The Federal Housing Finance Agency (FHFA) has released its latest Quarterly Home Price Index, and we’ve got great news – in the Pacific region, home prices are up 8.01%. In Washington state, home prices are up 10.4%. Home prices actually increased in every state but Vermont. This is fantastic news if you are thinking of selling your home this fall.
Homeowner’s insurance is insurance coverage that protects your home, its contents and other assets in the event of fire, theft, vandalism, accident, storm or other disaster. Homeowner’s insurance also covers liabilities if someone is hurt on your property.
Some coverages for your home are not included in a standard policy. For example, floods and earthquakes are usually purchased separately. Some homeowners also insure specific items such as an art collection or jewelry over a certain amount.
If you have a mortgage on your home, your lender will require you to have homeowner’s insurance, but it is not required by law. However, we consider it a “must have” even if your home is paid for.
How much coverage do you need to protect yourself financially if something happens to your home? To answer that, let’s look at some important terms that will influence the amount and cost of coverage.
- Guaranteed replacement coverage: Your insurer will pay to rebuild your home no matter what it costs. According to the Wall Street Journal, these types of policies are hard to find.
- Extended replacement coverage: Many insurance companies offer coverage with a cap at 125% of the insured value of your home. This limits their liability.
- Inflation guarantee or guard: This insurance feature ensures that your home’s insured value is in line with the current marketplace.
- Actual cash value vs. replacement cost: To insure the items in your home, a replacement cost policy is more advantageous than actual cash value as personal items such as furniture, clothing, electronics and household furnishings depreciate over time.
- Liability coverage: This is a standard feature of homeowner’s insurance to protect yourself if someone is injured on your property or in your home. Standard policies range between $100,000 and $300,000. How much coverage you opt to get depends on your needs.
The Wall Street Journal recommends that you get an appraisal and then purchase extended replacement coverage and an inflation guarantee to protect yourself. You will also want to ask your insurance agent if flood insurance is required in your region of the country. If so, you’ll want to obtain that coverage. Learn more about flood insurance at FloodSmart.gov.
Because each homeowner’s situation is different, it is best to discuss your specific needs with an insurance specialist. If you don’t have an insurance agent, ask your Realtor for a referral to local agents she knows and trusts. They can discuss your situation and make recommendations for your consideration. Good luck!
Though the real estate market slows down a bit in the fall, it is still a good time to sell your home, especially in the greater Seattle area where home inventory and interest rates are both low. Here are some tips to help you prepare your home for sale.
1. Clean up the exterior of your home. This means keeping your lawn, trees and shrubs neatly groomed, clearing out any flowers and plants that didn’t survive the summer, and keeping the leaves raked. It is also a good time to wash exterior windows, power wash the outside of your home, your front porch and deck.
2. Make the front of your home inviting. Don’t underestimate the value of curb appeal. You want the exterior of your home to be neat and clean, but you also want it to be inviting. This might mean putting flowers or plants (pumpkins even!) on your front porch, adding a seasonal wreath to your front door, giving your mailbox or front door a fresh coat of paint or replacing the old faded address numbers with something more attractive.
3. Clean your home’s interior, top to bottom. We always hear about spring cleaning, but fall cleaning is just as important. Give your home a thorough cleaning, including windows, blinds, ceiling fans, baseboards, floors, walls, if needed, etc. If you don’t have time, ask your Realtor® to refer you to a professional house cleaner in your area. It is well worth the money.
4. Declutter, depersonalize and organize your home, garage and any outbuildings. By doing so, potential buyers can more easily envision themselves in your home.
5. Prepare your home for fall weather. Take out or store window or portable air conditioners, replace screens with storm windows if your home has them, clean out your gutters, store your patio furniture, and consider having your furnace serviced.
6. Do minor repairs. This goes hand in hand with preparing your home for fall weather. Do the windows need caulking? Do any of the screens need repairing or replacing? Are any of your light fixtures broken or in need of an updated look?
7. Add seasonal touches to your home’s interior. This could mean a fall floral arrangement in your entryway, cozy autumn-colored throws in the family room, or a bowl of fall fruits on your kitchen counter. You could also take advantage of fall scents with candles or air fresheners – apple, cinnamon, pumpkin, etc.
During the initial walk-through of your home, your Realtor® can make additional suggestions for improving and staging your home to put the focus on its very best features. Happy selling!
This week we are continuing our top 10 list of home buyer’s most frequently asked questions!
6. Why should I buy a home instead of rent one?
A home is a long-term investment that gives you secure long-term housing and financial security. When you pay rent, that money goes to pay your landlord’s mortgage and related expenses. When you make a mortgage payment on your own home, however, you are putting money toward your financial future. You can deduct the cost of mortgage loan interest, as well as property taxes, from your federal income taxes and, in some states, from your state taxes. You’ll also have something that’s yours and that reflects you and your personal style. Also, right now, interest rates are at record lows, and they will increase over time. The sooner you buy, the more you’ll save.
7. How much can I afford to spend?
According to Bankrate.com, a good guideline is spending about 25 percent of your net income on house payments. You can go as high as 32 percent, but anything over 35 percent is dangerous, because a higher income-to-housing ratio puts your home at risk if your finances change, such as a job loss or increased living expenses. Work with your mortgage lender to analyze your current income and expenses and to identify a comfortable mortgage level for your situation. Then you can start shopping for your dream home within your price range. If you don’t have a mortgage lender yet, talk to your Realtor® who can refer you to trusted resources.
8. Can I buy a home while I’m selling my current one?
Yes, you can, but that depends on a variety of factors. For example, if you buy another home before you’ve sold your current one, you may overextend yourself financially. To avoid this pitfall, you can make your purchase offer contingent upon the sale of your current home. There is also the possibility that you could sell your current home before you lock in a new one. Talk to your Realtor to discuss your options and get some recommendations given your individual situation and current real estate market conditions.
9. Besides a mortgage, what other costs should I consider when buying a home?
In addition to your monthly mortgage, you may have to pay private mortgage insurance (PMI) if you are putting less than 20 percent down on the home. You will have property taxes and any applicable city and state taxes. You’ll also have homeowner’s insurance. Some or all of these may be rolled into your mortgage payment, but you’ll want to find that out before closing. Also, you may have higher utility payments in your new home and homeowner association or condo dues may apply. Ask your Realtor for more information about monthly and annual costs.
10. How much should I offer for the home I want?
Your Realtor is your best guide for choosing the right offer price. Factors to consider will include the asking price of similar homes in the same area, the condition of the home, how long the home has been on the market, how much of a mortgage will be required, how much you really want the home and if other offers are expected for the same property.
Here’s a link to Part 1, ICYMI. Have additional questions? Type them in the comments below or reach out to an experienced Realtor you know and trust to answer your questions.
Thanks for reading!
Prospective home buyers have a lot of questions about buying their first – or next – home. Here are some of the most frequently asked questions I hear from home buyers.
1. How do I get started? What’s the first step?
Choose a Realtor®, not just a real estate agent, to help you from the very first steps through the closing of your home. An experienced Realtor® can tell you what’s first, next and last, and there will be many steps. Start by asking friends and family for referrals. Then interview a few Realtors to see which best meets your needs and that you feel really understands what you want in a home. Is she easy to talk to, responsive and available? Is she a solo agent or does she have a team? How many homes has she sold in the last year? How long has she been a Realtor? All good questions.
2. How long does it take to buy a home?
It depends, but usually 30 to 60 days from the time a home buyer signs a contract to purchase a home, according to Homes.com. This does not include time to shop for a home, make an offer, get the offer accepted or to apply for mortgage pre-approval.
3. What type of credit score do I need to qualify for a home loan?
Again, the answer depends on what type of loan you are applying for. For an FHA mortgage loan, FHA.com says a FICO score of 580 or higher will allow you to make a down payment of 3.5%. A credit score lower than 580 will require a 10% down payment. For a conventional loan, Credit Sesame says home buyers need a minimum score of 620. We recommend you ask your mortgage broker, mortgage lender or your Realtor for the latest requirements, which can change. Bottom line: the higher the score, the better your chances for mortgage approval and the lower your interest rate.
4. How much of a down payment do I need?
A down payment on a home is a percentage of the home’s purchase price that you pay up front. Ideally, you should plan on a down payment of 20%, but depending on a variety of factors, you may qualify for a loan with as little as 3% down. For a conventional loan, if you are putting less than 20% down, your lender may require private mortgage insurance (PMI) which will increase your mortgage payments. The more you put down, the less your monthly mortgage will be. Also, remember that your down payment is not the only amount of up-front cash you’ll need to buy a home. There will be other expenses including closing costs to budget for.
5. Are there other mortgage loan programs besides a conventional mortgage?
Yes! There are special home financing programs available including specialty, government-based financing programs like FHA, VA and USDA loans. Learn more about them here.
Next week, we’ll cover the next 5 top frequently asked questions by home buyers. Have your own questions? Type them in the comments below or reach out to an experienced Realtor you know and trust to answer your questions.
Thanks for reading!
Buying a home is an exciting, emotional and stressful project. Whether you have purchased a home before or are preparing to buy your first home, you don’t want to let your emotions make the decision for you. The following are pitfalls that can be costly:
1. Love at first sight. Don’t fall in love with the first house you see and determine to buy it no matter what. You could end up overpaying for the property. Also, after the sale, you may discover costly repairs that will negate any profit from a future sale. Shop around. Compare.
2. Always looking for a better deal. These buyers are just the opposite of the love-at-first-sight crowd. They think there is always a better deal out there than the one they just saw, or they hope the price will drop on some of the homes they like. Though this is possible, it is highly unlikely, especially in a seller’s market where the inventory of homes is lower than usual. If you pass up a good deal because you think the owner might drop the price later, you are giving another buyer the chance to snatch it up first. If a home has all you want, is in the right neighborhood, and is priced well, buy it before it’s gone.
3. Paying too much for the perfect home. There is no such thing as a perfect home, though sometimes buyers think they may have found one. When this happens, the buyer acts on their emotions because they will do anything to get that house. When you buy a home, you always need to know you can resell it without losing any money. Unfortunately, when people find what they believe is the perfect home, they will often bid high to ensure their offer is accepted and in the process may overextend themselves financially.
4. Unrealistic offers. The opposite of the overpayer is the low bidder. There is a big difference between negotiating a price with a seller and offering an unrealistically low price. Discuss this with your agent before you wind up alienating the seller and possibly the chance to buy the property. Making a realistic bid that is good for you and the seller is the answer to getting the property you want.
Shopping with your emotions rarely yields a good deal. Instead, listen to your Realtor’s suggestions, view several homes, and then make your decision based on a variety of factors, not just your emotions. Once you have selected your home, don’t look back. Enjoy it, make improvements and make it your own, knowing you made a sound decision you’ll be happy with for years to come.
Happy House Hunting!
Thinking about selling your home? One of the first steps to preparing your home for sale is organizing your home’s contents, decluttering and depersonalizing, so prospective homebuyers can imagine themselves in your home. A great way to get rid of stuff quickly – and make a little money – is to host a garage sale or yard sale.
Here are 14 garage sale success secrets to help you get started:
- Clean out your closets to find clothes, shoes and accessories that you never wear anymore. If they’re in decent condition, set them aside for the garage sale. If they are in poor condition, toss them. It will save you from packing them later.
- Declutter your kitchen cabinets to find unused appliances, extra vases, kitchen décor, baking pan duplicates and other items that you don’t really need.
- Go through one room at a time, selecting items that you no longer want, need or use, and price as you go. This will make it so much easier when it is time to set up.
- Get your kids and their friends to help. Whether your kids are 5 or 15, they can be useful. Younger ones can help put price stickers on items for sale, while older ones can help promote your garage sale online.
- “Signs, signs, everywhere there’s signs1.” Everybody loves a good garage sale, so make sure you post signs in and around your neighborhood to list your garage sale, including days, hours and locations. The bigger and brighter the better. If you have an HOA though, make sure you follow any signage guidelines.
- Put larger price tags on bigger items like furniture, sporting equipment, etc., so prospective buyers won’t have to hunt for the price.
- Keep track of what you’ve sold and for how much. Consider lowering prices as the day comes to a close, so you can get rid of as much stuff as possible. Remember, whatever doesn’t sell has to be disposed of or packed up!
- Have lots of change on hand – small bills and coins – so cashing out customers is convenient and easy.
- More is better. Consider partnering with your neighborhoods to host your garage sales on the same days and times. This will draw more potential customers to your garage sale.
- Be flexible with your pricing. Sure, you paid $1,500 for that dining room set 15 years ago, but it has depreciated over time. Think about what you’d be willing to pay for an item in similar condition and scout other garage sale ads or Craigslist to see what similar items go for.
- Offer bulk pricing where appropriate. For example, you might price books at $0.25 each or the whole box for $3.00.
- Have a FREE box for smaller items that you want to get rid of. Happy Meal toys come to mind.
- Display your items as attractively as possible, on tables where possible, and in groupings of like items (e.g., books, record albums, shoes, etc.)
- Have a Plan B for items that don’t sell. Is there a local nonprofit where you could donate clothes and household goods too – maybe a local women’s shelter or Goodwill store? After the sale is over, pack it all up and haul it over. Don’t take it back into your house or garage. That just means more work later.
Good luck and Happy Selling!
1“Signs, signs, everywhere a sign” (“Signs,” song and lyrics by Tesla)
Do a Final Walk-Through Before Closing
You’ve done it! You’ve found your dream home, and you are almost ready to sign the papers that will make it yours. While you are anxious to close the deal and move in, there is one critical last step before you do so – a final walk-through. You might be tempted to use this opportunity to give the house one more cursory glance as you plan where you’ll put your furniture, but this is your last chance to make sure the home is in good shape and that any repairs or changes have been made as agreed.
- Heating and Cooling Systems. Check to be sure that the heating and cooling systems in the home work, no matter what the season. You don’t want to wait until winter to know that the furnace or heat pump isn’t working.
- Plumbing. Turn on every faucet and showerhead and flush all the toilets. Do they all work? Is anything leaking? Is the water pressure appropriate? If not, make a note of it.
- Electrical Systems. Turn on all the lights and ceiling fans, find the fuse box and check to be sure that switch plates, fixtures, etc. are in place. If anything is missing, jot it down.
- Appliances. Are the appliances in good working order? Make sure that any appliances that are staying work. Turn on the dishwasher, make sure the refrigerator and freezer are cold, give the dryer a spin, test the garbage disposal, and check the microwave and bathroom fans.
- Home Security. If the home has a security system, is it working? Does the keypad work? How about the remotes? Do you know where everything is and do you have instructions on how to change passcodes, etc. once the home is yours?
- Windows and Doors. Open every window and door to ensure there aren’t any problems, and make sure you have keys to each door. Are the screens and storm windows intact? If the home has an electric garage door opener, check that too and be sure you have access to all remotes.
- Landscaping and Lawn Care. Check to be sure that the lawn has been left as you agreed to it. Make note of any problems with the fencing and, if there is a watering system, check to be sure that it works. Is anything missing?
- Repairs. If the current homeowner agreed to make any repairs prior to selling the home, or if the inspection required repairs or upgrades as a condition of sale, follow up to be sure these repairs have been made. Also, if the homeowner agreed to leave the ceiling fan, curtains or other items, check to be sure they are still in the home.
- Overall Condition of the Home. Is the home clean? Have all of the previous owner’s property been removed? If not, let your Realtor® know.
Make sure you have your Realtor along when you do the final walk-through, so she can serve as the liaison between you and the sellers should there be a problem. You’ll want to get everything resolved prior to closing. Enjoy your new home!
What You Need to Know about Mortgage & Closing Costs
Whether you are a first-time homebuyer or a seasoned homeowner ready for your next home, it is important to understand mortgage and closing costs. Here are some frequently asked questions to help you better understand your options.
Q: What factors impact a mortgage interest rate?
A: There are many factors involved when determining a homebuyer’s interest rate including credit score, loan type, home price, down payment and mortgage costs (for example, points, mortgage insurance and closing costs).
Q: What other credit-related factors are important when financing a home?
A: The better your credit, the lower your interest rate for a home loan is likely to be. Mortgage lenders consider your overall credit score, but they also consider your credit history with them, the amount of debt you already have, how much money you have in savings, your total assets and your current income. Learn more about credit reports and scores here.
Q: What are points?
A: Also called discount points, points lower your interest rate in exchange for a fee paid at closing. When you choose to pay points, you pay more at closing, but you lower your interest rate and pay less for the home over time. Points are related to the loan amount, and one point equals 1 percent of the loan amount. For example, on a $200,000 mortgage loan, 1 percent of the loan amount would be $2,000. Points are listed on your loan estimate and on the closing disclosure.
Q: What is mortgage insurance?
A: Many lenders require mortgage insurance for borrowers who put less than 20 percent down on the purchase of a home. The mortgage insurance lowers the risk to the lender, making it easier for you to qualify for a home loan. The cost of the mortgage insurance is included in your monthly mortgage payment, increasing your monthly mortgage payment. The cost of private mortgage rates varies depending on the borrower’s down payment and credit score.
Q: What closing costs will I have to pay?
A: Closings costs, the amount of money you’ll need to pay when you close on the purchase of your home, vary. Sometimes these costs are paid out of pocket, but some lenders will roll these costs into the total loan amount of your mortgage. Certain closing costs may also be negotiated with the home seller and the home seller’s agent. Common closing costs include appraisal fees, title insurance, government taxes, tax service provider fees, and prepaid expenses (for example, property taxes, homeowner’s insurance and interest between the time of closing and the time your first payment is due).
For more information on interest rates, credit, points, mortgage insurance, closing costs and more, download this free home loan toolkit offered by the Consumer Financial Protection Bureau. It has some great information and checklists to help you through the home buying process. An experienced Realtor® can also answer these questions and guide you as you make decisions about buying a home.
Sources: Consumer Financial Protection Bureau
Buying a home is a lengthy, complex process, including the ins and outs of escrow. Our friends at Rainier Title have provided this handy infographic to explain it all. Have questions? Ask your favorite Realtor. She can help!
Compliments of Rainier Title