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Home Buying Tips

See all the home buying tips, and learn more about buying a home.

Quick Guide to Home Insurance

Quick Guide to Home Insurance

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You searched and found your dream home, negotiated the price, and got all of your financing in order. But before you turn the key on your new home, you need to protect your investment—and everything inside of it. That means buying a home insurance policy.

Even if you have never shopped for home insurance—or if you just haven’t purchased a new policy in a while—there are a few things to keep top of mind as you navigate the task.

How much is this going to cost?

We get it—you already plunked down a gut-wrenching amount of money for the house and the fees and the closing costs. Now you have to shell out more cash for insurance? No, it isn’t fun. And it isn’t sexy. But you gotta do it. And it all starts with the premiums. In California, this has become a large expense because of the wildfires over the last few years and insurance companies raising premiums and even cancelling policies.

Pro Tip: Take the time to talk to an insurance broker and see what the policy premiums for owning a home in the neighborhood/area you are looking to move to.

Your annual premium is the amount an insurance company will charge you every year to cover your home and its contents in the event of fire, theft, etc. Every insurance company has its own way of determining annual premiums.

A few factors set your rate: the value of your home and its contents, as well as your deductible, which is the out-of-pocket amount you’ll have to pay in the event of a claim. But home insurance premiums also vary by region and company. Two home insurance policies with identical coverage and limits in two different parts of the country, or even a town, could have very different annual premiums, Bank says.

Filing a home insurance claim within the past five years also increases the amount you’ll pay.

“To an insurer, that increases the likelihood you’ll file a claim,” Bank says.

And, of course, Mother Nature plays a role. If you live in an area with a history of wildfires, earthquakes and/or live in a flood zone, you can expect to pay more.

How you’ll pay

The initial premium is typically due when you purchase the policy and when you buy payed out of escrow or your insurance agent will provide an insurance binder which provides the coverage of the home. That will cover your home and property for the first year.

Subsequent premiums can also be paid directly by you (your insurer will bill you), or you can opt to escrow the premium and have a portion of it built into your mortgage payment. Even though that bumps up your monthly costs, you might find this the best way to ensure you have enough money to cover the premium when it’s due.

Timing is everything

It’s never too early to start shopping for home insurance. Gathering quotes as soon as the contract is signed will help you understand how the annual premium will factor into your budget. You need to know all of your monthly costs.

You’ll want to choose a policy and have it paid in full at least two weeks before closing—otherwise you might face delays for closing the home and/or be insured.

Know whom you’re working with

It’s a fine idea and makes sense to shop around. An independent insurance agency or broker deals with several companies, versus captive agents who represent just one insurer. Obtain a mix of three to four quotes from both types of agents to compare premiums (even from the same companies) and coverages available.

Take inventory

As you’re packing and/or unpacking, take videos or photos using your smartphone of your belongings and store them in the cloud (iCloud, Google Drive, Dropbox, etc) as a digital home inventory. That will help speed up a claim and ensure the maximum possible reimbursement in the event of a fire, theft, or other covered disaster. Knowing what you own and creating an inventory will also help you decide which insurance policy will give you adequate coverage for your belongings, including furniture, electronics, and collectibles.

Ask about add-ons especially for jewelry and collectibles

If you own jewelry, artwork, wine, coin or stamp collections, or other keepsakes, ask about coverage and coverage limits. You probably are under insured for jewelry and collectibles with a standard homeowners policy.

Get your docs in a row

You’ll need a copy of the “insurance binder,” which details the coverage values, premiums, and restrictions. But you shouldn’t have to track down that information. Your agent should work directly with the mortgage lender to provide proof of coverage required at closing.

Understanding terms used for home insurance

Insurance and risk management terms, click the link.

https://www.irmi.com/glossary?taxonomy=alphanumeric&propertyName=tags&taxon=a

Buying a house during COVID-19

How To Negotiate an Offer on a Home During the COVID-19 / Coronavirus Crisis

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Buying a Home has Changed

The real estate market—and daily life—has been completely impacted by the Coronavirus / COVID-19. You’ve put yourself in a position to financially afford home ownership. Now you’ve found a home you love and want to make an offer. Is the Coronavirus crisis an opportunity to make an aggressive offer? Is it now a buyer’s market? Will prices be lower? Fewer buyers? Let take the opportunity and strategize since you’ve found the right home, can you buy it at a lower price?

Be the Best Buyer – Get a Mortgage Commitment Letter

Securing financing may be the biggest challenge right now, so make sure you have a mortgage commitment letter when you make an offer. This is a more detailed document than a pre-approval and, as the name implies, represents a firm commitment from your lender.

I’m seeing in South Placer that many lenders are tightening up their terms and conditions. Minimum credit scores and required cash reserves have risen to new levels, making it difficult for many buyers to qualify. I’m also seeing home loans which allow buyer to borrow over $510,000 are being scaled back, and some banks are no longer offering “Jumbo” loans to buy a home.

Call and check in with your lender and get a mortgage commitment letter if possible. At a minimum you should have a pre-approval but in this low inventory market currently you need to demonstrate you are the best and strongest buyer. A mortgage commitment letter is the strongest qualification of you as a buyer using a loan to purchase a home.

I’m recommending buyers stay in touch with their lender as frequently as they need to. Here is what I would do if I was an active home buyer in this market:

  1. Check in with your lender prior to viewing home to make sure you have a loan to buy.
  2. Contact your lender at least once a week to see if the loan to buy is still available or there are better options
  3. Don’t hesitate to engage your lender to answer any questions or issues you have for financing a home

Just don’t be afraid to over-communicate during this time. The credit markets which fund the mortgage loan markets are shifting rapidly and often hourly from my discussions with loan officers.

Cash Offers Win – Prove You Have the Cash with Your Offer

And if you have the funds, all-cash offers are even more desirable to sellers during this time, as they allow buyers to close on the home more quickly than an offer contingent on financing.

How low can you go?

Well in reviewing the market activity for South Placer, homes are still being listed and homes that are priced competitively are going into contract quickly. The quality of the buyer: how qualified, strength of the buyer is more important to Seller’s now than getting their price. So yes, there is some wiggle but really what has happened IMO is that there are fewer buyers so the opportunity to buy a home without a bidding war is in your favor.

Mortgage Payment Programs are Impacting Inventory

The FHA and banks have rolled out mortgage forbearance programs, so most sellers are not in immediate danger of losing their home, even if they just lost their job or their income has been significantly cut. I have seen sellers pull their listings and wait for better market conditions, so inventory remains tight in South Placer at this time.

Let’s look at some buyer scenarios that are emerging in the time of the crisis.

Seller Scenario 1 – Every New Listing is Negotiable

If a home seller who doesn’t have the luxury of time is facing a smaller buyer pool, due to stay-at-home orders and concerns about buying a home based on what may only amount to a virtual tour. So, buyers might have a window of opportunity for a short time when it comes to homeowners who need to sell. However, I would find it difficult and challenging to get the information that the Seller needs to fire sale a new listing if it is priced right. I wouldn’t count on a new listing that is priced competitively being the opportunity to submit a low offer.

Buyer Scenario 2 – That Overpriced Home Listed for Months can now be Bought.

A home that has been on market for a long time and is by definition “overpriced” might be the best opportunity to make an aggressive below list price offer. This I feel is the best opportunity to get a better price if the home check all the boxes for feature you want in your next home.

Buyer Scenario 3 – If I can Steal it, I’ll Buy It

The entire real estate market is 2008, Inventory is at record highs, I’ll buy anything that is a steal. My agent and I will be writing an offer a day to get a deal. Why not? Because at this time buyers should not assume that because we are in a pandemic, they can automatically lowball a seller. Remember sellers aren’t flooding the homes with new listings right now. Sellers may be more willing, however, to entertain offers on the lower end. The real estate agent community is tight, and you might quickly learn that somehow your offers aren’t even getting a response. I don’t recommend you be the investor buyer at this point in time

Conclusion – Write an offer

The only way to test a seller’s level of motivation is to make an offer. But if you really want the home be prepared to pay a fair price. We are not sure at this time what the motivation is to sell. Trying to gain information prior to making an aggressive or fair offer is key for success in any market. At this time, I think if your offer is too low it will be “shopped” to other perspective buyers and their agents especially when the buyers buying were ready to buy before COVID-19 and the sellers are still optimistic that the low inventory works in their favor still.

Be Prepared for a Longer Closing Because of Coronavirus

In the age of coronavirus, the health and safety of everyone in the transactions is a concern. That means buyers need to prepare for potential delays. The California Association of Realtor has provided forms and guidance to help agents inform their sellers and buyers to understand the potential time needed currently to complete a real estate purchase.

In the end this is about protecting the health of everyone involved in a real estate purchase. Not only should we be concerned about the health and safety of buyers and sellers but also the people that will help you complete the purchase. For example: we need to protect from appraisers, home inspectors, and repair contractors. They are adjusting their guidelines and availability, which can slow the transaction. (Many of these professionals are quickly adapting to doing their work remotely when possible.)

Again, this additional time has been adjusted by the industry to help seller and buyers complete a purchase. You as a buyer just need to understand that the time periods might need to be extended to allow a smooth transaction. It doesn’t mean you shouldn’t have a viable and firm date for the close of escrow so you can plan the move into your new home.

Final Thoughts

The goal of buying any “dream” home is that is it for most of us the home we make an offer on is a home we really want. Sure, price is important but if it is the “one” and you are comfortable with the financial commitment you should be committed to making the purchase work and pay a fair price to own it. Sellers want to sell to a buy who want their home. Yes, at the end it’s about the sales price, but if you treat the transaction like buying a pair of shoes, you’ll find sellers generally want to sell to the Buyers who really wants their home. Be the best most qualified buyer, be committed to buy. You’ll find you will have more homes to choose from the market before COVID-19. Currently we are seeing fewer buyers, which mean these buyers that are active have more homes to choose from. If you are actively buying today it is a good time to buy. Good luck.

Related Blog Posts

finding the best lender

How To Find The Best Home Lender

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Before buying a home it’s important to understand your finances to buy a home. Often friends and family can be a great resource for finding a local lender for a home loan. Here is some advice and how to find the best lending pro to help you purchase a home if you are using a loan to buy.

When you buy a home, you’re in it for the long haul. You’ll have a mortgage payment for 15, 20 or 30 years, so it’s smart to understand what you need, the process, and picking the best loan officer to help you get a loan for your home.

How to Look for a Lender/Loan Officer

Finding a mortgage lender involves more than just getting a good interest rate; you want to work with the best mortgage companies, staffed by professionals who will guide you through the process. However ultimately you want to work with a loan officer/loan professional that you trust, can communicate effectively, and answer all you questions.

Before you start the search for your personal banker/lender/loan officer, you will need to do some work.

The Home Loan Journey

To get a jump-start on the mortgage loan process, use these tips to help you find the right lender and the right loan for you.

1. Review Your Credit and Income

Not everyone can qualify to buy a home; you have to meet certain credit and income criteria to assure mortgage companies you can repay the loan. The first step is to look at your credit score which is currently a feature in a lot of banking apps like Wells Fargo, Chase, Bank of America, etc

A low credit score signals that lending to you is risky, which means a higher interest rate on your home loan. The higher your credit score and the more on-time payments you make, the more power you’ll have to negotiate for better rates with potential lenders. Generally, if you have a score under 580, you’ll have a tough time qualifying for most types of mortgages. Don’t be discouraged by your current credit score if you think its too low. A good lender will have local resources to help you improve your credit score through “credit repair.” At this point just know what your approximate credit score is.

The lenders will look at your monthly bills and payments you make every month. There are ratios called “debt to income’ that need to be looked at to make sure you can afford to make the payment. Next, try to pay off high-interest debts and lower your overall level of debt as quickly as possible. the lower the “debt to income” the more credit worthy you are for a home loan. Paying off credit cards and recurring loans before you buy a home will also free up more money for the down payment.

2. Know the Types of Home Loan Lenders

Understanding the major players will help you navigate the crowded lending field. Here are the most common types of home lenders:

  • Credit unions: These member-owned financial institutions often offer favorable interest rates to shareholders. Most like.y you will have to join the credit union if you obtain a loan through them.
  • Mortgage bankers: They work for a specific financial institution and package loans for consideration by the bank’s underwriters.
  • Correspondent lenders: Think local mortgage loan companies that have the resources to make your loan, but rely instead on a pipeline of other lenders, such as Chase, to whom they immediately sell your loan.
  • Savings and loans: Once the bedrock of home lending, S&Ls are now a bit hard to find. But these smaller financial institutions are often community-oriented and worth seeking out.
  • Mutual savings banks: Another type of thrift institution, like savings and loans, mutual savings banks are locally focused and often competitive.

3. Find the Right Lender and Loan Officer to Work With

It’s easy to get a rough idea of what the home loan rates are by simply Googling “30 year home mortgage rates.” It’s also to find a “home loan calculator” to see what you can roughly afford for the budget for home. You can spend time on search looking for the “best rate for home loan.” Just be aware the rate offers out there are usually for a perfect buyer with excellent credit, 20% down, etc… In the end until you go through the credit application, credit check, and funds available for down payment and closing costs you won’t have an accurate picture of the actual cost of owning a home with a loan.

I recommend you connect to friends and family to find a good local lender and loan officer to work with. If you have a agent for buying a home they can provide a solid recommendation for a local lender to help you. The world of lending is ultra competitive and the best rates are often available to any lending professional to get you the best loan for your home buying.

It’s more than just the rate and terms for your home loan, it’s important that your lender is used to working with buyers like yourself for a home loan. Whether you are a first time buyer, a person with undocumented income, self employed, etc it helps to use a loan officer who can package you up for the best loan for your home buying situation.

4. The Right Questions to ask Your Lender and Read the Fine Print

Once you have some names, it’s time to ask:

  • How do you prefer to communicate with clients — email, text, phone calls or in person? How quickly do you respond to messages?
  • How long are your turnaround times on preapproval, appraisal and closing?
  • What lender fees will I be responsible for at closing? (Fees may include commission, loan origination, points, appraisal, credit report and application fees.)
  • Will you waive any of these fees or roll them into my mortgage?
  • What are the down payment requirements?

5. Get Ready to Home Shop With a Pre Approval Letter

Once you find a great lender, you need to get a pre approval letter to go home shopping. Getting a mortgage pre approval letter before you start looking at houses will tell Seller’s you can buy a home when you make an offer. The letter shows the seller that you’re a serious buyer whose loan is likely to close. It’s evidence that a lender has evaluated your finances and figured out how much you can afford to borrow, and therefore how much house you can afford.

Getting preapproved now will also save time later. When you’re ready to make an offer on a home, lenders will already have the information they need to process your home loan.

To get pre approved, you’ll have to provide your lender your financial information. Here’s a list of what a lender will typically ask you for:

  • Social Security numbers for yourself and any co-borrowers
  • Bank, savings, checking, investment account information
  • Outstanding debt obligations, including credit card, car loan, student loan and other balances
  • Two years of tax returns, W-2s and 1099s
  • Salary and employer information
  • Information about how much of a down payment you can make, and where the money is coming from

Once you get pre approved always ask what could help you get a lower payment. Also ask if this is the best rate they can provide? Ask if you should lock the rate and if its costs you anything to lock the rate, and how long the lock is good for.

Principal and interest payments on a mortgage aren’t the only costs of buying a home; you should ask your lender about others, including closing costs, points, loan origination fees and other transaction fees. If you’re unsure of something, ask for an explanation. I recommend prior to shopping for home you understand the total cost of owning a home on a monthly basis.

Final Thoughts

Although there are a tremendous amount of resources on the internet for “how to” and “learn more” about buying a home with a loan. Don’t forget to rely on family, friends and real estate agents to help you get started to find the best loan officer to work with you. Rates are in general very competitive and you should be able to determine if the rate and terms of your home loan is fair. However working with a loan officer who communicates well, answers your questions along the way, works hard for you goes a long way to help you succeed in your goal of owning a home.