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November 2018

Homeowner's Insurance Cost

Homeowner’s Insurance: A Guide to Your First Policy

 1000 500 Sam Radbil
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While homeowner’s insurance cost is always a major factor, there are other important things to look at as you purchase your first policy. In fact, many insurance and real estate professionals state that focusing only on homeowner’s insurance cost can cause trouble if a major disaster strikes and property insurance is to be relied upon for reimbursement. Let’s look at steps you can take to avoid future issues.

Get Enough Homeowners Insurance

homeowner's insurance costs

Being underinsured is a big problem. If you insure your home for $200,000 but it costs more than that amount to restore everything to pre-disaster status, you can find yourself with a costly problem. Work with your agent make sure that your home is totally covered for replacement cost. Sometimes the extra premium amount to do this is minimal, but if construction costs have risen since you first bought your insurance, a hurricane, tornado or fire can present you with a big bill to restore your premises, even after insurance has paid its share.

Deductibles: What Does That Really Mean?

Homeowners Insurance Deductibles

Your deductible is the amount of money you have to pay toward a claim before your insurance kicks in. Simply, if you have $5000 in roof damage due to a covered peril like hail, but you have a $1000 deductible, your insurance will pay only $4000 and you’re stuck with the rest of the bill.

Furthermore, deductibles used to be expressed in monetary terms like $250, $500, or $1000. Now, it is more common for deductible limits that are equal to a percentage of your home’s value. So, on a $300,000 home, a tiny-looking one percent deductible amount would actually be a whopping $3000.

Discounts on Homeowners Insurance Cost

Do check for discounts since the combination of auto and homeowner’s policies can get you a great break on homeowner’s insurance cost. There are also discounts available for fire protection, security systems, remote security solutions, and even wind-resistant shutters in some areas.

Customization of Your Policy

Customized Homeowner's Insurance

The flood damage experts at BMS CAT told us that, “there are some policies in some areas that do not cover every peril like floods. In fact, true flood damage is usually not covered, so if you live in a flood-prone area, you may be able to purchase FEMA flood insurance, although this isn’t cheap.” Also, watch out for stingy insurance company history. Sometimes insurance companies fight about water entering a home. They may consider it an uninsured flood event, while you may maintain that the water was wind-driven rain. Check with your agent on this.

Video for Proof

Finally, take a video of all of your belongings and upload the files to a cloud-based server. That way, your record of exactly what you own will be preserved. Also, make sure you disclose special possessions like jewelry and musical instruments as these may have to be “scheduled,” or you may even have to buy a separate personal articles policy in order to ensure coverage.

Insurance Claims for Home

Image source: ValuePenguin

If you thought that your days of carefully vetting documents were over when your purchase offer was accepted, think again, personal finance is more complicated than that. Your homeowner’s insurance policy is your lifeline to security, so remember to spend time choosing the proper policy, and don’t base your decision totally on homeowner’s insurance cost. Also, be sure to read up on the best personal finance books, so that you know exactly what you’re reading!

As always, feel free to contact us with any questions!

Contract for Deed Homes: What Realtors NEED To Know

 1000 500 Sam Radbil
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There are a number of reasons Minnesota residents looking to buy contract for deed homes have had success. But you might ask: why not just buy your home with a traditional mortgage from the bank? Let’s talk about that.

We’ve all had it happen. 

Loan Rejection

After a difficult and protracted negotiation period, you finally got both your buyer and the seller to agree on price, contingencies, and before-closing repairs. At the end, everyone came to their senses, gave a up a little, and all parties were looking forward to closing.

Then the bank stepped in and killed the deal. Even though your buyer was pre-qualified, they made a mistake, didn’t follow your instructions and decided to finance an expensive vehicle. As the bank did a final credit check, the new car loan appeared and skewed the buyer’s debt to income ratio. The deal was dead, but you could have brought it back to life.

Contract for Deed Homes

Image result for home buying process

Contract for deed is a widely accepted Minnesota financing tool where a seller finances the property purchase on an installment basis, and they buyer receives the deed upon making the final payment. Many think that for this to work they need to find free and clear properties where a seller agrees to be the bank.

Why free and clear?

Because sellers can’t usually sell encumbered properties without breaching the lender’s mortgage contract. Therefore, those interested in contract for deed financing look specifically for contract for deed homes. There is another way, however.

Companies Like the Contract for Deed Crew (Yes, that’s us!)

There are quality companies out there like C4D, and it works like this: You bring a deal to C4D. Like a bank, C4D analyzes the deal to ensure that the seller can make the required monthly payments.

Unlike a bank, however, C4D can look past problems like the vehicle purchase mentioned above. With a good contract for deed homes company, you will be dealing with the company owner—not a bureaucratic bank loan officer. If C4D approves the deal, they will buy the property.

They do this with a bank loan, but the company’s bank does not include a due-upon-sale clause in its mortgage to C4D. Therefore, C4D legally and ethically buys the home, and with the bank’s blessing, C4D sells it on a contract for deed to the buyer.

Contract for Deed Homes

Benefits to the Realtor using Contract for Deed

  • You can explain difficult situations to C4D and they will understand. A debt to income ratio that has recently changed can be worked with if the buyers can legitimately afford the home.
  • Contract for deed revives dead deals. Banks can be arbitrary and unforgiving, but with a contract for deed transaction, the seller has more leeway to analyze what really makes the buyer worthy.
  • While a down payment is needed, the actual percentage is not necessarily set, and there are even ways the contract for deed companies can facilitate payment assistance.
  • Buyers can look at any home—not just contract for deed homes. With a MN contract for deed sale, the seller is unaffected since a company like C4D is the only purchaser they need to deal with.
  • All real estate commissions are protected.
  • Sellers can move their homes more expediently because companies like C4D have lots of buyers waiting for their dream homes.

Also, if you’re looking to understand property value event more, check out this presentation:

Presentation courtesy of LoseTheAgent, a listing platform for homes for sale by owner.

Don’t let loan officers and finicky banks get in your way. Consider using MN contract for deed for any deal where the lender is causing you trouble. It’s worth an email!

5 Hurdles for Minority Home Buyers in Minnesota

 1000 500 Sam Radbil
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If you are a member of a minority group, you may have a more difficult path to a minority home loan. If you don’t come from generational wealth, financing could be a huge problem.

Everyone faces obstacles when contemplating their first-time home purchase, but these difficulties can be more pronounced and harder to overcome if you are a minority home purchaser. Let’s look at the top five:

Insufficient Income for Minority Home Loan

Minority Home Loan

 

The debt-to-income ratio calculation is a method used to determine whether a prospective applicant for a minority home loan can afford the purchase.

While this number varies, many lenders and government agencies use 43 percent as the figure. In other words, no more than 43 percent of your income can go toward your mortgage payment. Even if you have a great credit score, your income may be too low for your minority home loan.

If you’re struggling, you might want to look into some side hustles and learn about more passive income ideas.

Down Payment Trouble

Down Payment

Image credit: zillow.com

You may have great credit, a steady job, and a promising future, but if you haven’t been able to save for a minority home loan down payment, you may have to access available aid sources. A gift from a relative, or loan from Minnesota Housing, a legitimate governmental agency are two places to look.

Access to Credit

Let’s face it, even in 2018 you may still encounter racial bias when applying for your minority home loan. Check out these North Carolina statistics from WUNC:

“For all 203,939 loan applications in North Carolina in 2015 and 2016, 52,881 were from minorities, and had an overall denial rate of 11.5 percent. 151,058 were from whites, and had an overall denial rate of 6.3 percent.

In 1,415 of North Carolina’s 2,117 Census Tracts where at least one loan application came from a person of color, the loan application denial rate was higher for minorities than for whites.”

High Prices for Minority Home Loan

We mentioned the 43 percent debt to income ratio previously, and we know that since the 2009 recession, housing prices have dramatically increased.

If your debt-to-income ratio will only qualify you for a $150,000 home but there are none available in that price range, you can be out of luck. Higher home prices impact everyone, but while the wealthy can usually find a way to get their deals done, first-time minority homebuyers with good credit but low incomes can have a problem.

Just take a look at the graphic below from ABODO showing where minorities are buying the most and fewest homes. Interesting, huh?

Minority Homeownership

Image credit: abodo.com

Minority Home Loan with Bad Credit?

Creditcards.com tells us that:

“Minorities are less likely to have access to credit than white Americans. (Recently), 20 percent of whites did not have access to a credit card compared with 47 percent of African-Americans and 30 percent of Latinos.

African-Americans and Latinos are less confident that they will be approved for credit than whites. In (recent years), 67.7 percent of whites were very confident or somewhat confident that they would be approved for credit, compared to 45.3 percent of African-Americans and 53.7 percent of Latinos. While 19.5 percent of whites were not confident that they would be approved for credit, 28 percent of African-Americans and 30.7 percent of Latinos were not confident.”

If you are a minority, the simple act of applying for credit may put you at a disadvantage. And earning money is tough, much like using the best survey sites to make a quick buck can take a while.

While minorities may face uphill battles on the path to home ownership, MN residents should look to contract for deed as a great alternative to traditional financing. If you need more information, contact us — an excellent place to start.

Real Estate Terminology Explained

26 Real Estate Terms Defined for New Buyers

 1000 500 Sam Radbil
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Buying real estate can be complicated, and some of the real estate terminology can be confusing. Be sure to refer to this comprehensive guide when you need some clarification.

Real Estate Terminology

1) Adjustable rate mortgage

As opposed to a fixed rate instrument, your actual interest rate can move up and down at pre-determined intervals according to whatever index it is associated with.

2) Amortization schedule

A chart that shows exactly how much of your monthly payment is applied to principal, and how much is applied to interest.

3) Appraisal

An independent accounting of what a property is worth. Lenders will require to this to make sure the home they are financing is worth the loan amount.

4) Assessed value

What taxing authorities say your home is worth. This can be changed annually.

5) Buyer’s Agent

A real estate professional that represents the prospective buyer and is therefore entitled to part of the sale commission.

6) Closing

The meeting where the deal is finalized. Money is usually transferred that day or the next day.

7) Closing costs

These are the loan processing and various other costs that can equal two to five percent of the home’s purchase price.

8) Contingencies

Contract clauses that can allow either party to exit from a deal. An example is contract section that explains if the buyer cannot get financing within a certain period of time, the deal is off.

9) Equity

The difference between the market value of your home and any loans you have against it.

10) Escrow

An account that certain monies like down payments are placed into pending closing a deal. After the loan is closed, banks often require insurance and tax payments to be escrowed also.

11) Fixed-rate mortgage

A mortgage rate that can’t change no matter what happens to subsequent mortgage rates.

12) Home warranty

Usually purchases from a third party, these instruments help pay for problems after the sale has been consummated.

13) Inspection

Done by an independent person, this process checks the house for problems that may have to be addressed before the sale.

14) Interest

The price you pay for money expressed as a yearly percentage. This is an important piece of real estate terminology that you must understand.

15) Listing Agent

In a transaction, the seller’s agent.

16) Mortgage broker

A third party that finds appropriate lenders for buyers.

17) Offer

The legal document that spells out the buyer’s proposed terms of purchase.

18) Pre-approval

Buyers can go to the lender, present financial information, and get pre-approved for a loan. Pre-approval is not usually binding, however.

19) Principal

The amount of money that needs to be financed after your down-payment has been subtracted. This seems like a simple, easy to understand piece of real estate terminology, but make sure you fully understand this concept before searching for a home.

20) Private mortgage insurance

Insurance that the buyer pays for in monthly payments. It protects the lender against default.

21) Real estate agent

Someone with a real estate license who has passed certain exams and who works with a real estate broker. This should be a very familiar term to many; because whether you’re buying a home in Minnesota or renting an apartment in affordable Eugene, Oregon, it’s likely that you’ve worked with an agent. 

22) Real estate broker

Someone that has met certain requirements and who hires agents to work for him or her.

23) Realtor

A real estate agent that is a member of the National Association of Realtors (NAR). NAR has ethical and business standards that members must follow.

24) Refinancing

Restructuring a home loan to get a more reasonable rate or pull equity money out.

25) Title insurance

A policy that both sellers and buyers must purchase that protects that parties in a transaction against title deficiencies.

26) Contract for Deed

A unique process widely used in Minnesota that, when used correctly, can allow those that have been denied credit a real chance at home ownership.

As you can see, real estate terminology can be tricky, but by becoming familiar with this list, you’ll have a better understanding of what’s going on during your deal.