What Is a Mortgagee? Hint: It’s Not a Typo

Are You a Mortgagee or Mortgagor?

It’s mortgage Q&A time! Today’s question: “What is a mortgagee?”

No, it’s not a typo. I didn’t leave an extra “e” on the word mortgage by mistake, though it may appear that way.

Despite its striking appearance, it’s actually a completely different word, somehow, simply with the mere addition of the letter E.

Don’t ask me how or why, I don’t claim to be an expert in word origins.

Seems like a good way to confuse a lot of people though, and it has probably been successful in that department for years now.

You can blame the British English language for that, or maybe American English.

Anyway, let’s stop beating up on the English language and define the darn thing, shall we.

A “mortgagee” is the entity that originates (makes) and sometimes holds the mortgage, otherwise known as the bank or the mortgage lender.

They lend money so individuals like you and I can purchase real estate without draining our bank accounts.

It could also be your loan servicer, the entity that sends you a mortgage bill each month, and perhaps an escrow analysis each year if your loan has impounds.

The mortgagee extends financing to the “mortgagor,” who is the homeowner or borrower in the transaction.

So if you’re reading this and you aren’t a bank, you are the mortgagor. It’s as simple as that.

Another way to remember this rather confusing word jumble; Who is the mortgagee? Not me!!

Mortgagor Rhymes with Borrower, Kind Of

mortgagor

  • Here’s a handy way to remember the word mortgagor
  • It kind of rhymes with the word borrower…
  • Or even the word homeowner, which is also accurate if you hold a mortgage on your property

I was trying to think of a good association so homeowners can remember which one they are, instead of having to look it up every time they come across the word.

I believe I came up with a semi-decent, not great one. Mortgagor rhymes with borrower, kind of. Right? Not really, but they look and end similar, no?

Anyway, the real property (real estate) acts as collateral for the mortgage, and the mortgagee obtains a security interest in exchange for providing financing (a home loan) to the mortgagor.

If the mortgagor doesn’t make their mortgage payments as agreed, the mortgagee has the right to take possession of the property in question, typically through a process we’ve all at least heard of called foreclosure.

Assuming that happens, the property can eventually be sold by the mortgage lender to a third party to pay off any attached liens, or mortgages.

So if you’re still not sure, you are probably the mortgagor, also known as the homeowner with a mortgage. And your lender is the mortgagee. Yippee!

What makes this particular issue even more confusing is that it’s the other way around when it comes to related words like renters and landlords.

Yep, for some reason a landlord is known as a “lessor,” whereas the renter/tenant is known as the “lessee.” In other words, it’s the exact opposite for renters than it is for homeowners.

But I suppose it makes sense that both landlord and mortgage borrower are property owners.

What About a Mortgagee Clause?

mortgagee clause

  • An important document you may come across when dealing with homeowners insurance
  • Stipulates who the lender (mortgagee) is in the event there is damage to the subject property
  • Protects the lender’s interest if/when an insurance claim is filed
  • Since they are often the majority owner of the property

You may have also heard the term “mortgagee clause” when going through the home loan process.

It refers to a document that protects the lender’s interest in the property in the event of any damage or loss.

It contains important information about the mortgagee/lender, including name, address, etc. so the homeowners insurance company knows exactly who has ownership in the event of a claim.

Remember, while you are technically the homeowner, the bank probably still has quite a bit of exposure to your property if you put down a small down payment.

For example, if you come in with just a 3% down payment, and the bank grants you a mortgage for 97% of the home’s value, they are a lot more exposed than you are.

This is why hazard insurance is required when you take out a mortgage, to protect the lender if something bad happens to the property.

Conversely, if you buy a home with cash, as opposed to taking advantage of the low mortgage rates on offer, it’s your choice to insure it or not.

But more than likely, you’ll want insurance coverage on your property regardless.

In summary:

Mortgagee: Bank or mortgage lender
Mortgagor: Borrower/homeowner (probably you!)

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 15 years.

Source: thetruthaboutmortgage.com

5 Tips for Approaching the Open House

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For decades, sellers and their agents have been using open houses to help generate interest in their listings. Open houses give the general public the chance to view a home without scheduling a private showing. While open houses do get a lot of curious neighbors and casual browsers, they can be a good opportunity for serious buyers to decide if a home is worth pursuing further, or a way to get a better grasp on neighborhood home values. 

In fact, 59% of home buyers attended an open house during their shopping process last year and 43% of buyers said attending the open house was very or extremely important to determining if the home was right for them.* On average, home buyers attended 2.6 open houses before buying.

Whether you’re a sincere buyer or simply curious about the inside of a home, you should know how open houses work and understand how you can be a good open house attendee. 

Note: If open houses are restricted or unavailable due to public health concerns, work with your agent to arrange a private tour or video tour. All Zillow-owned homes include a self-tour option — just use our app to unlock the door and tour at your convenience.

What is an open house?

An open house is an event during which potential buyers can tour a home that’s on the market. It’s usually hosted by the seller’s listing agent, or by the seller themselves, in case of a for-sale-by-owner (FSBO) listing. Open houses usually take place on weekends, during a set range of hours typically midday.

Open house benefits for buyers

No scheduling required: Unlike a private showing, you don’t need to set up a specific appointment to see a home. Simply show up during the open house hours and view the home at your own pace. 

Scope out the competition: If you’re interested in a home, attending the open house can help you gauge interest from other buyers. This can be helpful when determining how quickly you need to submit an offer and how much you should offer. 

Understand current home values: Seeing what homes are selling for in your area and what you can buy at a particular price point can be helpful if you’re just starting your search. 

Redefine your nonnegotiable home features: Checking out homes in person can help you redefine your list of must-haves: Do you really need that extra bedroom? What does a backyard of this size really look like?

How do open houses work?

Not every seller or listing agent will hold one, but here’s the typical process for sellers setting up an open house:

  1. The seller and their agent determine a day and time for the open house.
  2. The agent lists the open house on the local MLS.
  3. The agent advertises the open house on social media, online and with print ads or flyers. 
  4. The agent prepares for the open house — purchasing refreshments, printing flyers, setting up signs and adding little touches to make the home feel welcoming to buyers. (Yes, as a shopper, you can eat the cookies.)
  5. The agent hosts the event, greeting buyers and answering questions about the property and community.
  6. Buyers remove their shoes, tour the home, take pictures and video (if allowed) and jot down important notes. 
  7. Any buyer who liked the house will contact their own agent. They’ll then set up a private showing to see the home again or they’ll submit an offer right away — the latter is common in fast-moving real estate markets.

Who hosts an open house?

The person hosting an open house could be any one of the following: 

  • Listing agent: As the person hired to sell the home, the listing agent should be an expert on the property. 
  • Listing agent’s team member or associate: A busy listing agent may also send another agent in their place — either someone on their team or another agent in their office. They should be experts in the local market, but may not be as familiar with the individual home. 
  • Homeowner: If a home is for sale by owner (FSBO), the homeowner will be hosting their own open house. They’re undoubtedly the expert on the home, but their local market expertise may be limited. 

How to prepare for an open house

There are times when you might just stumble upon an open house while you’re on a walk or running errands. But if you’re intentionally looking for open houses as part of your home-buying strategy, try these tips.

Seek out relevant open houses

If you plan to visit multiple open houses in one day, make sure you’re focusing on listings that fit your criteria for budget and location. It’s not worth wasting time looking at homes outside your budget or those that are too far from your work or school. 

Tip: With Zillow’s home search tool, buyers can filter by homes with upcoming open houses (this filter can be applied in addition to other search filters like price, bedrooms, bathrooms, square footage and location). When you use the open houses filter in conjunction with filters for your other criteria, you can easily find the right open houses for your search.

A map of home listings on Zillow.

You can also tour most Zillow-owned homes any time between 6 a.m. to 8 p.m., any day of the week — just select the tour option on the listing. Although the listing agent will not be present, you can avoid a busy open house and rest assured the property is in move-in ready condition.

Do research on the market beforehand

With help from your agent or on your own, find out how each home you’re planning to visit stacks up against others nearby. Is the price in line with similar listings in the area? Are there any defects? Has it gone under contract recently and then returned to the market? Are there a lot of other interested buyers? Has it been sitting on the market for a long time? (“Days on market” is an indicator of a stale listing, but the standard number of days on market can vary based on where you live.)

Stay open-minded

If you’re searching on a tight budget in a hot neighborhood, there’s a good chance that the home that fits the bill will need some TLC. Fortunately, attending an open house can give you a better idea of the home’s condition and potential, while also giving you the opportunity to ask renovation-related questions — e.g., the location of load bearing walls and the details of local regulations. 

How to attend an open house

Now that you’ve done your research and are prepared to add some open houses to your home search, here’s what you should do once the day arrives. 

Ask questions

An open house is your best opportunity to ask the listing agent (or their associate) your questions — don’t be shy. Ask questions that you wouldn’t be able to answer just by reading a home’s listing description, such as:

  • What are the HOA restrictions?
  • Has the seller done a property tax appeal?
  • Have there been any recent renovations or repairs?

Tip: If you’re not currently working with an agent and you ultimately decide you aren’t interested in a particular home you tour, the open house could help you see if the listing agent might be the right person to represent you — many agents represent both buyers and sellers. 

Be honest

If anyone other than the listing agent or the homeowner is hosting the open house, they’re likely an agent hoping to find potential buyer clients. If you’re already working with an agent (or if you have no real interest in buying), be honest.

Check for damage and disrepair

Professional or edited photos can make a home look a lot better online than it is in person. At an open house, take the opportunity to closely evaluate a home’s condition and take note of any potential defects that would factor into your offer price. 

Assess the windows: Look for flaking paint, misaligned sashes and condensation due to air leaks. These could be signs of windows that need replacement. 

Check for water damage: Look for warped baseboards, ceiling stains and musty smells. 

Make note of cracks: Noticeable cracks in the ceiling or drywall could indicate foundation issues. 

Test functions: Open cabinets, doors and drawers. Run the faucets. Check the water pressure. An open house is a good opportunity to make sure every part of the home is in good working order. 

Gauge potential renovation needs: Home improvements can really add up. As you walk through a home, keep an eye out for urgent renovation needs like floors, fixtures or large repainting projects.

Open house tips for buyers

Whenever you attend an open house, put yourself in the seller’s shoes — you’re letting a bunch of strangers walk through your home while you’re not there. While every seller wants their open house to net a buyer, they also want to keep their home safe and their furnishings free of damage.

Do

  • Take off your shoes or wear booties if requested.
  • Greet the host and provide your name.
  • Sign in if necessary or requested (this is a safety issue for the seller and their agent).
  • Take notes on your phone about your likes, dislikes and follow-up questions.
  • Ask if you can capture a video (if the listing doesn’t already include a video).
  • Respect other buyers and guests. 
  • Wait for others to exit a room before you enter.
  • Provide feedback if requested.
  • Thank the person hosting the event.

Don’t

  • Refuse to comply with an agent or homeowner’s house rules.
  • Criticize the home or the owner’s style.
  • Listen in on other visitors’ conversations.
  • Touch the owner’s belongings.
  • Let kids run around without supervision.
  • Bring food or beverages in (except water).
  • Reveal information that would compromise your negotiating power, like your budget or level of interest in the home.
  • Bring pets.

*Zillow Group Consumer Housing Trends Report 2019 survey data

Source: zillow.com

Do You Own the Land Under Your Home?

Do your due diligence to ensure you know about liens, easements or land grants made on property you’re thinking about purchasing.

When you buy a home, you probably assume that you own everything in and around it within the property lines. But in some parts of the country, homeowners are discovering the property they’re buying does not fully include the land beneath it.

For example, in Tampa Bay, FL a family realized at closing that their home builder had already signed away the rights to the land underneath their home to its own energy company. The “mineral rights” grant gave the energy company the freedom to drill, mine or explore for precious minerals beneath the home.

How is this even possible, and how can it be avoided? Who really owns the land beneath your home? Here’s what you need to know.

You probably own the land

Generally speaking, it’s likely that you own the property underneath and around your house. Most property ownership law is based on the Latin doctrine, “For whoever owns the soil, it is theirs up to heaven and down to hell.”

There can be exceptions, though. On occasion, a buyer will uncover an easement for a driveway or walkway that goes through their property. This is why it’s important to carefully review contracts and disclosures.

Contract and disclosures

A seller, be it a home builder or a homeowner, can’t claim any sort of rights to the property without first disclosing those rights in the real estate contract or in some sort of disclosure statement.

Each state is different with regard to how things are disclosed. Many disclosure statements require the seller to tell the buyer whether or not someone else has laid claim to the property or if the buyer is limited to claims in the future. If the seller is unaware, or the home you’re purchasing is in a state that doesn’t require the seller to disclose, then you should carefully review the property’s title report before signing off.

Preliminary title report

There can be a situation in which a seller doesn’t know that someone else has laid claim to the property. For example, this could happen in the case of a resale in a newer subdivision where the current owner bought from a homebuilder directly.

Throughout the years, there have been instances when an easement, encroachment or even a small mechanic’s lien sits on a title unbeknownst to the current seller. When this happens, all parties must work together to determine the best course of action. Access to the land below your home would have to be granted via a deed and, as such, it would show up on the preliminary title report.

The title report provides ownership information and acknowledges loans, deeds or trusts, easements, encroachments, unpaid property taxes or anything else that has been recorded against the property. If a homebuilder deeded mineral rights to themselves, for instance, they would have had to record that deed. If so, it stays on the title report until they and the current owner agree to take it off.

How to avoid last-minute disclosures

In Tampa Bay, unsuspecting homeowners signed over to the builder’s holding company the “eternal rights to practically anything of value (found) buried underground, including gold, groundwater and gemstones,” according to the Tampa Bay Times. If that weren’t enough, homeowners who didn’t realize they had signed over the mineral rights, or who did so at the last minute under duress, could have trouble selling their home later to wary buyers.

With any home purchase, you should give yourself enough time so that you can do your due diligence, either as a contingency to the contract or in the period leading up to the contract before you sign it.

When buyers think about due diligence, they immediately think “property inspection.” And in the case of new construction, it’s uncommon to do an inspection. But there is so much more to due diligence than a simple property inspection.

Never wait until the closing to discover such a big disclosure, as the unfortunate buyers in Tampa Bay experienced. It’s common practice for a good listing agent or seller, in states where disclosure is required, to raise something like mineral rights as a red flag to all buyers from the get-go.

Deeding access to the land below your home isn’t simply some “fine print” buried in the closing papers that could be easily overlooked. Such a disclosure would require paragraphs, if not pages, of documentation.

Best course of action: Review all documentation, disclosures and title paperwork prior to signing a real estate contract or during a due diligence period. If you’re uncertain, ask your agent for help reviewing the documents or hire a real estate attorney to pore through the paperwork on your behalf.

Related:

Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.

Source: zillow.com

The Average Cost of Home Insurance

We’ll get straight to the point: The cost of home insurance varies widely, but the average American homeowner pays $1,249 a year in premiums, according to the Insurance Information Institute’s 2018 figures, the most recent available.

(This is based on the HO-3 homeowner package policy for owner-occupied dwellings, 1 to 4 family units. It provides all risks coverage (except those specifically excluded in the policy) on buildings and broad named-peril coverage on personal property, and is the most common package written.)

America’s top-rated home insurance

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In this article

Home insurance premiums can vary widely in part because of:

  • Your location
  • Your history of claims
  • Your credit score
  • The age and condition of your home

However, there are ways that homeowners can save money on their insurance costs, which we’ll get into. We’ll also walk through which areas in the U.S. are the cheapest and most expensive, typical coverages and more.

[ Read: Home Insurance Quotes, Explained ]

How much does home insurance cost by state?

As you can see below, the average home insurance premium varies widely by state. As you might expect, weather events figure big in the average annual premium by state, although there are other factors, of course, such as your credit score and the age of the home. The figures in this table come from 2018 data provided by the Insurance Information Institute.

State Rank Average annual premium State Rank Average annual premium State Rank Average annual premium
Ala. 13 $1,409 Ky. 26 $1,152 N.D. 18 $1,293
Alaska 36 $984  La. 1 $1,987 Ohio 44 $874
Ariz. 46 $843 Maine 42 $905 Okla. 4 $1,944
Ark. 12 $1,419 Md. 32 $1,071 Ore. 51 $706
Calif. 31 $1,073 Mass. 10 $1,543 Pa. 40 $943
Colo. 7 $1,616 Mich. 38 $981 R.I. 5 $1,630
Conn. 11 $1,494 Minn. 14 $1,400 S.C. 19 $1,284
Del. 45 $873 Miss. 8 $1,578 S.D. 20 $1,280
D.C. 21 $1,264 Mo. 15 $1,383 Tenn. 23 $1,232
Fla. 2 $1,960 Mont. 22 $1,237 Texas 3 $1,955
Ga. 17 $1,313 Neb. 9 $1,569 Utah 50 $730
Hawaii 27 $1,140 Nev. 48 $776 Vt. 41 $935
Idaho 49 $772 N.H. 36 $984 Va. 34 $1,026
Ill. 28 $1,103 N.J. 24 $1,209 Wash. 43 $881
Ind. 33 $1,030 N.M. 30 $1,075 W.Va. 39 $970
Iowa 35 $987 N.Y. 16 $1,321 Wis. 47 $814
Kansas 6 $1,617 N.C. 28 $1,103 Wy. 25 $1,187

Based on the HO-3 homeowner package policy for owner-occupied dwellings, 1 to 4 family units. Provides all risks coverage (except those specifically excluded in the policy) on buildings and broad named-peril coverage on personal property, and is the most common package written.

Most expensive states in home insurance premiums

Below are the most expensive average home insurance premiums by state, according to the Insurance Information Institute’s figures from 2018. Premiums can vary widely within the state, and of course, there are more factors in your premium than the location of your home.

  • Louisiana: $1,987
  • Florida: $1,960
  • Texas: $1,955
  • Oklahoma: $1,944
  • Rhode Island: $1,630

Cheapest states in home insurance premiums

Below are the cheapest average home insurance premiums by state, according to the Insurance Information Institute’s figures from 2018. Premiums can vary widely within each state, and of course, there are more factors in your premium than the location of your home.

  • Wisconsin: $814
  • Nevada: $776
  • Idaho: $772
  • Utah: $730
  • Oregon: $706

What determines the cost of homeowners insurance?

The cost of an individual homeowners insurance policy is determined by a wide range of factors. Some of those factors are within your control, and some of them are not. 

For instance, home insurance can be more expensive in areas with a high risk of flooding or fires than in places where natural disasters are uncommon. Newer homes often cost less to insure than older dwellings — especially those in need of repairs. Insurance companies also look at your personal credit history before covering your home, so people with good credit histories could receive a lower premium than those with poor credit histories.

Every insurance company calculates rates differently. Some carriers place a higher value on credit score and claims history, while others look more closely at the condition and age of the home. Below is a more comprehensive list of the considerations that might determine your homeowners insurance premium.

[ Read: The Best Homeowners Insurance Companies ]

  • State, city and neighborhood: Some states are more prone to wildfires, earthquakes, and hurricanes than others.
  • Location of home: This information is pulled for crime and claim statistics in your home’s area.
  • Construction of the home: Is the home made out of wood, brick, or vinyl siding?
  • Heating system: Is the home heated with an HVAC or wood stove?
  • Security system: Homes with security systems might be less likely to be broken into.
  • Previous claims on the home: If the home has a history of water and electrical issues, then the homeowner may be more likely to file a future claim.
  • Homeowner’s previous claims: If the homeowner has a history with other insurance companies, he or she may be more likely file a claim again in the not-so-distant future.
  • Credit score: People with low credit scores may be more likely to file a claim.
  • Nearest fire station: The distance between your home and the nearest fire station can be a factor.
  • Marital status: Married couples are statistically less likely to file claims with insurance companies.
  • Replacement cost: The cost to replace an older home and bring it up to code can be more expensive than replacing a new home.
  • Pets: Certain animals might be considered a greater risk for liability claims.
  • Outside structures: Things like pools, sheds or greenhouses can also affect your policy rate.

Aside from these factors, the cost of an individual policy can also be determined by which features you chose to include in your coverage. A few of the options that can affect the cost are:

  • Deductible amount
  • Extra coverage add-ons
  • Bundled insurance policies
  • Discounts

[ More: Complete Guide to Home Insurance ]

Types of coverage

There are many different types of homeowners insurance coverage. Some coverages, like dwelling and liability coverage, can come standard with most policies. But insurance companies also often sell add-on policies that offer protection in certain areas. Here are some of the most common home insurance coverages you might find:

  • Dwelling coverage is insurance that covers qualified damages to the home itself. If the siding of your home tore off in a major storm, dwelling insurance might cover the cost of repairs. Insurance companies might sell add-ons for roof damage, water back/sump pump overflow, flood insurance and earthquake insurance.
  • Personal property coverage pertains to the cost of replacing possessions in your home, such as furniture. If someone broke into your home and stole personal items, personal property coverage might reimburse you. If you need to protect valuables, your agent might recommend you purchase a scheduled personal property endorsement for higher coverage limits.
  • Personal liability coverage protects against lawsuits for property damage or injury. If a delivery driver slipped and fell on your icy driveway, liability coverage might pay for their medical expenses and court costs if they sued you. Some insurance companies offer add-on policies that extend your liability coverage limits.
  • Loss of use coverage might cover additional living expenses you have after your home has been damaged. This might include hotel stays, groceries and gas while your home is being repaired. If your house is under construction after a covered claim, loss of use coverage might pay for your temporary hotel and food expenses up to your policy’s limit.

Generally speaking, your agent may recommend that your home insurance coverages be based on your lifestyle, where you live and the value of your assets.

Keep in mind that your agent may recommend you add coverage as time goes on. If you adopt a puppy six months after you purchase your home insurance policy, your agent may recommend you add pet coverage when the time comes. Or, if you take on a remote job, you can contact your insurance company and see if you should add home business coverage for a small fee.

Every home insurance coverage has a policy limit. A policy limit is the highest amount of money your insurance company will give you after a covered loss. For example, if your dwelling coverage limit is $400,000, that may limit how much is paid out if your home is damaged or destroyed by a covered peril to no more than $400,000, although factors like your deductible may come into play.

When you purchase a home insurance policy, you may be able to set your own policy limits. As a rule of thumb, you may be recommended to have enough dwelling coverage to rebuild your home in its current state, enough personal property coverage to cover the full value of your personal items and enough liability coverage to protect your personal assets.  

[ Read: What is Dwelling Insurance? ]

Reimbursement coverage types

There are three different coverage options commonly provided by home insurance companies. Each option affects your premium differently.

  • Actual cash value (ACV) is based on the current market value, or how much your home and personal property is worth, with depreciation factored in. Most home insurance policies offer ACV reimbursement by default. It can be the lowest option.  
  • Replacement cost value (RCV) works in the same way as ACV, but without depreciation factored in. That means you might get a higher payout after a covered claim. RCV home insurance policies can be more expensive than ACV policies, and you may need to purchase an endorsement to get it. Your agent may recommend this if you own valuables or have an expensive home.
  • Guaranteed replacement cost (GRC) is also referred to as extended replacement cost (ERC), and this option can cover the complete cost of rebuilding the home, even if that cost exceeds the policy limit. GRC can be the most expensive replacement cost type, and not all insurance companies offer it. Your agent may recommend this if you live in areas with extreme weather, wildfires, earthquakes or any place where home destruction is more likely. 

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Discounts and ways to save on home insurance

Homeowners insurance can be costly, so before selecting a plan, shop around to find the best deal based on your needs. It can be helpful to consult an insurance agent, read consumer reviews and check online insurance quotes to find companies with the lowest rates. Here are some other ways to save money on home insurance:

  1. Ask about available discounts: Some companies offer discounted policy rates if your home is in a gated community, if you bundle with your car insurance or if you’re part of a homeowner’s association.
  2. Bundle your insurance policies: Oftentimes, companies that sell home, auto and life coverage may deduct up to 15% off your premium if you buy two or more policies from them.
  3. Make your home safer: Some providers may offer a discount if you install fixtures that make your home safer, such as smoke alarms or a security system, that reduce the likelihood that damage or theft will occur in the first place.

How do past claims impact home insurance cost?

It depends on the nature of the claim. Just how much a claim raises your premium varies in part on the provider and the nature of the claim.

There are also further complications when you make the same type of claim twice. Not only can this increase what you pay each month, but, depending on you and your home’s history, it’s possible the provider may even decide to drop you.

Though your premium may increase if you are found at fault, it’s also possible for your monthly bill to increase even if you’re not found to be liable. Your home may be considered riskier to insure than other homes.

Home insurance cost FAQs

No, states do not require homeowners to get insurance when they purchase a home. However, if you choose to get a mortgage loan, most lenders will require you to have some insurance.

To determine how much coverage you should purchase, talk to your agent about your home inventory, your overall worth, and of course, comfort level. Also discuss factoring in the location of your home, and evaluate risks based on weather, fires and other events that could potentially damage or destroy your home.

There are a few ways to potentially get home insurance discounts. Discount options include things like:

  • Bundling your home insurance policy with another policy (such as auto).
  • Going claims free for extended periods of time.
  • Making certain home improvements.
  • Living in a gated community.
  • Installing a security system.

In 2018, 34.4% of home insurance losses were wind and hail related, 32.7% were fire or lightning related and 23.8% were water damage or freezing claims. Only 1% of claims were related to theft, and less than 2% of losses were liability claims. These figures are according to the Insurance Information Institute.

In Florida the most common claims may be related to hurricanes, wind damage, water damage and flooding. In California, earthquake, flood and wildfire claims may be more common. When you purchase insurance, talk to an agent about the specific risks in your area and ask about separate insurance policies you might need, like flood or earthquake coverage.

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

Source: thesimpledollar.com

Here Are 8 Home Repairs You Can’t Afford to Ignore

During preparations for her nightly baths, Laura Starrett noticed the water pressure wasn’t as strong as it once was. She had also received an alert from her utility company that she had used more water that month than she had before.

“Then I realized I’d left my sprinklers on and they were running every day, so I thought that’s why I got an alert that I was using a lot of water,” said the recently retired homeowner in Jacksonville, Florida.

So she turned the sprinklers off.

Then Starrett got another alert saying her water bill was going to be $1,000. A plumber came out, listened to the pipes and heard water running. Turns out, a backyard pipe was leaking.

“You just hope it will go away,” Starrett said. “But I knew there had to be something because your water just doesn’t just disappear.”

According to a survey by Travelers insurance company, 42% of homeowners put off a needed repair during 2020. Much of it was the concern about having someone in their house during the pandemic. Of those, 19% said they tried to fix the problem themselves and failed, and 22% just left it broken.

That can lead to a bigger and often more expensive problem, says Angela Orbann, vice president of property and personal insurance at Travelers.

“I typically think of this as what’s cosmetic versus really critical, and sometimes that can be a fine line for a homeowner,” she said. “You shouldn’t delay things that can lead to bigger issues.”

8 Home Repairs You Can’t Afford to Put Off

1. Anything Involving Water

A water spot on the wall or ceiling can mean a leaky roof or a leaky pipe. If not fixed, the leak will just get bigger and can destroy floors, walls, furniture and more.

“Any time you notice a stain, those should be addressed immediately because that indicates you potentially have moisture entering your home. Moisture in small amounts will not turn into mold, but if left, mold and continued damage will occur so it is important to address these situations when they occur,” said home inspector John Wanninger. He and his INSPECTIX team in Nebraska have inspected more than 30,000 homes..

The same goes for a leaky faucet, running toilet or dripping water heater.

“The cost of allowing a running toilet to run will cost more over the course of a month or two than it would have cost to fix it up front,” he said.

Don’t ignore higher-than-normal water bills. As Starrett realized, they were a sign something was wrong somewhere.

2. Anything Involving Electricity

Do you have lights that flicker? Switches or outlets that stopped working? Breakers tripping? GFI outlets that won’t reset?

These can be signs of electrical problems.

“A flickering light can be something as easy as a loose light bulb or it could be something as severe as a loose wire,” Wanninger said. “Any of those things when it comes to electricity should be considered important and time sensitive.”

In houses built between 1965 and 1974, connections in some older aluminum wiring may be failing. Older houses built in the 1950s and before had knob and tube wiring. The connections could be going bad.

Circuits can be overloaded. Sometimes when people update their homes, they don’t update the wiring.

Electrical problems can lead to fires, and fires can lead to injury or property damage.

3. Pests

Bugs and rodents might be small, but they can cause big issues.

“Termites can do an extensive amount of damage over a period of time. If they go undetected for three or four years, minor damage becomes pretty heavy damage,” Wanninger said.

There’s no telling how long pests like termites and carpenter ants have been chewing before you noticed them, so taking immediate action is important.

Be on the lookout for signs of termites and carpenter ants and what they leave behind:

  • Sawdust or wood damage.
  • Mud tubes.
  • Discarded wings near closed windows, doors or other access points.
  • Large black ants.
  • Faint rustling noises in walls.
  • Holes in cardboard boxes, especially on the bottom.

As for furry pests, they can spread diseases with their droppings and can chew through insulation.

“When you hear noises in your attic, it’s often either mice, rats, squirrels, or raccoons. In any case, it’s something that should be addressed immediately because left unattended they can all cause an extensive amount of damage,” Wanninger said.

4. Peeling Caulk and Paint

See #1: Water.

If caulk comes loose and peels away, water gets in and you know what happens then and it isn’t good.

“We don’t think about cracked joints in your tile bathroom. It doesn’t look severe and it doesn’t look like a big issue, but as time goes on, moisture gets in there and deteriorates the shower board and the material behind the wall. Before you know it, you get yourself a $2,000 or $3,000 repair,” Wanninger said.

The same for paint. Paint is like skin for the house. It protects it from water and pests. Removing that protection can cause problems.

5. Broken or Malfunctioning HVAC

Having a lack of climate control isn’t just an uncomfortable inconvenience, it can lead to bigger issues.

“If the humidity is too high in the home, it will pass through the drywall and enter the attic area,” Wanninger said. “If you get moisture on your windows in the wintertime on the inside of the glass in your house, it is an indication your humidity level is too high.”

In the winter, that moisture can freeze and eventually melt, causing a leak. In the summer, excess moisture can lead to mold and mildew.

If you notice your HVAC isn’t working as it should, taking care of it before it breaks can reduce stress on the system and possibly prevent a bigger issue.

6. Cracks

Some cracks in walls and foundations are harmless, but they aren’t something to ignore.

“One thing concrete does is crack, it’s pretty standard,” Wanninger said. “If you get cracks in foundation walls or floors that are considered expansive or starting to displace at a greater level, that may be the indication that you are having structural issues or movements that need to be reviewed before they become a bigger issue.”

Keep an eye on the size of the cracks. Measure the length and width periodically and note any changes.

7. Smoke Alarms and Carbon Monoxide Detectors

It sounds simple, but replacing batteries in smoke alarms and carbon monoxide detectors should happen immediately after they begin chirping, even if it happens in the middle of the night.

“At two o’clock in the morning when the thing does start chirping, your mind says you’ll fix it tomorrow and tomorrow never comes,” Wanninger said.

Better yet, replace your batteries annually when you change your clocks for Daylight Saving Time.

8. Darkening Ceilings Near Fireplaces

If you notice darkening on your ceiling or a sooty smell in your house, it could mean your fireplace isn’t drafting properly. That could bring deadly gasses into the house.

“There’s no second-guessing that. It would cause carbon monoxide poisoning,” Wanninger warned.

Tiffani Sherman is a Florida-based freelance reporter with more than 25 years of experience writing about finance, health, travel and other topics.

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Source: thepennyhoarder.com

How to avoid or remove PMI

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

Private mortgage insurance (PMI) has been around for more than 60 years, helping make mortgages more affordable for buyers who can’t afford a 20 percent down payment. Loans with PMI certificates have often accounted for a decent percentage of mortgages issued each year. In fact, in 2019, that number was just below 40 percent.

But PMI does add an expense to your home loan, and you likely want to sidestep it if possible. Find out below if you can avoid PMI, or learn how to remove PMI if you’re already paying it.

What is PMI?

PMI is insurance, but don’t get it confused with homeowner’s insurance—that’s a different product you might need to pay for. PMI is insurance for the lender. It’s meant to be a fail-safe to help a lender recover losses if you default on the loan.

Lenders require that you purchase PMI in cases where you aren’t putting at least 20 percent down on your home. Most commonly, you pay PMI as part of your monthly mortgage payment. In rarer cases, you might pay all of the PMI as a lump sum when you close on the home or pay a partial lump sum and pay the rest in your monthly mortgage payments.

Regardless of how you pay, PMI can be an expensive addition to your mortgage. It’s important to note, however, that PMI works differently with FHA loans and certain other government-backed loans. For example, FHA loans have MIP, which is a mortgage insurance premium, instead of PMI.

What factors affect the cost of my PMI?

According to Freddie Mac, PMI can cost on average between $30 and $70 extra per month for every $100,000 you borrow. So, if you’re borrowing $200,000 for 30 years and you pay PMI for half of that term, you could pay between $60 and $140 per month for 15 years—or 180 months. That’s between $10,800 and $25,200 added to your mortgage.

The exact amount you pay for PMI depends on a variety of factors, including:

  • Size of down payment (the more you pay up front, the less risk there is to the lender because the home has some equity—or profitability—built in)
  • Credit score (the higher your score, the less risky of a borrower you appear to lenders)
  • Loan appreciation potential
  • Borrower occupancy
  • Loan type

How can I avoid PMI?

In today’s mortgage market, it can be difficult to steer clear of PMI altogether. But here are some things you can do, depending on your situation, to avoid this expense.

Make a 20 percent down payment

If you can make a 20 percent down payment, you typically avoid PMI. That’s because PMI kicks in when you owe more than 78 to 80 percent of the value of the home. Assuming the home you’re purchasing is priced at or below its appraisal value, paying 20 percent up front automatically gets you enough equity to not need to pay for PMI.

Get a VA loan

VA loans don’t require a down payment at all, and no matter what, they don’t come with PMI. These loans are reserved for qualifying veterans and their eligible beneficiaries.

Get a piggyback loan

A piggyback loan is a second mortgage or home equity line of credit that you take out at the same time you take out your first mortgage. You use the piggyback loan to fund all or part of your down payment so you can meet the 20 percent requirement. If you consider this option, make sure to do the math to determine which saves you the most money: paying PMI or paying the interest on the second mortgage.

Request lender-paid mortgage insurance

In some cases, the lender might be willing to take on the burden of the PMI cost. They would do so through lender-paid mortgage insurance, or LPMI. Typically, the lender charges a higher rate of interest in exchange for this favor. Again, it’s important to do the math to find out which one is in your best interest.

How can I remove PMI once I have it?

As a homeowner, you have some options for removing PMI once you have it. You can take some of the actions summarized below, but the Consumer Financial Protection Bureau notes that you must also meet four criteria to protect your right. Those are:

  • Asking for the PMI cancellation in writing
  • Being up to date on payments and having a generally solid payment history
  • Certifying, if required, that there are no other liens on your mortgage
  • Providing evidence, if required, that the property value has not fallen below the original value of the home when you purchased it

If you can fulfill these criteria, here are some ways you can cancel your PMI.

Get enough equity in your home

The PMI Cancellation Act, or Homeowners Protection Act, mandates PMI cancellation when your principal mortgage balance reaches 78 percent of the value of the property (or you can also think of it as you reaching 22 percent equity). At that point, lenders must remove PMI. If you want, you can ask for PMI cancellation as soon as you reach 20 percent equity, but lenders aren’t required to remove PMI at that point.

Lenders are also required to tell you when you will reach the point of PMI cancellation if you continue to pay on your loan as agreed. You can calculate where you are in the process at any time by taking your current loan balance and dividing it by the amount the property originally appraised for. For example, if you owe $170,000 and the property appraised for $200,000, you are at 85 percent.

Get halfway through your mortgage term

Values can rise and fall, but you’re not stuck with PMI forever. Lenders must remove PMI when you’re halfway through your mortgage regardless of values. So, if you have a 30-year loan, your PMI should be canceled at the 15-year mark.

Refinance your mortgage

Another way to remove PMI is to remove your mortgage altogether. If you can arrange it so you meet the 78 percent value requirement on a new mortgage, you avoid PMI.

Get a reappraisal

Perhaps your home has gone up in value substantially and you owe much less than 80 percent of the current value. If you can demonstrate this, the lender may remove PMI because there’s less risk involved with the loan.

Remodel your home

If your home hasn’t gone up in value on its own, you might be able to add value with a remodel. Certain types of remodels, such as kitchen upgrades, could add enough value to impact the loan-to-value ratio so you don’t need PMI anymore.

Getting rid of PMI can be a great way to save money on your mortgage, but always remember to follow good personal financial management. Look at all your options and run the numbers to ensure you’re not spending more than you would save. If you’re already considering a home remodel, tossing PMI to the curb is a great perk. But you might not want to put in $30,000 worth of remodel costs just to save $10,000 in PMI, for example.

Finally, while you’re dotting the i’s and crossing the t’s on your mortgage expenses, make sure you don’t lose track of other financial matters. Keep an eye on your credit report, and if you find something that looks wrong, consider working with Lexington Law on credit repair.


Reviewed by Vince R. Mayr, Supervising Attorney of Bankruptcies at Lexington Law Firm. Written by Lexington Law.

Vince has considerable expertise in the field of bankruptcy law. He has represented clients in more than 3,000 bankruptcy matters under chapters 7, 11, 12, and 13 of the U.S. Bankruptcy Code. Vince earned his Bachelor of Science Degree in Government from the University of Maryland. His Masters of Public Administration degree was earned from Golden Gate University School of Public Administration. His Juris Doctor was earned at Golden Gate University School of Law, San Francisco, California. Vince is licensed to practice law in Arizona, Nevada, and Colorado. He is located in the Phoenix office.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

Source: lexingtonlaw.com

The Average Homeowner Could Reap $4,000 a Year by Refinancing

Tips for Your Mortgage Refinance Savings | Money

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Source: money.com

What is PMI and How Can I Get Rid of It? – Lexington Law

private mortgage insurance
For prospective homeowners, there are many things to learn before you even begin the process of searching for a home, especially for first time buyers. One of the most important lessons to learn for those who have less than 20 percent to put down on their home is that of private mortgage insurance (PMI).

What is PMI?

PMI is a type of insurance your lender solicits from you in the event that you buy a home without a 20 percent down payment. It usually ends up affecting Federal Housing Administration (FHA) loan applicants, because these applicants are only required to put down 3.5 percent of their total purchase price.

For any buyer who was unable to put down a full 20 percent, you should expect mortgage insurance premiums of roughly .05-1.00 percent of your total loan amount per year. There are several factors that affect the cost of your PMI:

  • Down payment size – The larger your down payment, the lower your PMI premium.
  • Credit score – Higher credit scores earn a lower PMI rate.
  • Loan appreciation potential – If your home is expected to appreciate in value rather than depreciate, your PMI will be lower.
  • Borrower occupancy – If you plan to rent your new home rather that occupy it yourself, expect to pay higher PMI premiums.
  • Loan type – The greater the risk to your lender, the higher your PMI will be. Anyone applying for a loan with a low credit score (500-650) and the minimum down payment might expect to have a higher PMI premium.

Why do I need PMI?

You may be wondering: why would anyone elect to get PMI? The short answer is they would not.

PMI is not the same as car insurance or homeowners insurance. The aforementioned types of insurance are designed to protect consumers in the event of catastrophe, such as a house fire or car accident. PMI, on the other hand, only protects your lender in the even of loan default. Not only will they take over possession of your home, but they will have the additional money you paid into your PMI policy.

How do I get rid of it?

If you are like many FHA loan applicants, there might not be much you can do about avoiding PMI altogether, but you can keep a close eye on your loan balance and request to remove it as soon as possible. Lenders are required by law to remove PMI automatically when you have paid enough to have 22 percent equity in your home. However, when you reach 20 percent, you can call your lender and request to have it removed, and they are required to comply with your request.

There are a few other ways to remove PMI:

  • Refinance your home
  • Get a new appraisal
  • Pay extra on your loan (any extra amount will be applied directly toward your principal loan amount)
  • Consider making additions to your home, which may increase its value.

Ultimately, you should try to remove PMI as soon as you possibly can. It does not benefit you as a homeowner, and you can save thousands of dollars over the life of your loan if you have it removed. For more information on how to improve your finances, including credit repair after buying a home, contact the experts at Lexington Law at 1-833-333-2281 .

You can also carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.

Source: lexingtonlaw.com

Understanding Seller Concessions

Buying a new home requires managing a lot of moving parts, from mortgage preapproval to closing. Even after an offer is accepted, buyers and sellers are still at the negotiating table. If closing costs or surprise expenses become too much for the buyer, a seller concession could help seal the deal.

Although seller concessions can work to a buyer’s advantage, they are neither a guaranteed outcome nor a one-size-fits-all solution for every real estate transaction.

To determine if seller concessions are the right move from a buyer’s perspective, here are some key things to know, including what costs they can cover and when to consider asking for them.

Recommended: How Much Are Closing Costs on a New Home?

What Are Seller Concessions?

Seller concessions represent a seller’s contribution toward the buyer’s closing costs, which include certain prepaid expenses and discount points. A seller concession is not the equivalent of a price reduction; nor is it received as cash or a loan discount.

Closing costs usually range from 2% to 5% of a home’s purchase price. When combined with a down payment, the upfront expense of buying a home can be burdensome, especially for first-time homebuyers.

Buyers can ask for concessions on the initial purchase offer or later if the home inspection reveals problems that require repairs.

Although this can be a helpful tool to negotiate a house price, there are rules for eligible costs and limits to how much buyers can ask for.

Recommended: Home Buyer’s Guide

What Costs Can Seller Concessions Cover?

A buyer’s closing costs can vary case by case. Generally, buyers incur fees related to the mortgage loan and other expenses to complete the real estate transaction.

There are also types of prepaid expenses and home repairs that can be requested as a seller concession.

Some common examples of eligible costs include the following:

•   Property taxes: If the sellers have paid their taxes for the year, the buyer may be required to reimburse the sellers for their prorated share.

•   Appraisal fees: Determining the estimated home value may be required by a lender to obtain a mortgage. Appraisal costs can vary by geography and home size but generally run between $300 and $500.

•   Loan origination fees: Money paid to a lender to process a mortgage, origination fees, can be bundled into seller concessions.

•   Homeowners insurance costs: Prepaid components of closing costs like homeowners insurance premiums can be included in seller concessions.

•   Title insurance costs: A title insurance company will search if there are any liens or claims against the property. This verification, which averages $1,000 but varies widely, protects both the homeowner and lender.

•   Funding fees: One-time funding fees for federally guaranteed mortgages, such as FHA and VA loans, can be paid through seller contributions. Rates vary based on down payment and loan type.

•   Attorney fees: Many states require a lawyer to handle real estate closings. Associated fees can run $500 to $1,500, based on location.

•   Recording fees: Some local governments may charge a fee to document the purchase of a home.

•   HOA fees: If a home is in a neighborhood with a homeowners association, there will likely be monthly dues to pay for maintenance and services. A portion of these fees may be covered by the seller.

•   Discount points: Buyers may pay an upfront fee, known as discount points, to lower the interest rate they pay over the life of the mortgage loan. (The cost of one point is 1% of the loan amount.)

•   Home repairs: If any issues emerge during a home inspection, the repair costs can be requested as a seller concession.

Closing costs can also be influenced by the mortgage lender. When shopping for a mortgage, evaluating expected fees and closing costs is a useful way to compare lenders. Factoring in these costs early on can give buyers a more accurate idea of what they can afford and better inform their negotiations with a seller.

Recommended: Home Improvement Calculator

Rules and Limits for Seller Concessions

Determining how much to ask for in seller concessions isn’t just about negotiating power. For starters, the seller’s contributions can’t exceed the buyer’s closing costs.

Other factors can affect the allowable amount of seller concessions, including the type of mortgage loan and whether the home will serve as a primary residence, vacation home, or investment property.

Here’s a breakdown of how concessions work for common types of loans.

Conventional Loans

Guidance on seller concessions for conventional loans is set by Fannie Mae and Freddie Mac. These federally sponsored enterprises buy and guarantee mortgages issued through lenders in the secondary mortgage market.

With conventional loans, the limit on seller concessions is calculated as a percentage of the home sale price based on the down payment and occupancy type.

If it’s an investment property, buyers can only request up to 2% of the sale price in seller concessions.

For a primary or secondary residence, seller concessions can add up to the following percentages of the home sale price:

•   Up to 3% when the down payment is less than 10%
•   Up to 6% when the down payment is 10-25%
•   Up to 9% when the down payment is greater than 25%

FHA Loans

FHA loans, which are insured by the Federal Housing Administration, are a popular financing choice because down payments may be as low as 3.5%, depending on a borrower’s credit score.

For this type of mortgage, seller concessions are limited to 6% of the home sale price.

VA Loans

Active service members, veterans, and surviving spouses may qualify for a mortgage loan guaranteed by the Department of Veterans Affairs. For buyers with this type of mortgage, seller concessions are capped at 4% of the home sale price.

VA loans also dictate what types of costs may qualify as a seller concession. Some eligible examples: paying property taxes and VA loan fees or gifting home furnishings, such as a television.

Seller Concession Advantages

There are a few key ways seller concessions can benefit a homebuyer. For starters, they can reduce the amount paid out of pocket for closing costs. This can make the upfront costs of a home purchase more affordable and avoid depleting savings.

Reducing closing costs could help a buyer make a higher offer on a home, too. If it’s a seller’s market, this could be an option to be a more competitive buyer.

Buyers planning significant home remodeling may want to request seller concessions to keep more cash on hand for their projects.

Seller Concession Disadvantages

Seller concessions can also come with some drawbacks. If sellers are looking for a quick deal, they may view concessions as time-consuming and decline an offer.

When sellers agree to contribute to a buyer’s closing costs, the purchase price can go up accordingly. The deal could go awry if the home is appraised at a value less than the agreed-upon sale price. Unless the seller agrees to lower the asking price to align with the appraised value, the buyer may have to increase their down payment to qualify for their original financing.

Another potential downside is that buyers could ultimately pay more over the loan’s term if they receive seller concessions than they would otherwise. If a buyer offers, say, $350,000 and requests $3,000 in concessions, the seller may counteroffer with a purchase price of $353,000, with $3,000 in concessions.

The Takeaway

Seller concessions can make a home purchase more affordable for buyers by reducing closing costs and expenses, but whether it’s a buyer’s or seller’s market will affect a buyer’s potential to negotiate. A real estate agent can offer guidance on asking for seller concessions.

The vast majority of homebuyers finance their purchase. So for most buyers, finding the right mortgage is an important step in landing their dream home.

SoFi offers home loans with competitive rates and down payments as low as 5%. And prequalifying takes just a few minutes.

Buying a home? Find out how much you could qualify for with SoFi.



SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

SoFi Home Loans
Terms, conditions, and state restrictions apply. SoFi Home Loans are not available in all states. See SoFi.com/eligibility for more information.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Source: sofi.com