as far back as 2001. July also had record breaking sales in dollar volume with $3.9B sold. The best July ever recorded prior was in 2005 at $2.9B. The monthly appreciation rate finalized 12.5% higher than 2019 and was the 4th highest appreciation rate for July going back to 2001.

“One third of homes closed were over asking price and only 15% involved any sort of seller-paid closing cost assistance; down from a high of 27% last May. Half of all sellers who accepted contracts in the first week of August did so with 7 days or less on the market.

Contracts on luxury homes over $1M are up an incredible 93% over last year at this time. Between $500K-$1M, contracts are up 64%. Between $300K-$500K, they’re up 39%. Between $250K-$300K, up 15%. If you need to sell, this is indeed the time to do it!” -Jennifer Hull, Associate Broker at Homie Arizona.

Want to Know Your Home’s Value?

Want to know how much your home is worth? Click here to request your home value report.

Turn to a Homie

Homie has local real estate agents in all of our service areas. These agents are pros in everything they do, including understanding the local real estate market. Click to start selling or buying and to get in touch with your dedicated agent.

Source: homie.com