If you’re in the process of purchasing a new home, on your bank paperwork, you may have noticed something called “mortgage insurance.” Not sure what it is? There are several different types of insurance that homeowners should be familiar with. Here, I will explain the basics.
Title insurance from the seller comes from the title company. It protects home owners and lenders from damage or property loss that may happen because of liens or other defects in the title to the property. Each title insurance policy is subject to specific terms, exclusions, and conditions.
Homeowner’s insurance/hazard insurance/fire insurance is a policy issued from an insurance company and it protects your property as well as the contents and possessions inside. It also provides liability coverage against accidents in the home or on the property. At closing, homeowners will pay for the first year’s policy in full.
This type of insurance is not a benefit to a homebuyer. When a lender provides a loan and the buyer puts less than 20% down on the purchase, the lender takes a bigger risk. If the buyer ends up defaulting on the loan and they don’t have much “skin” in the game, it’s possible that the lender won’t cover their loan amount when it comes time to liquidate the property. This cost can be paid within your monthly mortgage payment or up front and it will cover the lender’s loss if something were to happen. For some types of loans, particularly FHA loans, the premium will last for the life of the loan, even though your equity position might get you above the 20% mark. Conventional financing will typically have a provision for mortgage insurance that can be removed once the homeowner has 20% equity in the home.
Buying a home requires many different steps and there is a lot of research that is required. The insurance process can be complex and sometimes confusing, especially if you haven’t gone through the home buying process before, and that’s one of the many reasons why it is important to work with a well-qualified, experienced, hands-on Realtor. If you have questions about it, I’m happy to sit down and talk with you about any questions you may have!
If you have lived in your home for a while and you’re considering completing a refinance, you likely have some questions as to when or if it’s the right time to do so. Refinancing is a big decision, as it requires a lot of details and time, but it can have some great benefits to it once it’s all said and done. When deciding whether or not you want to refinance, one of the key questions is to ask yourself how long you plan on being in the home. If you intend on staying in the home for several years, a refinance could be a great choice, as you’ll likely recoup the closing costs over your time spent there. For those that are looking to move in a couple of years, refinancing might not make as much sense.
Aaron Hicks, Mortgage Consultant at HomeStreet Bank in Vancouver provides some great reasons to take into consideration on when a refinance might make sense for you.
Reason#1: Reduction in interest rate
Refinancing to lower your interest rate and payment is one of the main reasons why people choose to refinance. Hicks says, “There are still many people out there that have a much higher interest rate on their home loan than they should considering the current market. Refinancing could very well favor a lower interest rate or reduced monthly payment that reduces a person’s overall outgoing monthly debt.”
Reason #2: Reduction in loan term
If you want to pay off your loan faster, refinancing to significantly lower your loan term could be a fantastic idea. In most situations for example, if a borrower wants to refinance from a 30-year fixed mortgage to a 15-year fixed, the borrower will save a substantial amount of money in interest every year.
Reason #3: Cashout.
If you have been in your home for a while and it has gained significant equity, many homeowners choose to refinance and take cash out of the equity. Hicks says, “Some people do this to consolidate liabilities, make home improvements, or use the cash to invest in additional real estate. The ultimate goal here is to have the cash you are taking out work toward future financial freedom.”
Reason #4: Change loan programs.
If you have an adjustable rate mortgage (ARM), it can be very helpful to refinance to a fixed rate loan. Hicks shares, “ARMs carry the risk of having their interest rate increase significantly. When this happens, this can cause severe financial burden on a person’s finances.”
There are many reasons to consider a refinance, but each homeowner’s situation is different. What may work for one, may not work for another. Sit down and look closely at your home loan and what is left to be paid back and consider whether a refinance is right for you.
If you’re new to the home buying process, there is a lot to learn and a lot of different terms that you may be unfamiliar with. Property taxes are one of those things that are just one of the forms of tax that homeowners will need to pay in order to remain compliant with the government. Taxes are made up of charges from different entities and local governments will use property tax revenue to fund important programs, with the biggest percentage going to schools.
Assessed value is the value placed placed by the county on your property. Every six years it is reviewed/assessed by a real person. The appraised value is the amount a trained appraiser places in the property for loan purposes and the ratio of assessed to appraised varies greatly. If the market is going up, then the appraisal is always higher than assessed. As a homeowner, there can be several things that can cause an increase and one of those is taking on home improvements. Remodeling and home additions will add to the value of your home, but it can also cause the assessed value to increase. So, before you take on a big project, make sure you balance what the increased property taxes will be compared to what money you will make when you sell the home for a higher price.
Every jurisdiction levies on your house based on a tax rate. Several different levels of taxing entities/jurisdiction have permission to collect property tax, including counties, school districts, and others such as fire districts and libraries. All of these jurisdictions have a tax rate which add up to a total millage rate. The millage rate is the amount you’re charged for every $1,000 of assessed value of your home and it differs from location to location. Multiply the millage rate per thousand dollars your house is assessed at, and that’s what your property taxes is.
Property taxes can be confusing for many homeowners, so understanding the basics is important in understanding how to they’re calculated and what it means when you’re buying a home. Homeowners will have the option to pay their property taxes yearly in a lump sum, or they can be factored into your mortgage payment every year. If you factor them into your mortgage payment, and the property taxes fluctuate, there may be a change in the amount you’re paying every month on your mortgage bill.
Wondering what your property taxes are and what they are being allotted to? You can look at the Clark County website here and enter your address to get the details.
Still not sure how they work? I’m happy to go over them with you to make sure you understand what all the terminology means.
Tips Provided by Nancy Johns, Blog Written by Brooke Strickland (brookestrickland.org)
At some point in your life, it’s common to feel some kind of buyer’s remorse. Whether it’s a small item at the store that you bought on an impulse or a car that you bought that you wish you wouldn’t have spent so much money on, there is likely something that has made you want to go back and return it or change the situation somehow. Buying a home is probably the biggest purchase you’ll make in your lifetime, so when you go into it, keep in mind some simple things that will help you avoid having buyer’s remorse. Once you sign on the dotted line to become a homeowner, be sure that you’ll feel excitement….not remorse!
Tip #1: Find a realtor that is focused on your needs and wants.
When you’re searching for a home, work with a Realtor that understands your “must haves” and “would likes” so you know that he/she has your best interest in mind. If your agent doesn’t have a clear idea of what it is you need or want in a home, you’ll waste time and likely end up feeling frustrated. On the flipside, remember that homes on the market now are moving very quickly and you have to be ready to make a decision. Know what you want from the get go and know what you can spend. Get prequalified right away so you know the financial portion of the home buying process.
Tip #2: Don’t compromise on your core requirements.
Keep your core requirements at the core! It’s easy to find a house that “almost” fits the bill, but if it doesn’t have the core of what you need, keep shopping. For example, if you know you need at least 2 bathrooms but the one you really liked had just one, don’t settle. In addition, don’t let your spouse or another family member try to talk you into a home that doesn’t have everything you’re looking for.
Tip #3: Remember that your wish list is just a wish list.
While core requirements can’t be compromised, be sure that there are things that you can compromise on. For instance, if you know you don’t need a formal dining room, but it’s on your wish list as something that you’d like if possible, remember that it’s not a necessary requirement. Know what you can live without when you are going through the home buying process.
Tip #4: Don’t let the excitement get to you.
The market today is hot – and that means that if you find a home that you love, you’ll have to act quickly. But don’t let the excitement or stress of getting an offer on the table get to you. Getting caught up in the heat of the moment – whether it’s in a bidding war on a home or just trying to get the details wrapped up in a timely fashion, remember to sit back and take a deep breath.