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Sep 25

What Homebuyers Need To Know About Homeowners Insurance

What Homebuyers Need To Know About Homeowners Insurance

New homeowners may anticipate closing costs associated with buying a home, but may not anticipate the ongoing costs of homeownership. As you complete your home purchase it is important to understand the cost of homeowners insurance, which will be required by your mortgage lender and is intended to protect your investment.

What is homeowners insurance?
Homeowners insurance is a specific type of policy that protects homeowners against potential losses from disasters such as fire, storm damage or burglary. It will also protect against certain types of personal harm that could happen to others on your property. You may also add coverage for earthquakes or flooding depending on where your property is located. If you live somewhere flooding is likely, your insurance company may require additional flood coverage.

A home insurance policy covers four major areas:

  • Dwelling, which covers damage to the home and attached structures.
  • Additional living expenses, which covers living expenses if your home becomes unlivable.
  • Personal liability protects you against lawsuits from damages or personal injuries that occur on your property.
  • Personal possessions, which covers destroyed or stolen personal property.

How is private mortgage insurance different from homeowners insurance?
Private mortgage insurance (PMI) is paid to protect the mortgage lender and bank from the homeowner defaulting on the loan. PMI is paid until the homeowner owns at least 20% of the home. Although there are variables in policies for PMI, these variables will be decided by the mortgage lender and included in the closing disclosure. PMI may also be included in your monthly mortgage payment.

Homeowners insurance is paid to protect the homeowner throughout the time that they own the home. It may also protect the mortgage lender and bank during the time of the mortgage loan. Homeowners insurance should be paid regardless of your mortgage loan. Homeowners insurance will include many variables that can change to match your preferences and needs.

Learn more about Private Mortgage Insurance.

What does homeowners insurance have to do with my mortgage?
All mortgage lenders will require you to purchase homeowners insurance at the time of your home purchase. Similar to a car dealership requiring proof of insurance, this is to ensure that something will not affect the value of your house after purchase. It is even more important when the homeowner is repaying their mortgage to a bank for the cost of the home. Even if the home is yours, the bank still owns equity in the home, and they will want that equity to be protected.

Your mortgage lender will establish that you have homeowners insurance prior to closing on a home. You will want to speak with your mortgage lender to establish what coverage you will need. Most likely, your policy will need to ensure that 100% of the home’s cost is insured.

Can homeowners insurance be included in mortgage payments?
Yes, it can be. When you pay your homeowners insurance as a part of your mortgage, it’s called having an escrow. Depending on your lender, you may be asked to have an escrow as opposed to seeking homeowners insurance privately if you own less than 20% equity in your home. This is to ensure that your home is protected for both you and your mortgage lender.

If you own more than 20% equity in your home, you may still choose to have an escrow. Some homeowners will do this to minimize the number of payments that they are responsible for or to also include property taxes into their escrow, which is also an option.

Is homeowners insurance required?
Before you close on your home your mortgage lender will likely require you to have a homeowners insurance policy. This is to protect your equity in the home as well as the equity owned by the mortgage lender or bank.

It is possible to sign a home insurance binder, which acts as a temporary policy while purchasing a home. This may be helpful if you are planning to close on a home quickly.

How much should homeowners insurance cost?
The cost of homeowners insurance is highly variable depending on location, risks like flooding or earthquakes, and the value of your home. However, in the US it typically costs between $600-1,200 per year. You can expect to pay about $35 per month for every $100,000 of home value.

When is a certain coverage required?
If your home is going to require additional insurance coverage, such as earthquake or flooding coverage, your realtor and mortgage lender should be aware of this before the home is placed under contract. That’s why it’s important to understand what to expect to pay in closing costs and to have an estimate about the cost of homeowners insurance.

Visit the RatePro Mortgage blog to learn more about closing costs and contact us to answer your questions about mortgage loans.

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Sep 9

What to Expect With Closing Costs

What to Expect With Closing Costs web

When preparing to buy a home, there are a few things that most people are prepared for. And when you close on a home, it means that the end of your negotiations are over, your mortgage is approved, and you and the seller are prepared for sign and have the property turned over. However, you will also need to prepare for closing costs as an expense before you finalize the purchase of your home. Here’s what you need to know about closing costs:

What are closing costs?
Closing costs are fees associated with your home purchase that are paid at the closing of a real estate transaction. These costs are typically between 2-5% of the purchase price of their home. What makes up closing costs is unique to the type of mortgage lender that you work with, as well as your location and the type of mortgage that you choose. There are multiple factors that make up closing costs, but they will usually be itemized and explained to you by your mortgage lender. Some of these fees may also be negotiable, but remember, this must be done prior to closing.

Where can I find my closing cost?
You will receive a closing disclosure by your mortgage lender 3 days before your loan closes. This document has a lot of useful information, including the amount of your loan, interest rate, monthly payment, and the closing costs.

Before you get here, you should have been given a loan estimate from your mortgage lender which would have included a summary of these costs. There are restrictions that prevent a mortgage lender from increasing these costs substantially, so this should be used as a first indicator of how much money you will need to have set aside.

How much should closing costs be?
Closing costs are typically between 2-5% of the purchase price of your home. If you purchase a home that is $150,000, your closing costs will be between $3,000 and $7,500. Because there are other costs that come with owning a home, such as mortgage insurance, it is important to be prepared to pay these costs at closing.

What factors determine the cost of closing costs?
The items that make up your closing costs can vary, but they will most likely include appraisal and attorney fees, title insurance and services, as well as local and state taxes and recording fees. These fees are all a normal part of purchasing a home, and should be easily explained by your mortgage lender.

Other costs include the set up of your escrow account for the payment of future real estate taxes and homeowner’s insurance.

Is there a way to not pay closing costs?
You can avoid pay closing costs by getting a no-closing cost mortgage. This type of mortgage does not require you to pay costs at closing. However, the buyer will usually have to pay an increased monthly interest rate to make up for these costs.

In some instances, closing costs may be paid by the seller of the home if you agree upon this in the purchase and sale agreement. Also, if you are required to move for your career, your company may be able to pay or subsidize your closing costs. It’s always worth asking.

When can I ask my mortgage lender or realtor about closing costs?
You can, and should, speak with your mortgage lender about closing costs immediately. When you apply for pre-approval, a mortgage lender or bank will typically evaluate your finances with fees like closing costs in mind. Because they are paid at closing, it is another important item to save for when planning to purchase a home.

When you are looking to purchase a home, there are a lot of things that you may have questions about. Finding a local mortgage lender that you can rely on will help you to understand everything that you need to know about this important process. Visit RatePro Mortgage to answer all of your questions.

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Jul 18

Tips for Buying a Home When Mortgage Rates are Rising

Tips for Buying a Home When Mortgage Rates are Rising

Mortgage rates have risen about .5% since the end of 2017 to 4.625% for a 30-year conventional loan. If you are planning to buy a home this year, it’s important to learn what this could mean for you.

The mortgage rate increase will have an affect on your monthly payment. It may not be a large amount each month, but the cost increase will add up over time. However, this has happened steadily over the past decade, and it doesn’t mean that this is a bad time to buy a home.

Here are a few things that you can do when mortgage rates rise:

Lock your mortgage rate
Speak with your lender about locking your mortgage rate. This means that your interest rate will be frozen until your closing, ensuring that you will not pay more in interest than the rate you were quoted at the time you sought pre-approval. This can be helpful if month-to-month interest rates seem variable.

Consider increasing your down payment
Even if interest rates are rising, the lowest rate available is always going to go to an ideal homebuyer. If you can increase your down payment, you will have a better chance of getting a lower interest rate.

Consider your price range closely
When interest rates increase, the housing market can slow. This often means that houses on the market may be open to selling at a lower price range. If this is not the case, consider reevaluating your price range now that interest rates have changed.

Pay down your ARM mortgage
If you have an ARM (adjustable rate mortgage) and the rate is going to change soon, you will likely pay more per month due to the increase. If you can pay more at this time, you can decrease your total amount owed prior to the increase in interest.

Buy discount points
Most lenders will allow you to pay more money in loan costs with the specific goal of reaching a lower interest rate, called buying discount points. The amount paid is determined by the loan amount, and will lower your rate by .125% increments. The larger the rate decrease, the larger the amount of discount points.

Don’t panic. Mortgage rates have fluctuated up and down for many years. Monitoring interest rates has always been a part of buying a home, but it should not dissuade you from making a purchase when you are ready for it.

Contact RatePro Mortgage for the current rate trends and to learn the best time to lock in your interest rate on a mortgage.

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Apr 19

Everything You Need to Know About FHA Loans in 2019

Everything about FHA Loans 2019 web

FHA (Federal Housing Authority) Loans are designed for first-time homebuyers and can help buyers with low or building credit to make homeownership a reality. FHA Loan limits are set by the U. S. Department of Housing and Urban Development, or HUD.

It is important to stay up-to-date on what these changes are if you are interested in signing an FHA Loan in 2019. And remember, these limits can vary by state and housing market, so be sure to check with your local mortgage lender to discuss the current rate.

FHA loan limits 2019

What is a high-cost or low-cost market?

Locations within Virginia range from low-cost to high-cost. The central Virginia market, including Richmond, is currently set at $535,900.

FHA loan limits increase when the average price of homes rises. This means that the limit is considering the average home price over the past two years in Virginia. It is also expected that home prices will continue to rise and FHA loan limits may change again to correspond. This could mean that FHA Loans can work with your home buying budget and correspond with the market that you wish to buy in.

FHA downpayment 2019

FHA Credit Reqs 2019 1

Lender requirements

Although an FHA Loan is insured through the Federal Housing Agency, the mortgage lender may have specific requirements that they set to qualify for an FHA Loan. It is important to discuss these requirements before deciding what type of loan that you would like, and it may be helpful to learn about other loan options as well. Remember, when looking for a mortgage, a priority should be the face-to-face contact only available from a local mortgage lender.

Want to learn more about other loan types? Check out What Mortgage Loan is Right For You?

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Jan 24

4 New Year’s Resolutions For Homebuyers

NewYears

New Year’s resolutions are hard to keep—but if you are planning to buy a home in 2019 or later, that decision will benefit you for life. With a few smart choices, these resolutions can help you to save money, improve your credit score, and to find a mortgage and home that fits your lifestyle.

Look ahead at 2019 with these resolutions:

1. Start a savings fund

The first step in preparing to buy a home should be to start a savings fund. FHA Loans require a down payment of 3.5% of the home’s cost. Other mortgages typically see down payments of 20% of a home’s price, and it can take time and planning to accrue that amount of money.

If you are not able to provide a large down payment, learn more about FHA mortgage loan requirements.

If you have trouble saving, try using a financing app, look for places where you can cut spending, or speak with your bank about creating a savings plan. Any amount that you can set aside will be useful in buying a home.

2. Check your credit score

Be prepared to check your credit score before planning to shop for a mortgage. If you have established credit accounts and a good history of on-time payments, then your score may already be above 580, which is required for an FHA loan.

However, if you do not have good credit history, here are a few ways that you can plan to improve your score in just one year.

  • Lower your credit usage. You should use no more than ⅓ of your available credit each month.
  • Make on-time payments for your credit accounts. A single late payment can be one of the largest negative impacts on your credit score. If you have trouble remembering payment dates, use your accounts’ online interface or app to set up automatic payments on each due date.
  • Pay your full balance each month. Showing a consistent payment history and low credit usage will help improve your credit score.
  • Don’t over check. If you are applying for credit cards, mortgage loans, or other large credit accounts, a hard pull will be made on your accounts. This can negatively impact your score if too many occur within a year.
  • Similarly, a self check of your credit score will not impact it negatively. This is called a soft pull. Make sure that you use a reliable credit checking agency to view your score periodically. Many banks and financial institutions are now providing monthly credit reports as an included service with certain accounts.

With these credit tips, you can begin to see your score improve. If you make a habit of using these methods, you can expect to have a better credit score by the next new year.

3. Plan for pre-approval

When you are shopping for homes, pre-approval can help you to make a decision on a home when the time is right. Homes can sell faster than you expect, and getting a pre-approval can allow you to make an offer on a home when you are ready to act.

4. Choose a mortgage lender that understands your needs

When you are shopping for pre-approval, you can start to build a relationship with a mortgage lender that understands your interests, your home market, and what you expect in a loan.

If you are looking for a close, personal connection with a mortgage lender, try shopping locally. Local mortgage lenders are often easier to contact, can meet with you to explain costs and other variables, and are most familiar with your local market values.

Taking time to understand your finances and learn about your mortgage options can be helpful at any time of the year. If it is your goal to buy a home in 2019, RatePro Mortgage wishes to help with any information that you may need. Good luck!

Are you planning to refinance your home this year? View more information here!

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