Chicago Homeowners Insurance: Are You Over or Underinsured?
Trying to get just the right amount of homeowners insurance for your house and possessions may leave you feeling a bit like Goldilocks searching for a chair, a bed, and porridge that are just right. If you underinsure your home and suffer a devastating loss — flood, fire, theft — then you risk not being able to return to the lifestyle you’ve worked hard to achieve. Yet if you overinsure, you’re throwing money away every year on unnecessarily high premiums.
What you need is coverage that’s just right. Here’s how to get it, and it shouldn’t take more than 4 or 5 hours of your time spent reviewing your homeowners insurance policy, talking to your agent, and doing a little research.
Look before you leap into a policy
All homeowners insurance isn’t created equal. That’s why it pays to review your coverage every year to ensure your policy meets your evolving needs. Begin by understanding the types of coverage available.
Actual cash value coverage reimburses you for the value of your home based on its current condition, explains Marjorie Young, senior vice president at E.G. Bowman Co., a New York City insurance brokerage. If your home was built 10 years ago, you’d receive only the depreciated value of decade-old windows, cabinets, appliances, and so on.
Most insurers recommend the more comprehensive replacement cost coverage. With it, says Young, you’ll be reimbursed for the amount it will cost to rebuild your home like new with the same kind and quality of materials. Depreciation doesn’t factor into the settlement equation.
To get the full benefit of replacement coverage, you need to purchase enough insurance to cover the total cost to rebuild your home, excluding the value of the land. Many people make the mistake of insuring at the market value, says June Walbert of USAA Financial Planning Services in San Antonio. But the amount you could sell your home for today isn’t necessarily the same as how much it would cost to rebuild.
Construction costs play big role
Look to current construction costs in your local area for guidance. If you’ve purchased a newly constructed home in the past year, you already have the answer. The same is true if you’ve refinanced within the past year. You almost certainly paid for an appraisal during that process that likely includes three valuations: replacement cost, market value, and actual cash value.
If you’re determining replacement cost without those head-starts, Walbert recommends calling several local homebuilders and asking the average square-foot construction cost in your area. If the going rate is $175, and your home is 2,000 square feet, you’d purchase $350,000 in coverage. For just a few bucks you can also order a valuation report online at a website like AccuCoverage ($7.95) or Home Smart Reports ($6.95).
Remember that any time you spend at least 5% of your home’s value on a remodeling project—or $5,000, whichever is less—you should contact your insurer to increase your coverage. Young recently did that after she revamped her own kitchen. An additional $40,000 in homeowners coverage raised her annual premium by about $40.
Don’t neglect valuables, liability
Be sure you’re also insured at the right value for your home’s contents and for personal liability. Most insurance polices provide only actual cash value on contents, says Lisa Lobo, vice president of underwriting operations at The Hartford in Southington, Conn. To get replacement cost coverage, you’ll need to purchase an endorsement. If you have valuables not covered by your policy—silverware, jewelry, furs—purchase endorsements for those, too.
Many people pay no attention to the liability coverage limits in their policies, but Walbert says that’s a mistake. If you have a dinner party and a guest falls down your front steps, you don’t want to be underinsured. In recent years the average liability claim for bodily injury and property damage has been $15,854. Walbert recently increased a homeowner’s liability coverage by several hundred thousand dollars for just $6 more per year.
If you’re concerned about increasing your premiums by adding endorsement after endorsement, ask whether you can save money by splitting your deductible, paying a higher amount for certain claims and a lower amount for others. Bundled endorsements can save you a few bucks, but only if you require them all. Take a pass on unneeded riders. Why spend $8 to $12 a year for $500 worth of refrigerated property coverage when you eat takeout every night?
Full article here
Chicago Homeowners – Insurance: Time for an Annual Check-Up
It’s time for your annual check-up. The good news is that for this one, you won’t have to dorn one of those revealing hospital gowns—and you may walk away with a healthier pocketbook. We’re talking about a homeowners insurance check-up, a task you should complete once a year, ideally around renewal time. This will ensure your policy still provides the right level of coverage for your family, and your premium isn’t costing you more than it should.
Remember, homeowners insurance is essential. The coverage is designed to protect your home and its contents, as well as shield you from liability for accidents and such on your property. Block out an hour of your time, call an insurance agent, and get answers to these three important questions.
What type of coverage do I have?
The most effective type of coverage is known as “replacement cost,” which covers, up to your policy limits, what it would take today to rebuild your house and restore your belongings, says Jerry Oshinsky, a partner at Jenner & Block in Los Angeles who has represented homeowners in litigation against insurers.
“Extended” replacement cost coverage provides protection to your policy limit, say $500,000, and then perhaps another 20% of the cost after that. Percentages vary, but in this example you could recoup up to $600,000 on a $500,000 policy, assuming your losses reach that high. Extended coverage can compensate for any unanticipated expenses like spikes in construction costs between policy renewals. Now harder to find due to the industry shift toward extended replacement coverage, “full” or “guaranteed” replacement coverage covers an entire claim regardless of policy limits.
A less attractive alternative is “actual cash value” coverage that usually takes into account depreciation, the decrease in value due to age and wear. With this type of policy, the $2,000 flat-screen TV you bought two years ago will be worth hundreds of dollars less today in the eyes of your claims adjuster. Kevin Foley, an independent insurance broker in Milltown, N.J., favors replacement cost coverage unless you can save at least 25% on the premium for going with actual cash value coverage instead.
Even if you have replacement cost protection for your dwelling and personal property, don’t assume everything is covered. Structures other than your home on your property—such as a detached garage or swimming pool—require separate coverage. So too do luxury items like jewelry, watches, and furs if you want full replacement cost because reimbursement for those items is typically capped.
How much coverage do I really need?
OK, now that you’re clear on what type of policy you have, you need to figure out how much policy you truly require in dollar terms. Let’s say you purchased your home five years ago and insured it for $200,000. Today, it’s worth $225,000. Simply increasing your coverage to $225,000 may nonetheless leave you underinsured. Here’s why.
The key to determining how much dwelling coverage you need isn’t the value of your home but the money you’d have to pay to rebuild it from scratch, says Carlos Aguirre, an agent for Liberty Mutual Insurance in Arlington, Texas. Call your local contractors’ or homebuilders’ association and inquire about the average per-square-foot construction cost in your area. If it’s $150 and your home is 2,000 square feet, then you should be insured for $300,000.
There’s no rule of thumb for how much your homeowners insurance should cost. Insurers use numerous factors—age, education level, creditworthiness—to determine pricing, so the same policy could run you more than your neighbor. In recent years the average annual premium was $804. Oshinsky advises against scrimping on insurance because big increases in coverage probably cost less than you’d think. He recently purchased a liability policy that cost $250 for the first $1 million in coverage. Adding another $1 million increased his premiums only $12.50 more.
How can I lower my premiums?
The higher your deductible, the amount you pay out of pocket before coverage kicks in, the lower your premium. Landing on the appropriate deductible level requires remembering that insurance should cover major calamities, not minor incidents, says Foley, the independent insurance broker. Most homeowners should be able to absorb modest losses like a broken window pane or a hole in the drywall without filing claims. If you can, then you’re wasting money with a $250 deductible.
Foley’s rule: If you’re a first-time homeowner and don’t have a lot of savings, moving up to a $500 deductible will probably stretch your budget. However, if you live in a ritzy home and drive an expensive car, then you should be able to afford a $1,000 deductible. In Milltown, N.J., for example, the premium for a $200,000 home with a $500 deductible would be $736, according to Foley; moving up to a $1,000 deductible drops the annual premium to $672. That’s $64 in savings.
Every major insurer offers discounts to various groups, such as university employees or firefighters. Figure about 5%. Ask which affiliations would entitle you to a discount and how much. If an AARP membership would result in a $50 savings, pay the $16 dues and pocket the $36 difference. Many insurers also offer discounts ranging from 1% to 10% or more for installing protective devices like alarms and deadbolt locks, for going claim-free for an extended period, or for insuring both your car and your home with the same carrier.
Full article here
Renting Out Your Chicago Home? Get Landlord Insurance
Maybe you’re moving up to a bigger home and holding on to your former residence as a rental property. Or maybe you’ve tried to sell your home without success. Whatever the reason, if you’re thinking about renting out your home, you need to look into landlord insurance.
Homeowners insurance covers your house if it burns down, your possessions if there’s a break-in, and medical and legal bills if someone gets hurt on your property. Problem is, homeowners insurance might not offer protection if you decide to rent out your home. Landlord insurance does. Set aside half a day to research policies.
Renting out your home raises risks
Homeowners insurance typically covers owner-occupied, single-family residences, says John W. Saunders, president of Slemp Brant Saunders, an independent insurance brokerage in Marion, Va. When your home doesn’t meet that definition because it’s being rented out regularly, it’s no longer covered.
Most homeowners policies will cover an occasional short-term rental if, say, you’re going away for a few weeks, says Dave Millar, a partner at Riley Insurance Agency in Brunswick, Me. “But if you have a summer home you’ve decided to use as an income property and are putting different people in there every week,” he explains, “that’s a lot higher risk for the insurance company.”
The risk is also higher for both you and your insurer when you rent out your home on a full-time basis. You have an increased responsibility for injuries on the property, whether to your tenants or your tenants’ guests, says Bob O’Brien, vice president of Noyes Hall & Allen Insurance in South Portland, Me.
Insurers also experience more claims on tenant-occupied properties because tenants typically don’t care for properties as well as owners would. Renters are less likely to either identify or report maintenance needs, says O’Brien, and may be unfamiliar with a home’s systems like the location of the water shut-off.
Look into landlord insurance
When you decide to become a landlord, inform your insurer and ask about a specific landlord insurance policy, sometimes known as a dwelling fire policy or special perils policy. Coverage from a basic landlord policy isn’t quite as broad as a homeowners policy, says O’Brien, but it includes big risks like fire, wind, theft, and ice damage.
There are several levels of dwelling fire policies: DP-1, DP-2, and DP-3. The higher the number, the better the coverage. “A DP-3 policy might provide replacement cost on the house and theft of contents coverage for your belongings,” says Millar.
Expect to pay 15% to 20% more for landlord insurance than you did for homeowners insurance. In recent years the average cost of homeowners insurance was $822 a year. Tack on 20%, and that would put the average annual premium on landlord insurance at about $986.
A landlord policy covering a one-year rental for a home in Maine insured for $370,000 and personal property for $10,000 would cost $1,170, for example, says Millar. Expect to pay even more if you allow short-term rentals. The same insurance for the home if rented by the week for 12 weeks during a year would be $2,170.
Other insurance policies to consider
Landlord insurance typically covers the house itself, other structures on the property such as sheds, the owner’s possessions (but not the tenant’s possessions), lost rental income if the house is damaged and uninhabitable, and some liability protection for the owner in case of injury or a lawsuit. Policies vary, however, so read the fine print. If lost rental income isn’t included, you might be able to add the coverage for an additional $50 a year, says Saunders.
Also consider an umbrella policy that provides additional liability protection beyond the limits of your landlord policy. “If you’re talking about owning more than one house, and your net worth is starting to build up, then you should consider an umbrella policy,” says O’Brien. You can usually get an additional $1 million worth of liability coverage for $250 to $300 a year.
Finally, O’Brien advises that you require tenants to buy renters insurance that protects their own property. Remember, landlord insurance only covers the owner’s property. In recent years, the average cost of renters insurance has run $182 annually.
Full article here
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January maintenance checklist for your Chicago home
The most important job this month is to prevent water damage from bursting pipes and leaks in your home.
The dead of winter is the time for the greatest vigilance in your home-maintenance routine. The most important job this month is to head off damage to your home from water and dampness from a number of sources including: groundwater and rain seeping into your home, leaky pipes inside the walls and pipes bursting from freezing and thawing.
Take a tour
After a winter storm, get outside as soon as you can. Walk around the house, checking for damage from wind and broken tree limbs. User binoculars if you can’t see your entire roof. Scan for loose or missing shingles.
Give special attention to vulnerable pipes — indoors and out — that are exposed to the cold, including hose bibs, pipes in outside walls, garden sprinkler lines, swimming pool pipes and pipes in unheated attics, basements and garages. A frozen pipe needs only a one-eighth-inch crack to leak as much as 250 gallons a day, according to this State Farm Insurance video, which demonstrates how to shut off your water and insulate pipes.
Take these steps to safeguard against damage from frozen and bursting pipes:
- If practical, insulate any pipes exposed to the cold. Ask hardware-store personnel for the best materials for the job.
- Seal any leaks that are letting cold air in, especially around dryer vents and pipes and where electrical wiring enters the house.
- Search for uninsulated water supply lines in the attic, garage, basement and crawl spaces and in bathroom and kitchen cabinets adjacent to outside walls. During a cold spell, open cupboard doors in the kitchen and bathroom so the home’s heat can reach them. (Reminder: Put harmful household cleaners out of the reach of children.) Keep doors shut tight in the garage and outside closets and cupboards during freezing weather.
- When temperatures drop below zero, open both hot and cold faucets a trickle to relieve pressure in the pipes.
- Locate your home’s water shut-off valve; learn how to turn off the water quickly in case a pipe bursts.
- If you’ll be gone in freezing weather, even overnight, ask a friend or neighbor to check on your house for broken or leaking pipes. Show him or her how to shut off the water.
- Keep temperatures inside the house at 55 degrees Fahrenheit or above, night and day, even when you’re gone.
- Promise yourself that when the weather improves you will add to the installation in the basement or crawl space and attic.
Leak prevention
- Install small, battery-powered individual leak alarms, also called flood alarms, under the refrigerator, kitchen and bathroom drain pipes, dishwasher and laundry appliances and behind toilets. Cost: around $10-$15 each.
- Check to make sure your sump pump is operating properly. If it has a battery backup, unplug the pump from the wall and test it.
Look for pests seeking shelter
Cold weather drives mice and insects into the walls of your home. Even unheated parts of the house invite these pests. Insects need only a crack to enter, and mice can get in through a dime-sized hole. Houseflies, particularly, pose a health risk because they can transmit disease.
- Seal any cracks where pests enter.
- Empty compost and garbage frequently.
- Keep food covered and put away; keep counters clean.
- Fix leaky pipes quickly.
- Pour boiling water down bathroom and kitchen drains monthly, preventing the buildup of bacteria-laden sludge; scrub removable drain covers weekly.
- Check basement, attic, crawl spaces and the back of cupboards and cabinets for mice droppings or holes. If you find evidence, install traps immediately or call a pest-control service.
- Pick up and dispose of outdoor pet waste promptly; turn compost piles frequently.
Make an inventory
While you are putting away holiday gifts, seize the opportunity to make a quick home inventory.
An inventory is a record of your home’s features, conditions, furnishings and valuable possessions. If your home is damaged or destroyed by fire, flood, mudslide or other disaster, you can use the inventory to substantiate your insurance claim to get the maximum replacement value for what was lost.
Tips:
- Save receipts for valuable home purchases and for work you have done to upgrade the interior or exterior of your home.
- Keep a copy of your inventory in a bank safe-deposit box or on a hosted server online, so you can get it even if your computer is destroyed.
Also …
Here are a few more winter tasks:
- Check the labels on the switches in your electrical circuit-breaker panel and make new labels if necessary.
- Check your furnace filter monthly in the winter to see if it needs replacing.
- Use a vacuum-cleaner tool or a long-handled brush to clean under and behind the refrigerator, including the coils.
- Clean lint from under laundry appliances, especially the dryer, carefully work the cleaning tool down into the lint filter; outdoors, clean the dryer vent outlet, reaching as far as possible into the pipe.
- Gather product documents and warranties into a folder. Go through the contents and discard outdated materials.
- Walk around inside the house with a screwdriver, pencil and paper. Tighten any loose knobs and attachments and list repairs to tackle later.
- Examine the ducts of your forced-air furnace and seal any leaks with duct tape.
Full article here; courtesy of MSN Real Estate
Chicago Real Estate: What’s ahead for home prices in 2012
The bleeding is just about over, but don’t expect a speedy recovery.
The median home price in the U.S. has plunged nearly 40% in a little more than five years, but the worst is over: The market has finally wrung out the last excess valuations born of the housing bubble. Before you break out the party hats, note that this doesn’t mean prices across the nation are poised to rebound anytime soon. Alex Villacorta, director of research and analytics at Clear Capital, a provider of real estate data and analytics, says the housing market is in a “suspended state,” with positive and negative factors offsetting one another. But he doesn’t expect another free fall in prices, assuming “things are left to work themselves out and there are no further shocks to the economy.”
Although the percentage of sales of distressed homes will rise, the federal government’s latest loan-modification program might allow as many as 1.5 million to two million homeowners to refinance, estimates Mark Zandi, chief economist at Moody’s Analytics. Zandi says that further home-price declines nationwide will be limited to 3% to 5% and that 2012 will be the year that prices finally stabilize — setting the stage for gains in 2013.
Short-lived spikes in prices will affect some cities sooner. When housing markets touch bottom and begin to stabilize, price appreciation tends to be spread unevenly, creating a lot of confusion about where the recovery is occurring and when, says David Stiff, chief economist at Fiserv Case-Shiller. Even within a single city, more desirable neighborhoods will stabilize first, while prices in other neighborhoods may fall at a rapid pace.
Homes in many cities are now substantially undervalued as measured by affordability, says Stiff, and that can lead to double-digit bounces in prices — say, a jump of 10% to 15% in the year following the trough, as the natural optimists, especially investors with cash, jump in to catch the bottom. It might look like a bubble all over again, but it won’t last long. A good example is Cape Coral-Fort Myers, Fla., where investors pushed up prices by 12% during the year ended September 30. Such a bounce will be followed by a sideways drift, during which the “glass half-empty” folks will slowly return to the market.
Theoretically, low rates should help push buyers to act. The average interest rate on 30-year fixed mortgages fell to 3.94% in the first week of October 2011, according to Freddie Mac. The past couple of years’ predictions that rates would rise were based on the premise that the economy would improve, says Guy Cecala, publisher of Inside Mortgage Finance, an industry publication. “As long as the economy remains stagnant, unemployment remains high, and the housing market is in the toilet, rates will remain near historic lows,” he says. At least for the first part of 2012, he adds, rates should hover between 4% and 5%.
Other positive signs: Existing home sales increased during the summer and early fall of 2011, according to the National Association of Realtors, after a deep slump following the expiration of the first-time home buyer tax credit. Although the inventory of homes on the market and in foreclosure remains high, a lull in home building over the past three years is gradually easing the surplus. The months’ supply figure, or how long it would take to sell the inventory of homes on the market at the current pace of sales, improved to 8.5 months in September — although that ratio still favors buyers (six months’ supply represents a normal balance between sellers and buyers).
The lure of affordability and low mortgage rates hasn’t increased buyer demand as much as one might expect. Some would-be buyers can’t get a mortgage, given lenders’ stiffer requirements. Many more are hesitant to pull the trigger on a home purchase for fear that home prices will continue to fall or that their job prospects are uncertain. Although the recession has technically ended, the economy doesn’t feel better to many.
But Celia Chen, director of research at Moody’s Analytics, says that both corporate and household balance sheets are healthier and should lead to stronger economic growth and improved confidence. She anticipates more robust growth by the second half of 2012, assuming that Congress follows through on its debt-ceiling deal, the Fed keeps interest rates low, and there are no new shocks to the economy.
The foreclosure problem
The dark cloud of foreclosures still hangs over the housing market. The pace of foreclosures has slowed as lenders, loan servicers and regulators have sorted out paperwork and procedures in the wake of the robo-signing controversy that emerged a year ago. But RealtyTrac, which monitors the foreclosure market, says that foreclosure filings have begun to ramp back up.
Nevada, California and Arizona — among the epicenters of the boom and bust — still suffer the highest rates of foreclosure. Georgia, Florida, Utah, Michigan, Idaho, Illinois and Colorado round out the top ten. Among metro areas, Las Vegas still tops the list.
Currently, about 1.84 million home loans are 90 days or more delinquent (a strong predictor of foreclosure) but not yet foreclosed on, and 2.17 million have finished the foreclosure process but haven’t yet been offered for sale, according to Lender Processing Services (LPS). What happens to home prices if and when they come to market? Villacorta, of Clear Capital, says that despite the downward pressure on prices by foreclosures, prices won’t tank as long as lenders continue to bring additional foreclosures to market at a steady pace.
Bank-owned foreclosures sell for an average discount of one-third off the per-square-foot price of conventional homes for sale, according to RealtyTrac. Buyers who want to snag a bargain on a distressed property will face competition from investors, and the biggest bargains may require a lot of work. Short sales, or homes sold with lenders’ permission for less than their owners owe on their mortgages, have also grown in number. Lenders take an average of 16 weeks to sign off on a short sale, so patience is imperative.
Of course, the longer lenders take to work through the foreclosure glut, the longer it will take for home-price appreciation to return to its normal pace of 2% to 4% a year. To hasten the process, the federal government may introduce more policy initiatives — although whether they’ll have any meaningful impact or come soon enough is debatable. In October, Fannie Mae and Freddie Mac, along with their regulator, the Federal Housing Finance Agency, expanded the Home Affordable Refinance Program to allow more underwater borrowers to refinance out of their mortgages into more manageable loans. The FHFA, the Department of Housing and Urban Development and the U.S. Treasury have called for ideas to handle the foreclosures they own, such as converting them to rental properties for purchase by investors.
Full article here; courtesy of Pat Mertz Esswein, Kiplinger.
Simple changes for your ‘new’ Chicago home in 2012
When your old calendar comes down each year and the new one goes up, it marks the passage of time, but your house may still be stuck in the past. Now is the perfect time to give your house a new look for 2012.
Reposition seating
Look at the current set-up of your furniture and see if you can swap seating positions. Sometimes, simply shifting things around is enough to make a room look fresh. If you have a sofa and loveseat in an L-shape, try positioning the pieces across from one another. Or, reposition seating in an L-shape if you currently have a conversational arrangement. Add an armchair from a dining room or another room of the house to finish off the open end of the square.
Refocus
Another way to add punch to a room is to create a new focal point. If you have a window and a fireplace and furniture is arranged around the hearth, shift the focus to the window. A wall of color, an architectural detail, or a large piece of furniture, such as an armoire or entertainment center, can also serve as a focal point.
Take a different tack
Decorating shows on television often suggest that simply doing the opposite of what you’ve been doing has the most impact. Interior designers take spare, clean, contemporary rooms with minimal color and give them a warmer traditional look with rich tones and luxurious appointments. At the other extreme, they banish dark colors and heavy fabric and furnishings to make a room light, bright and airy. Such transformations, while more labor intensive, add more impact than merely rearranging design elements.
But you don’t have to make drastic changes to shift the way a room looks. For example, if a room has an open concept and lacks coziness, add furnishings and accents to make it feel more intimate. Folding screens can bring a big room down to size. Placed behind a sofa, against a flat wall or in a corner, a screen adds intimacy and focuses the attention on the furniture. Adding or removing window treatments can also make a big impact without a huge amount of effort. Swapping lamps and artwork takes little time and makes a room look instantly refreshed.
Small touches
Once you’ve moved your furniture, it’s time to tackle the rest of your decor. Remove plants or shift them to different positions, switch out old plants with new ones, clear off shelves, and try using different pieces of furniture in a room; instead of a leggy sofa side table, place a small nightstand with drawers there instead. Rearranging a room can take less than an hour, yet give the space a whole new look – and really make you feel like you’ve turned over a new leaf for the new year.
Courtesy of the Chicago Tribune and Kathryn Weber, www.redlotusletter.com
Chicago Market Update: FHA Loan Limits Restored to Original Levels
The U.S. housing industry has scored a victory with House and Senate votes to raise the size of mortgages backed by the Federal Housing Administration to $729,750, starting for a One-Family. President Obama signed into law on Friday, November 18, 2011, effectively reinstalling the higher conforming loan limits for FHA through the end of 2013. After a brief return to lower, pre-2009 levels, effective October 1, 2011. The range in the Chicagoland area was from $365,700 (One-Family) up to $703, 250 (Four-Family). The loan limits were revised to $410,000 (On-Family) up to $788,450 (Four-Family). The loan limits may vary from state to state, from city to city and from county to county. Check your local FHA loan limit.
The move creates additional mortgage financing possibilities in more than 650 U.S. counties, and promises to increase the FHA’s mortgage market share, which has grown from 6% in 2007 to roughly 30% today.
The change in FHA loan limits also marks the first time that FHA loan limits exceed those of conventional mortgage-backers Fannie Mae and Freddie Mac.
Conventional loans remain capped at a maximum of $625,500.
For home buyers in Chicago and nationwide, FHA-insured mortgage offer several advantages over comparable conventional loans, the most commonly cited of which is that FHA-insured loans require a down payment of just 3.5 percent.
FHA-insured mortgages carry other advantages, too, however.
First, FHA home loans are not subject to loan-level pricing adjustments (LLPA). This means that, all things equal, buyers and would-be refinancers with credit scores below 740; or, who live in multi-unit homes; or, who have high loan-to-values are not subject to additional loan fees as a conventional mortgage applicant might.
Second, after 6 months of on-time payments, FHA-backed homeowners are eligible for the FHA Streamline Refinance. The FHA Streamline Refinance is among the simplest loan products for which to qualify with no appraisal required. Even if you’re “underwater” on your mortgage, you can still be streamline-eligible.
And, lastly, at least in today’s market, FHA mortgage rates are below those of the conventional market.
The downside of FHA financing, however, is that all FHA mortgages require mortgage insurance and FHA mortgage rates are often higher versus a comparable conventional loan. This means that, although its mortgage rate may be lower, the payment for an FHA home loan may be higher as compared to a Fannie Mae mortgage with similar credit traits.
FHA loans aren’t always optimal, but with higher FHA loan limits, expect the FHA’s market share to increase.
Courtesy of Todd Johnson, Guaranteed Rate
