Author: cardinalfinanc

Categories
PURCHASE

How to Choose Homeowners Insurance (And Lower Your Rate)

Homeowner’s insurance isn’t just a “nice-to-have.” In fact, for most lenders, it’s a required investment. Why? Because it doesn’t just protect your new home and the possessions inside. It protects the lender’s investment.

If you’re in the market for a new policy, we’ve got a few tips to help you find the right provider.

To start, let’s talk about what “homeowners insurance” really is. There are a lot of ways to cover your home purchase, including homeowners insurance, mortgage insurance, and a home warranty. They’re all different things. Mortgage insurance protects the lender in case you default on your loan, and a home warranty is a separate piece of coverage that protects your home’s internal systems (HVAC, plumbing, appliances, etc.).

Homeowners insurance, however, is a policy that pays for damage to or the destruction of your actual property, the things inside your home, and the people around it. Generally speaking, lenders will require proof that you have homeowners insurance before you reach the closing table.

That said, homeowners insurance policies aren’t magic “cover-all” options. While they do cover many things, there are several things they won’t cover. We’re here to help you figure out how to choose the right homeowners insurance policy, and we’ll even throw in a few tips on how to save some cash along the way.

Homeowners insurance is a policy that pays for damage to or the destruction of your actual property, the things inside your home, and the people around it.

“What should my policy cover?”

At the very least, your homeowners insurance policy should cover the “full or fair value” of the home, or the purchase price. Some providers choose one amount, others opt for the latter. Either way, that’s what we call your “dwelling coverage,” or the part of your policy that covers the repairs to or reconstruction of a home that’s been physically damaged by a covered event. Note: “hazard” and “peril” are two other terms you’ll see through your search, but they both mean similar things.

Homeowners insurance policies cover damage or destruction to a home’s interior and exterior, but they also cover theft, personal liability (in case someone gets hurt on your property or worse), and personal property. We recommend getting dwelling coverage that covers the cost to rebuild your home, including labor and materials at their current rates—not just the purchase price or previous assessed value.

Just so you know, there are some things a homeowners insurance policy will not cover. Natural disasters, or “acts of God,” typically aren’t covered by your standard policy. Lightning strikes your home, for example, and zaps your dated breaker panel without additional coverage, and you may have to pay for that fix out of pocket. In some cases, for people living in areas prone to floods, earthquakes, and tornadoes, policies may be expanded at an additional cost.

“How is my rate determined?”

There are many things that go into your rate calculation, much of which is done behind the scenes. Usually, policy rates are determined by your “assessed risk,” which considers your personal claim history, your credit record, the home’s previous claims (if there are any), the home itself (construction, materials, security, etc.), and the surrounding neighborhood (including crime rates). 

“How can I lower my rate?”

Some of the factors that go into your rate calculation are admittedly out of your control. For example, you found your dream home, but it’s in a flood zone. In that case, there’s not much you can do about that other than pay for flood coverage. 

However, there are several other ways you can lower your insurance premium.

Shop around

At the very least, as with anything, you should look at three different policy quotes from three different providers. Some sources say you should gather as many as five quotes, but if you’re seeing similar numbers for equal coverage across the board, go with your gut. Remember: don’t just choose the least-expensive option. Consider other things like company reviews, technology capabilities (can you file a claim from your phone?), and whether or not you’re already a customer with that provider.

Pro-tip: Depending on how many quotes you get, try to call one or two local providers. Sometimes smaller providers can provide better pricing.

Bundle up

Speaking of already being a customer…did you know that many providers offer discounts for bundling your coverage? If you have auto insurance with one company, you may be eligible for a multi-policy discount if you get homeowners insurance with them as well.

Security systems

Investing in a home security system can also help lower your premium, because it tells providers that your home has an added layer of protection beyond locked doors and windows. Security goes beyond cameras, too—upgrading your smoke detectors could bring benefits as well.

Home improvements

Some companies may offer additional discounts for upgrades to your home, like metal construction instead of wood (due to flammability), modern or eco-friendly HVAC and electrical upgrades, and an impact-resistant roof to help protect against Mother Nature.

Increased deductible

While less popular, another way to lower your premium is to increase your deductible. Unfortunately, that means you’d pay more out of pocket if and when you file a claim. It removes risk on the provider’s part, forcing you to carry the expense instead. Note: some lenders may have a maximum to the deductible they allow, such as 5% of the insurance coverage. 

How do I choose a provider?

That’s the easy part: research! You’ve already started the journey by reading this blog, so take everything you’ve learned here with you when you start calling around to different providers. When you’re ready to apply for a mortgage, we’ll be waiting for you.

Homeowners insurance isn’t just a “nice-to-have.” In fact, for most lenders, it’s a required investment.

Categories
HOME & GARDEN

Study Room Ideas for The Ultimate Kids’ Home Study Space

As kids head back to school, you may be looking to level up their home study space this season. When it comes to study room ideas, we’ve got you covered. From focus-enhancing features to storage solutions, try these six tips to turn your home into study central for students of all ages (adults, too).

Pro Tip: Creating a study space doesn’t have to mean remodeling. But if you want it to, your home loan could actually help cover those costs.

6 Kid-Friendly Study Room Ideas

  • Optimize lighting
  • Incorporate nature
  • Minimize distractions
  • Provide comfortable seating options
  • Let your kid choose decorations
  • Get creative with storage
Optimize lighting

The right lighting doesn’t just look nice—it can actually impact cognitive performance. Warm, natural light has been shown to increase productivity, improve moods, and increase creativity. And for those with sensory issues, harsher lighting can often be overstimulating. So, when setting up your kid’s home study space, aim for a room with windows and adjustable lighting (like lamps vs. overhead fixtures). Just don’t make it too dark, unless you’re looking to turn study time into nap time.

Warm, natural light has been shown to increase productivity, improve moods, and increase creativity.

Incorporate nature

From houseplants to leaf-patterned wallpaper, incorporating elements of nature in any space is a great way to make it more inspiring. Plus, caring for plants offers your kids opportunities to learn responsibility and gain some hands-on science experience. Win-win.

Pro Tip: Looking for beginner-friendly plants? Philodendrons, pothos, and succulents are all good options.

Minimize distractions

In a perfect world, you may be inclined to make your kid’s study room a device-free zone. But realistically, most homework is going to require the use of at least one device. So, minimizing distractions really comes down to the unique needs of your kid. After all, some might find a complete lack of stimulation to be more distracting than anything else.

  • Opt for a white noise machine instead of music
  • Choose a quiet part of the home to set up shop
  • Create an easy-to-maintain organization system
  • Make sure the study space has everything your kid needs before they get started
Provide comfortable seating options

A desk and chair are a given when it comes to study room ideas. But, it can also be helpful to give your kid seating options to break up the monotony of studying. That could be a beanbag chair in the corner for reading, a balance ball, or floor cushions for those projects that require more surface area than a desk can offer.

Pro Tip: Explore some of the best desk chair options for kids here before buying.

Let your kid choose decorations

Your kid’s home study space should be an environment they enjoy spending time in. So, as tempting as those Pinterest boards of cleverly themed study rooms may be, opt for decor your kid wants rather than any specific aesthetic. Keep in mind that whatever decor you go with should be budget-friendly and easily replaced to accommodate your kid’s changing interests.

Your kid’s home study space should be an environment they enjoy spending time in.

Get creative with storage
You don’t have to rearrange your whole home to create a great study room. It’s all about making the most of the space you already have. If your study area needs to have multiple functions, consider these space-saving study room ideas.
  • Foldable desk
  • Desk with built-in storage
  • Loft bed with a desk underneath
  • Wall mounted storage

Any other study room ideas?

You want to give your kid every advantage in their academics. Luckily, that doesn’t mean you have to stress over the details of their study space. Every student has different needs, and what’s important is to be there for them. Just like any other home project, a more aesthetic finished product isn’t necessarily worth blowing your budget. Whatever ideas you have for your kid’s home study space, make sure they’re involved with the process, too. It’s a fun bonding experience, even if it’s for a room where not-so-fun homework takes place.

Whatever ideas you have for your kid’s home study space, make sure they’re involved with the process, too.

Categories
PURCHASE

Buying a House “As-Is”: What It Means & What You Need to Know

Tight on time? Working with a bottom-dollar budget? Fancy a fixer-upper? If you answer “yes” to any of these questions, buying a house “as-is” might be the right move for you. But before you go searching, read through this blog to make sure you know exactly what buying a house “as-is” means, and the things you should consider well ahead of making an offer. 

What does buying a house “as-is” mean?

The answer to this one is fairly simple: Buying a house “as-is” means you’re buying a home that’s sold in its current condition—warts and all. 

On the upside, these homes are often priced accordingly, because “as-is” homes are rarely in perfect condition. Sellers realize that there’s some work that needs to be done, and they’re willing to settle for less than they would if the home was turnkey. 

The downside, however, is that because “as-is” homes are sold as-is, sellers are stating upfront that they’re not going to make any repairs or touch-ups prior to exchanging the keys. What you see is very much what you get. However, “as-is” isn’t always synonymous with “bad condition.” In fact, while a home’s condition may be one factor that leads to an “as-is” sale, sometimes sellers simply want to sell the property quickly. 

Four considerations to make before buying

We won’t call this official mortgage advice, but consider the following four things before putting an offer on an “as-is” house:

Don’t skip the home inspection

These days, buyers are sometimes hesitant to ask for home inspections. After all, a seller’s market led to a surge in cash offers, bidding wars, and waiving contingencies. However, because the market has cooled off a bit and home prices have started to fall (slightly), there’s no need to skip the inspection—especially if you’re buying a property “as-is.”

Said simply, a home is a huge investment, and a thorough inspection can protect that investment or keep you from getting involved in something you’re not financially ready to maintain. An inspection is less about trapping the seller or uncovering “gotchas,” and more about making sure the house is being sold as described, “as-is” or not.

Explore home warranty options

We’ve got in-depth coverage on home warranties in this blog, but here’s the gist: A home warranty is not required, but certainly recommended if you’re buying a home that’s in questionable condition. You can either purchase a plan yourself or ask the seller to provide one, but it’ll usually cover servicing and maintenance for the home’s appliances, plumbing, HVAC systems, roofing, and other parts of the dwelling.

Make sure it meets minimum requirements

Fun fact: Mortgages aren’t just handed out for any property. Many home loans—including most government-backed mortgages—have “standards for livability” that must be met before finalizing the sale, regardless of whether or not the property is being sold “as-is.”

For starters, a home is almost always required to be structurally sound. If it’s got walls, windows, a ceiling, and a roof, you should be in good shape. Some loans may require access to safe drinking water, and USDA loans specifically may require up-to-date electrical systems and functioning heating and air conditioning.

If certain requirements aren’t met, appraisers may decide that repairs must be made before closing, which can delay or derail the process completely. For this reason, cash offers—which require no mortgage—are oftentimes more palatable for “as-is” sellers.

Crunch the numbers

Consider this: When it comes to “as-is” homes, you’re not just buying the house. You’re buying whatever repairs and renovations need to be made to make the house a home. “As-is” properties may require new doors, windows, lights, flooring, and/or pest control (among other things). These seemingly little projects can add up to tens of thousands of dollars quickly.

Sure, you may save on the purchase price, but you’re going to want to make sure you have a mortgage that includes the cost of repairs or have enough cash on hand to get the ball rolling on repairs on day one.

Weighing the pros and cons

Buying a house “as-is” comes with a variety of its own pros and cons. 

Pros

Like we said earlier, “as-is” homes are typically priced lower. And because there’s not a lot of “work” to do on the homes before closing, the timeline from offer to closing may be expedited. Lastly, if you’re interested and have the funds available to do so, “as-is” homes offer a nice foundation for flipping.

Cons

When you include the down payment, closing costs, and repairs, you may see higher “all-in” costs. Additionally, not every state requires a “Seller’s Disclosure”, which would identify the home’s issues and alert you to them ahead of time. Finally, as we mentioned earlier, a property’s poor condition may prevent you from qualifying for certain loans. 

Now that you know what “as-is” means, are you more or less interested in buying a house in that category? Whenever you’re ready, we’ve got home loan pros who can help.

When it comes to “as-is” homes, you’re not just buying the house. You’re buying whatever repairs and renovations need to be made to make the house a home.

Categories
HOME & GARDEN

Top 10 Home Remodeling Mistakes to Avoid

So you’re thinking about remodeling your home? Before you start busting through walls like the Kool-Aid Man, take note of these 10 home remodeling mistakes you need to avoid.

When it comes to home remodeling, the line between what you can do and what you shouldn’t do becomes a little blurry. If you’re thinking about maximizing your home’s square footage or tweaking a few things to optimize usage, you’re going to want to pay attention to the following home renovation tips. They’ll help you stay (mostly) sane during some of the more hectic periods of your upcoming project. 

1. Rushing into remodeling

First things first: Take it easy. Unless you’re a house flipper who just closed on an “as-is” home, and you need to start renovations ASAP, take some time to truly live in your home and get a better understanding of the flow. What you want and what the home needs may not line up exactly, and the last thing you want to do is start a remodeling project before realizing that maybe the original floor plans worked better before you blew out that wall. 

Beyond that, planning is key to project success. Unless you’re flush with cash, you’re probably not going to hire a contractor and start demolition in a short time span. Measurements need to be made, contractors need to be interviewed, plans need to be created, and things like paint, tile, and fixtures need to be picked out. Even a single room can take weeks or months of preparation.

2. Skipping research

Speaking of preparation, research is vital to your home improvement project. On one hand, that means measuring twice (or thrice), sketching out ideas, and perusing color palettes. There’s fun research—like looking at different fixture styles, and not-so-fun research—like crawling under cabinets to see if your pipes are PVC or cast iron. All of this will inform your remodeling project.

On the other hand, it means meeting with more than one contractor, gathering multiple bids, and setting your priorities straight. Here are some tips in that regard:

  • Look for local builders who have been in business for several years, have in-house designers, and have plenty of reviews.
  • Before scheduling contractor consultations, take some time to read their reviews (including the bad ones, because bad reviews don’t always mean bad contractors).
  • Take note of everything, including how the contractor speaks to you during your consultation, whether or not they pay attention to your plans and ideas, and whether or not they show up on time.

3. Not documenting things

Have you ever refreshed TikTok accidentally, or heard a catchy song without remembering to write down the lyrics so you can look it up later? It’s a gut punch of a feeling, right? Knowing that something you liked is now lost to the void, and all you can do is hope that it turns up again someday.

Imagine that feeling with an expensive remodeling project. Don’t be afraid to keep a spreadsheet of products, prices, and contacts. If you come across tile you love, screenshot it. If a contractor scratches your floors, snap a photo.

Documentation can keep you organized, and organization can save your behind and your budget.

4. Choosing the lowest quote

A common rule of thumb is to collect three quotes from different contractors for any kind of project. New windows? Three quotes. New concrete slab? Three quotes. New floors? Three quotes. 

A common rule of thumb is to collect three quotes from different contractors for any kind of project.

Three should be your minimum, and you’ll likely have a high bid, a low bid, and a bid that falls somewhere in the middle. Don’t just choose the cheapest contractor—compare those quotes and consider what they may or may not include. Does the high bid include better quality fixtures? Does the low bid leave out something important? Does one contractor offer a multi-project discount?

While choosing the lowest bid might save you a few thousand dollars now, it could end up costing even more money down the line. Know this: According to the National Association of Home Builders, “more than 30% of all jobs home remodelers perform come from failed DIY projects”

5. Forgetting to budget

Remodeling is expensive. Even simple DIY projects can add up to hundreds of dollars, and more complex work can quickly balloon out of your control. One of the best things you can do is to know your budget inside and out, and work with a contractor who will work with your budget. That isn’t to say you can’t interview contractors to get “ballpark” estimates, but they’ll be able to give you a better estimate if you come prepared with a number beforehand. Different resources (and opinions) exist on the matter, but consider this table before committing to the following project types:
Budget Estimate Table
Project Type Suggested Budget (% of Home Value) Suggested Budget($ per Square Foot)
Kitchen 10-25% $75-250
Living Room 10% $10-60
Bedroom 3-15% $15-40
Bathroom 5-10% $120-275
Note: This table uses rough estimates from various resources, including HomeGuide and OpenDoor. We are not affiliated with these resources, and homeowners should perform due diligence on their project estimates before agreeing to anything.

6. Working without permits

Depending on the scope of your project, and depending on your city’s requirements, permits may be required for your remodel. Those permits may be pricey, and they may even be a hassle to obtain, but they are a must if you want things documented (remember that part?) and done right. Electrical work, plumbing, and wall removals will often require permits, largely because any of those three things could have disastrous consequences if done incorrectly. Permits are supposed to help ensure the safety and compliance of your projects, in accordance with local zoning ordinances. Consequences of working without a permit include, but aren’t limited to:
  • Future buyers backing out of a sale
    • Permits are recorded and tied to your home’s deed. If the projects you complete aren’t recorded, buyers may be wary of what lurks behind the walls of your unpermitted projects.
  • Having to tear out and restart the work
    • Building authorities may force you or your contractor to start from square one if they discover unpermitted electrical and plumbing work, which could set your budget back by thousands of dollars.
  • Homeowner’s insurance not covering damages
    • Picture this: You want an open floor plan, so you hire someone to remove a wall between your kitchen and your living room. Lo and behold, the ceiling caves in because the wall was load-bearing. Because the work was completed without a permit, your homeowner’s insurance may not cover the substantial damages—leaving you with a hefty mess and an even heftier repair bill. 

7. Chasing trends and clashing styles

Just because it’s pretty, doesn’t mean it belongs in your home. Homes come in many architectural styles—including Victorian, Colonial, Mid-Century Modern, Contemporary, and more. Different styles come with their own defining characteristics, and today’s trends may not always fit your home’s established style. 

For example, a modern door may not match a Colonial home. Likewise, Art Deco design may not jive with a Tudor home. And all-black everything could diminish the charm of your newly purchased Cape Cod cottage. 

Instead of chasing trends, consider design elements that enhance the existing beauty of your home. After all, trends change frequently—the last thing you want is to lose resale value because 2023 was the year of plaster. 

Instead of chasing trends, consider design elements that enhance the existing beauty of your home.

8. Changing plans (too often)

Hey, we get it—sometimes that tile you really loved doesn’t quite fit the space the way you imagined. Short of minor changes to superficial things like paint and tile, it’s best to stick to the plans your designer and contractor drew up. After all, it’s what you’re paying them for, and major deviations to those plans—meaning structural changes and heavy design alterations—could increase your costs and frustrate your contractor. 

A good contractor will walk through the plans with you multiple times before work starts, giving you ample time to adjust before materials are ordered. They may even bring you in for a look before installing something, just to get a gut check. These are your opportunities to make changes, not after tile has already been grouted into place.

9. Sidestepping safety

Permits, which we talked about earlier, are one element of creating a safe work environment. Here are some other ways you can protect yourself and others when remodeling your home:
  • Wearing PPE (gloves, safety glasses, masks/respirators, hardhats, etc.)
  • Using fans to help evacuate chemical fumes
  • Hanging or laying down plastic sheeting to capture dust and debris
  • Disabling electricity at the breaker before beginning demolition
  • Testing for asbestos and lead paint (important for older homes)
  • Keep your hands clear of sharp objects
Following these home reno tips can help everyone working in your home safe. If the contractor you hired isn’t following these safety precautions, bring it up. There’s no such thing as “too safe” when it comes to protecting yourself, your family, and your investment.

10. Ignoring your gut

If you ever feel like the numbers aren’t adding up, don’t like the way something is being handled, or think something isn’t quite right, don’t be afraid to listen to your gut and voice your concerns. A good contractor will either listen to your concerns, or explain why alterations had to be made. Ultimately your home’s renovation is just that: your home’s renovation, not anyone else’s. Your gut instincts may protect your investment. 

 
Categories
MORTGAGE MARKET

The Best Mortgage Refinance Options and Alternatives

Purchasing a home isn’t the final step in the life of your mortgage. At some point, you’ll likely want to refinance your loan for new terms. Luckily, you’ve got plenty of mortgage refinance options to choose from. The right fit for you depends on your goals—lowering your monthly payment, tapping into home equity, or paying off your mortgage faster are some common ones. 

To help you narrow it down, let’s explore the types of mortgage refinances, as well as some financial alternatives.

5 Types of Mortgage Refinance Options and Alternatives

  • Rate and term refinance
  • Cash-out refinance
  • Home equity line of credit (HELOC)
  • Sell your home and downsize
  • Turn your home into an investment property

Rate and term refinance

When most people think of refinancing a loan, they think of a rate and term refinance. This is the most traditional route, and for good reason. As the name implies, a rate and term refinance allows you to get a new rate and/or term on your mortgage. You may also be able to refinance to a different loan type that better meets your needs. 

For example, many homeowners start out with an FHA loan because it can be easier to qualify for as a first-time homebuyer. As they build home equity and grow their credit score, they may want to refinance to a Conventional mortgage so that they can drop monthly mortgage insurance premiums.

When is it a good idea?

Rate and term refinances are a great choice if you want to pay off your mortgage faster or take advantage of lower interest rates. 

Cash-out refinance

A cash-out refinance is when a borrower refinances their mortgage for more than the amount they currently owe and receives the difference in cash. They allow you to lock in a new fixed rate for the life of the loan and get predictable payments that make budgeting simple. Plus, all fees associated with the cost to borrow are paid upfront—no surprise fees down the road.

When is it a good idea?

If your goal is flexible funds, consolidating debt*, or financing home upgrades, a cash-out refi could be the right fit for you. Just keep in mind that unlike a rate and term refi, your monthly payment will likely go up, not down.

*Using your home equity to pay off debts or make other purchases does not eliminate the debt or the cost of the purchases, but rather increases the loan amount of your mortgage to be paid according to your new mortgage terms.

Home equity line of credit (HELOC)

A home equity line of credit (HELOC) is a refinance option that allows you to borrow against your home equity and use that to pay for miscellaneous expenses. It’s unique in the sense that the cash may be advanced to the borrower via a line of credit—like a credit card—rather than in a lump sum. You may have heard HELOCs more commonly referred to as second mortgages.

When is it a good idea?

Cash-out refis and HELOCS are similar. But, if your goal in tapping into home equity is for more flexible finances in general (rather than for a specific project like renovations) a HELOC might be a better fit.

Sell your home and downsize

Refinancing isn’t the only way to meet your homeownership goals. If your goal is to get cash from your home equity, selling your home might also be a viable option. In fact, you may even get more money back from selling your home than you would from refinancing. A smaller home may come with a smaller monthly mortgage payment, leaving you with more money in your pocket to pay for other expenses.

When is it a good idea?

This option could be right for you if you’re ready to downsize and current rates are more optimal than when you bought your current home. 

Pro Tip: For borrowers age 62 or older, a reverse mortgage is a way to leverage the home equity of your current home to reduce the cost of purchasing a new home.

Turn your home into an investment property

If you’re cash-strapped, flipping your home into an investment property might pay off more than refinancing. You could rent out a room, a floor, or the whole place if you’re away often. This option means you can keep living in your home, continue with your current mortgage terms, and make additional income at the same time. Renting out your home isn’t for everyone, though. And in some cases, using your home as an investment property may not be permitted by your existing mortgage, local government, or homeowners association.

When is it a good idea?

If you don’t mind people in your space, aren’t looking for new mortgage terms, and want to increase your cash flow, renting out your home could be the right choice for you.

Are there any other mortgage refinance options I should consider?

There’s no single right answer when it comes to refinancing or using your home to access more flexible finances. The right choice for you depends not just on your goals, but also on the current market rates. Whether you decide to keep your current terms, refinance, or take a different route with your home loan altogether, don’t rush a decision just because it seems like the next milestone you should reach. At the end of the day, homeownership happens at your own pace.

The right mortgage refinance type for you depends not just on your financial goals, but also on the current market rates.