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First-Time Homebuyers Discounts through FHA

People in the market for their first home can take advantage of a new offer from FHA. This new initiative aims to provide more information to buyers though classroom education and will reward them with a reduction in the premiums paid towards mortgage insurance.

HAWK to the Rescue

The name of the new initiative is called Homeowners Armed with Knowledge (HAWK). The borrowers are asked to complete a series of classes prior to buying the home as well as a few courses scheduled after the home has been purchased. At the time of this writing the classes are broken down in the following ways

* 1st class to be completed before the buyer completes a purchase contract

* 2nd class will be completed after a contract is signed and before the loan is finalized

* 3rd class will be completed within 12 months after the loan is finalized

Goals of the Program

Simply put, the HAWK initiative is hoping that people buying their first home will have a better understanding of the overall process thanks to the counseling and will be in a better position to make wise financial decisions in the future not only in regards to their housing but also to their other needs.

Monetary Benefit

Once the customer has completed the necessary classes their upfront mortgage insurance premium will be reduced along with the monthly premium that is paid as part of the mortgage payments. In addition, if the customer has no delinquent mortgage payments within the first 2 years of the loan the monthly premium will be reduced again.

Some Limits and Expiration Dates

Since this is a new program with no history to review the FHA is rolling this out with limits. The program is currently scheduled to only last for 4 years. In addition, not all FHA loans are going to be accepted under this program. At this time there is no news about how many loans will be allowed to use HAWK but FHA has stated that there will be a maximum number each year.

Class Time Requirement

For the class completed before the contract signing the prospective buyers will need to finish at least 6 hours of counseling and education.

The class that is conducted after the contract signing is a one hour class as well as the class that comes after the loan is closed.

Each class will issue a certificate to the students indicating that the course has been successfully completed. These certificates will be necessary in order to get the reduction in mortgage insurance premium.

In general, this is a great program that FHA is offering. It provides critical information to potential home buyers in order to better prepare them for a prosperous future and it rewards them by reducing the amount paid on their mortgage.

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Should You Compare Quotes from Various Agents for Home Insurance?

Don’t be fooled by funny commercials and catchy slogans; insurance is quite complicated.  Varying levels of coverage, locations and other factors make insurance policies very different from one provider to the next.  That is why it is so important to compare various quotes from different insurance agents.

Wild Changes for Multiple Locations

Check out these findings from Bankrate for multiple quotes for various locations

Bankrate used the websites of popular insurance providers to get quotes for various cities.  The parameters for the quotes were as follows:

• Single family home
• Full replacement policy
• Value of home $250,000
• Liability policy of $300,000
• A deductible of $500
• Medical coverage of $1,000 for each person

As you can see from the chart in Racine, WI the 3 quotes for the same property varied by 37%.  For higher priced areas such as Chicago, IL the quotes differed by as much as 121%.

What Causes the Differences?

Every year the insurance department from each state will approve a set of rates which is based upon the actual losses in the state from prior years as well as anticipated claims for the upcoming year.  Each insurance company uses a team of actuaries to look at historical data to come up with a reasonable expectation of insurance claims for the upcoming year and compares that with the company’s financial ability to pay the claims.

Each insurance company has their own standards and guidelines for assigning rates.  One company may place a higher weight on the costs to build in a particular neighborhood while a second insurance company would place more emphasis on the rate of crime and possibility for a natural disaster.  This is one reason why it is so important to thoroughly investigate a new neighborhood and understand the area’s history before buying a home.

Rash of Disasters Take Their Toll

The disasters from that past few years all over the country have resulted in higher insurance in multiple areas.  Tornadoes in Missouri, flooding in Tennessee and hurricanes along the northeast have left a wake of millions of dollars of damaged buildings, automobiles and personal belongings.

All of these events, and many similar disasters, have driven up the cost of homeowner’s insurance. Along with these natural problems there is also the issue of higher costs to build a home after it is totaled and the decreased investment returns that insurance companies have experienced with the sluggish economy.

Before getting a policy with an insurance agent make sure all of your bases are covered.  You will obviously need a policy that will take care of your home and your mortgage loan if the property is completely destroyed.  You also need to take an inventory of your belongings to make sure they are protected in the case of burglary, fire or other event.  Some people have collections of valuable items such as art, jewelry and firearms.  Losing these items can be disastrous, especially if the insurance policy is not adequate for the loss.

Verona, Wisconsin Homes for Sale

Has anyone had the situation where the short sale bank cancels the home owner's home insurance policy?

I have never had this happen... Please help.

Understanding your Home Owners Insurance Policy

There is no doubt that an insurance policy on a home can be tough to understand. However, going over the policy and making sure you are comfortable with the important parts can payoff down the road. Here is an overview to make sure you have the basics covered.

The Home

It is important to know that in the event you lose your home to some sort of accident or force of nature that the insurance plan will provide enough funds to rebuild the home. This goes beyond the selling price of the home when you bought it. You need to know that the home can be replaced at today's costs. Construction costs and materials tend to rise over time. It is important to have replacement cost as part of your insurance policy.

Replacement of Belongings

Besides the actual structure of the home you should also consider your belongings. This can really mean anything such as furniture, dishes, picture frames, electronics, clothes, jewelry and a host of other items.

Try to stay away from the “current market” clause. This means that your 5 year old couch would be replaced at a price that assumed 5 years of use. The same concept would apply to any item that you have owned for a considerable amount of time. Also, ask the insurance company about their process for allowing you to replace items. For instance, if your home burned down and you are staying in a small apartment, do you really want to replace your giant screen TV right now? If the insurance company only gives you 60 days to replace an item, where will you store the products? Does the company demand that you buy an item, provide a receipt and then get reimbursed? All of these items should be covered prior to getting a policy.

Deductible

The deductible for a home insurance policy works in the same manner as an automobile insurance plan. Higher deductibles will result in a lower monthly premium. However, a high deductible assumes that you have the funds to pay the amount in the event of an emergency. A smart financial move would be to save up a good amount, such as $2000, and then change your plan to a deductible of $2,000.

Liability

It is always a good idea to have a strong liability plan in place. For instance, if you have guests for a backyard barbecue and someone falls at the party, your liability policy should cover the expenses for the fall. This could be the cost for the ambulance, any stay at the hospital and possible rehabilitative therapy that is necessary after the injury.

Day to Day Expenses

Some insurance companies will reimburse you for your expenses while you are awaiting for your home to be rebuilt. Make sure you understand the circumstances surrounding this type of expense and how the insurance company will reimburse you.

A lot of the terminology used in the insurance plan is unique to the insurance world and may take a conversation with an agent to understand it properly. Understanding the policy before purchase will help you to feel confident that you are covered in the event of a major crisis.

Understanding Home Owners Insurance 

The real estate industry is just like any other major industry segment. The people that work within the industry use specific phrases and words that are not too common in other types of work. Understanding some of the common jargon will help first time buyers feel a little more comfortable with the process.

Mortgage – This is a loan that provides the financing for the purchase of a home. Buyers will sign a promissory note that explains the terms of the loan. The interest rate, amount borrowed and number of payments required to repay the debt are all laid out in this document. A mortgage is different from a car loan or a credit card since a piece of property is used as collateral for the loan.

Appraisal – This is a report that explains the home's value. A professional appraiser will inspect the home and then compare it to other similar homes in the nearby area. Based on common criteria such as location, square footage, age and amenities the appraiser assigns a market value to the property. This is slightly different from a home inspection. A home inspection is designed to point out any areas in need of repair or replacement. An appraisal simply decides how much a home is worth as it currently stands.

Contingency – These are requirements spelled out in the real estate contract that must be completed or met in order for the sale to go through.

For instance, most contracts will have a contingency concerning the appraisal. If the home is not worth the sales price then the buyer may be able to get out of the contract.

Escrow – This refers to the funds, assets or securities being held by a third party separate from the buyer and seller. The buyer will place funds in escrow as proof that they wish to go forward with the sale. Once the seller has met the conditions of the contract the funds will be released.

Disclosures – The buyer must be informed of various details by the seller prior to the purchase. Each area will have slightly different requirements for the disclosures in their location. An example would be the location of a home in a known flood zone. This would affect the homeowner's insurance and could affect the buyer's ability to pay.

Closing – This is the last phase of the property purchase. All parties involved in the transaction will meet at either an attorney's office or an escrow agent's office (title company). The seller, buyer, and any attorney will typically attend the closing. At the closing the seller will receive funds for the transaction and the buyer will sign the necessary documents for the loan. The deed will be transferred from seller to buyer. Finally, the closing costs will be paid based on the agreed terms in the contract.