Home Ownership

Climate Change is Driving Up The Cost of Your Insurance

Many Americans tune out coverage of climate change, thinking the risks it poses will affect them “someday.” But with dangerous storms, excessive heat and droughts becoming more frequent and extreme, consumers are already feeling the pinch from climate change when it comes time to pay their homeowners insurance premiums. ...

From one extreme to the other

Some regions of the U.S. are more vulnerable than others to dangerous weather. California has gorgeous mountains and stately trees, but summer brings devastating wildfires. The Gulf and Atlantic coasts have sun-drenched beaches…and hurricanes. The upper Midwest is America’s farm belt, with the mighty Mississippi bisecting its rolling plains, but tornadoes, blizzards and floods wreak mayhem annually....

These weather phenomena have happened for many years but are becoming increasingly frequent and intense. And as real estate development spreads, more property lies in the path of these catastrophes....

By the numbers

Insurance companies set premium rates based on a rolling year-by-year amount of claims paid and the frequency of events in an area. That’s why increasingly destructive storms lead to rising homeowners insurance premiums. In recent years, the rising prices of construction materials restricted by supply chain kinks have also increased insurance costs. Altogether, Americans paid 8.4 percent more in property insurance premiums between the third quarter of 2020 and the same period in 2021....

Attracted to trouble

Some of the highest-risk locations in the country have the fastest-growing populations. In other words, people are moving into danger zones where homeowners insurance premiums are rising quickly....

Florida has long been attractive to retirees and others with its mild winters, lush greenery, golf, tennis and water recreation. Because it’s located in the tropics, however, Florida has a bullseye on it when it comes to hurricanes, causing its insurance rates to rise. The same holds true for the rest of the Gulf Coast and northward along the Atlantic seaboard. ...

In Florida, insurance rates have increased so much, sometimes into the tens of thousands per year, that many retirees on fixed incomes can no longer afford to pay their premiums....

What can you do?

You are not entirely helpless in the face of relentless insurance cost increases spurred by climate change. Here are some steps you can take to keep your premiums down....

If you live in a hurricane-prone area and your house does not already have “hurricane straps” in the attic, investigate having them retrofitted. Hurricane straps are galvanized metal braces that reinforce the junction between roof trusses and the top plate of outside walls. They fortify your roof against strong winds.
Have your roof inspected annually if your area is a target for hurricanes. Catching slight damage to shingles, flashing and gutters early prevents more extensive damage later during a storm.
In wildfire-prone areas, keep brush cleared from beneath larger canopy trees. Clear brush within 150 feet of your house and cut tree limbs that hang over your roof. Cut down high grass. Gather grass, brush and tree trimmings and have them hauled away.
Observe county burn bans strictly in areas prone to wildfires. According to the National Park Service, human activity triggers 85 percent of wildfires. So don’t be the cause of a wildfire emergency.
Take advantage of “bundle” insurance rates, using one company for all your property insurance for cars and homes.

If you live near a river, creek or lake along the Gulf or Atlantic coast, you should also talk to your insurance agent about flood insurance. This won’t lower your insurance costs — homeowners insurance doesn’t cover floods caused by overflowing bodies of water, so you need flood insurance in addition to your homeowners’ coverage. But it will protect you from a threat that increases with climate change. Flood insurance is sold separately by the National Flood Insurance Program....

Money, Mortgage,

FAQs on Financing Your First Home

Getting your first home mortgage can be intimidating. Let’s eliminate fear of the unknown by answering some common questions....

Q: Can I get a mortgage even though I have bad credit?

Yes, though you’ll get better interest rates with a good credit rating. With conventional financing you can get a loan with a FICO credit score as low as 620. (You can get a government Federal Housing Administration (FHA) loan with a score of 580.) To hedge against the greater risk of default with borrowers whose credit scores are relatively low, mortgage companies charge them a higher interest rate....

Though it’s possible to get a mortgage with bad credit, remember that the difference in interest paid over the life of a loan with a higher interest rate is tens of thousands of dollars. If you know you have troubled credit, it’s important to work diligently to pay your debts on time and reduce overall debt before applying for a mortgage. This may mean you have to delay a home purchase, but you’ll save big in the long run....

Q: Can I put down less than 20 percent on a home?

Yes, but again, this can cost you in the long run....

You can put down as little as 3 percent on conventional loans and 3.5 percent on FHA. But if you put down less than 20 percent on these loans, mortgage companies consider you a credit risk and will require you to pay monthly for a mortgage insurance policy that protects them from the risk you’ll default. Lenders view borrowers who put down 20 percent or more as a lower default risk because they have a bigger stake in the house and their monthly payments will be more manageable. Paying for mortgage insurance, which is required until the borrower has a 20 percent stake in the home, uses money that could be going toward building equity....

You can pay nothing down on Veterans Administration (VA) and United States Department of Agricultural (USDA) loans....

Q: Should I choose a fixed-rate or an adjustable-rate mortgage?

The answer depends on your personal circumstances and the interest rate environment....

When interest rates are low, most people choose a fixed-rate loan to lock in a low rate for the life of the loan. The upside with fixed-rate loans is that you’re protected against a rate hike when interest rates rise. The risk is that if rates go down, you’ll be missing out on lower payments. Refinancing, however, is always an option in this situation....

With an adjustable-rate mortgage (ARM), your loan begins with an interest rate below prevailing rates, and at a predetermined time, ranging from a few months to five years, the interest rate rises. Usually these loans offer a cap on the highest rate allowed. ARMs are described by their adjustment period, such as a three-year ARM....

The risk with an ARM is that the rate adjustment will happen when interest rates are rising. An ARM might work for you if you know that you plan to sell the house before the adjustment happens. Otherwise, ARM borrowers run the risk of being unable to handle the higher payment in the future. If the adjustment occurs when interest rates are falling, an ARM could actually save you money by lowering the interest rate at which the loan began....

The lender must give you a very detailed description of your loan’s terms, so read carefully and consult a financial adviser if you aren’t sure what to do....

Q: How do I find a reputable lender?

Your mortgage search should begin before your house search....

There are three main types of mortgage lenders: banks, credit unions and independent mortgage brokers. Ask your real estate agent, friends and family, and research online. Read customer reviews and compare interest rates. Understand that the rates shown are estimates and can vary according to your financial profile....

Choose three lenders and make phone calls. Ask about underwriting, the ease of application and costs such as application fees, loan origination fees, appraisal fees, credit report and points. Ask whether the lender will waive any of these costs or roll them into the loan. Also ask about discount points. These are payments you can make up front to “buy down” your interest rate by an eighth- or quarter-point. By paying points, you are essentially prepaying interest to save more interest charges over the life of the loan....

Find your lender of choice and get preapproved for a mortgage before looking at homes. Pre approval tells sellers you are a serious buyer, not just a browser, and streamlines your final approval once you put a contract on a house....

Q: When should I lock in my interest rate?

Locking an interest rate with a lender means you and the lender commit to a rate for a certain period, typically 30 days. A rate cannot be locked until after initial loan approval, and the lock usually lasts during the underwriting and final approval process on up to closing....

A rate lock protects you against the risk interest rates will rise during this process. The risk of a rate lock is that rates could actually go down during the lock period, leaving you committed to a higher rate. A “float down” provision with your lender could protect you against this risk. There’s also a risk that your closing on the house could be delayed and the rate lock will expire. The lender assumes risks of its own in rate fluctuations....

When interest rates are rising, you can commit to a 30-day lock if you believe you can close on the home in that period of time. If you choose to lock for longer than 30 days, the mortgage company may charge you an extra eighth of a percentage point or more in interest to hedge its risk....

When interest rates are falling, you might wait for a lower rate until much nearer to closing, hoping to get the best rate possible....

Q: What if my loan application is denied?

Even before the application process you should know your credit score by pulling a free credit report. Apply for pre approval before you begin home shopping. The lender doing the pre approval should be candid with you about challenges you may face. It’s important to note that even with pre approval, final mortgage approval is not assured....

If you are denied, the lender must tell you why. You can apply with another lender, but remember that each new application shows on your credit report and can be a drag on your score....

Keep in mind that banks’ lending standards will likely be tighter than other lenders. A mortgage broker has more latitude because he works with many lenders and can shop among them to find the best rate, fee packages and other terms for you....

Ultimately the best way to recover is to work on improving your credit score. This means making timely payments and paying down your overall debt level....

Related – FAQs for First-Time Home Buyers...

Money, Mortgage,

Purchasing Your Rental Home With an FHA Loan

Renters who want to purchase their dwelling from their landlord can do so using an FHA loan. You can also use FHA loans to buy a house from a family member. But in certain circumstances, lenders in these transactions may require a higher down payment than is typical for FHA loans. Here’s a primer on using an FHA loan to buy from your landlord or a family member....

“Identity of interest”

The down payments required for FHA loans are sometimes as low as 3.5 percent. But if the parties to a home sale transaction have an “identity of interest,” as defined in certain FHA loan rules, lenders will require a down payment of at least 15 percent....

What does the identity of interest mean? HUD rule 4000.1 defines an identity of interest transaction as one “between parties with an existing Business Relationship or between Family Members.” This includes a landlord-tenant relationship....

Exceptions to the rule

Unless the seller has offered an “inducement to purchase” (see below), lenders will not require the higher down payment in these two circumstances: ...

The buyer is purchasing a principal residence from a family member who also used it as a principal residence.
The buyer is purchasing a family member’s home in which he has been a tenant for the six months immediately preceding the sale. The FHA will require a written lease or other documentation of this relationship.

Allowing a tenant to live in a property rent-free or at a rate below market value is considered an inducement to purchase. If the landlord has been providing such an inducement, the FHA lender is required to reduce the loan by an equivalent amount, thus increasing the amount needed for a down payment....

Buying, Financing a Home, Mortgage,

How to Build a Strong Credit History in Four Steps

Securing a good interest rate and qualifying for a home require a good credit report. That’s easier said than done, especially for today’s millennials who are often weighed down by student loan debt. Here’s a four-step approach to building a strong credit history....

Types of credit

Debt falls into two categories: revolving and installment. Revolving accounts include credit cards or cards to specific stores. These accounts give a maximum limit that you can borrow. You’ll then have a minimum payment every month that goes toward the principal and interest....

Installment accounts refer to a fixed loan amount, paid back in scheduled payments over a specific number of months. Car loans, mortgages, student loans, personal loans – payments on these regularly reduce the principal amount, which eventually results in full repayment. Revolving debt typically carries higher fees and interest rates than installment accounts....

Step 1: Establish and maintain your credit history

Yes, you need credit, and you need credit in order to get more credit and higher limits. First-time borrowers may be required to start with a “secured” credit card. Secured means you put money in an account like a certificate of deposit and in return, the bank gives you a credit card. If you put $250 down, then your credit limit is $250. Many experts recommend using this type of card for all your gasoline purchases and then paying the balance in full each month. The longer your accounts are open and in good standing, the stronger your credit history will be....

Step 2: Pay on time

Your credit history also will reflect your timeliness in repayment. Late or skipped payments will bring your score down and can remain on your report for a number of years. In addition to the ding on your report, late or skipped payments may also bring stiff financial penalties. Credit cards companies may increase your interest rate after missed or late payments and charge late fees. Car loan companies may repossess your vehicle. The interest on student loans continues to accrue when you fail to make payments. All of these scenarios make the debt more expensive for you and harder to catch up. A history of on-time payments, on the other hand, tells a mortgage lender you’re likely to pay your mortgage on time, too....

Step 3: Don’t max out

Part of your score is based on how much of your available credit you actually spend. Using all of your available credit may be interpreted as relying too heavily on debt....

Step 4: Pay down your balances

Lenders look for diligence at reducing your debt over time. Using the above tip with a small card that you pay completely each month shows you can budget and plan your spending. Keeping high balances that carry over from month to month indicates a tendency to over-spend your income. If you find yourself with a high balance because of an unforeseen expense, it’s crucial to work steadily toward eliminating the debt, paying more than the minimum required payment each month....

These tips also work for rebuilding damaged credit but are especially important for younger millennial adults to set themselves up for success....

Building a Home, Buying,

The Three Ms: Modular, Mobile, and Manufactured Housing

For many, an alternative to costly housing has renewed interest in the three Ms: modular, mobile, and manufactured housing. The housing industry has swung from the Great Recession in 2008 to the price mania of 2022 to a dramatic slowdown in 2024 (due to rising inflation and interest rates). All of the three Ms can be less expensive than homes built on-site. How do they differ?...

Defining the three Ms in housing

All three Ms—modular, mobile, and manufactured housing—fall under prefabricated housing....

Modular homes are factory-built, but the key difference is that once the house is moved on-site, it is set upon a permanent foundation and cannot be moved again. This type of home can be placed on a slab foundation, have a basement, and even have two stories....

Modular home-quality standards are typically set by the local and state building codes where the house will be placed, and these standards can vary by jurisdiction....

Mobile or manufactured homes are built according to factory requirement standards set by HUD. Under HUD regulations, manufactured housing is the official term for a house built in a factory on a chassis with wheels rather than being constructed on-site. ...

Commonly called a mobile home, this type of house is movable to its location and movable again if needed. Once on-site, the wheels can be removed or covered with a skirt. These homes come in single, double, or triple sections assembled on the property. If the home is moved later, it is split into original parts and reassembled on its new site....

Pros and cons of modular, mobile, and manufactured housing

The most significant advantage of factory-built housing is affordability. The factory construction process is not subject to conditions that can drive up the price, delay completion, and create issues with local building inspections. It is a more efficient operation that reduces costs....

Like site-built homes, buyers are offered various customizable choices in floor plans, paint colors, flooring, cabinets, colors, hardware, and more. ...

Though building in the factory is more efficient, moving the sections to the home site incurs transportation costs: the specialized moving vehicle and crew, a pilot vehicle many states require to accompany the move, and the location of routes that allow the home to clear overpasses and overhead power wires. ...

Financing for modular homes can be challenging. The builder may require a substantial down payment or full payment in advance. The house may have to be built using a construction loan, which can be converted into a regular mortgage after completion. Finally, weather awareness is essential for those living in these homes....

Buying, Buying a Home, Selling, Selling Your Home,

How to Buy a House Before You Sell

Across the country, a shortage of houses for sale coupled with strong demand has led to homes selling mere days after going on the market. Often these houses receive multiple offers and sell well over the asking price. If you must sell your existing house before you can buy, you risk losing the house you want. But there are strategies that will allow you to buy before you sell. Read on for 10 ideas. ...

Sell and rent while you home shop

You could sell your existing home and rent another place while you home shop. The downside is that you move twice, first to the rental, then to the home you eventually purchase....

Submit a contingent offer

An offer with a home sale contingency provides that you will purchase the seller’s home once you’ve sold yours. In a less heated market, this would be the most common way to buy before selling. But in today’s red hot market, sellers are often rejecting such contingencies because they know they can sell rapidly to another buyer. You can still ask, but don’t be surprised if the seller’s agent advises him not to accept a contingent offer....

Negotiate a later closing date

During your purchase negotiation, request a closing date far enough out that you feel confident you can sell your current home. There’s always the chance you may not be able to sell in time, but the current hot market lessens that risk, since your house may sell quickly, too....

Build a home

Rather than buy an existing home, opt to buy new construction. You will have three months or more before closing, during which your new home is being built and you can sell your existing home....

Obtain a HELOC loan

If you have at least 20 percent equity in your current home and good payment history, you may qualify for a home equity line of credit (HELOC). You can make the down payment on your new purchase using that money and take the additional time before closing to sell your existing home. You then use the proceeds of that sale to pay off your first mortgage and the HELOC. The downside risk is that your existing home does not sell before you’re obligated to close on the new home, leaving you with three mortgage payments for a period of time....

Obtain a bridge loan

Another type of temporary financing is a bridge loan. This temporary loan finances the purchase of the new home, allowing you time to sell your existing home. Bridge loan payback terms are often one year. ...

Use a home buying service

A variation of the bridge loan is to use a service such as Ribbon or Easy Knock to purchase your current home. This will provide you with funds to purchase your new home. The service will then sell your former home to recapture their purchase price, charging you a percentage of the sales price. ...

Negotiate seller financing

If the seller is willing, he could finance the sale of the home to you, with you making payments to him. ...

Borrow against your 401K

If you have enough in your 401K for the new home’s down payment, you could borrow it and pay yourself back with interest when your existing home sells. Before doing so, carefully research the rules your employer and the fund custodian firm impose on such loans. The downside of this approach is that if you do not pay back the entire amount with interest, you could end up owing significant taxes and penalties....

Negotiate a leaseback

Say you’re ready to sell your home and have found a buyer who wants it, but you haven’t yet found a new place to live. Perhaps you can get the buyer to agree to let you lease the property you’re selling for a short time after closing in order to give you time to find a new home....

Selling, Staging Your Home,

Potential Buyers Don’t Want to See, Hear or Smell Your Pets

When putting your home up for sale, it’s crucial to make a plan for your pets. While prospective buyers may love their own pets, they don’t want to see — or smell — yours when touring your home. Here are a few ideas for keeping your pet’s presence low profile....

Arrange for help. Boarding your pets might be cost prohibitive, especially when homes are on the market for extended periods of time. However, it’s crucial that your pets not be inside the home when it’s being shown. When notified of a showing, be prepared to remove the animals. If you work far from home, consider making arrangements with a neighbor, friend or family member to care for them during the showing. If you are selling by owner, insist on scheduled appointments only....

No exceptions. At best, potential buyers will be distracted by your pets, especially barking dogs and free-roaming cats. Even worse, buyers or their children may be frightened by your pets and refuse to go inside. Liability is another concern if a potential buyer were to be scratched or bitten....

Leave no trace. Beds, bowls, litter boxes, crates and toys should also be removed. Pare down your pet’s belongings before your home goes on the market so when you get the call for a showing you only have a few things to grab....

Beware of odors. Ask any experienced real estate agent and they will tell you that unpleasant odors can kill a buyer’s interest. Besides cigarette smoke, pets are probably the leading source of odors. You may have grown so accustomed to your pet’s smells that you don’t notice it. Ask friends or neighbors for their frank opinion....

Have all carpets and rugs professionally cleaned before listing the house. If your pets are permitted on the furniture, steam clean the upholstery. Ask cleaners to use solutions specifically designed to lift pet smells and stains. To keep odors from returning, bathe dogs more often, and clean litter boxes and cages more frequently....

Selling, Selling Your Home,

Turning the Page: 10 Reasons To Sell Your Home

Many situations motivate people to put their homes on the market, but the reasons to sell tend to fall into these 10 categories. Some home sales are for happy reasons, and some are not. ...

Positive and negative reasons to sell your home

Let’s start with the joyful considerations for home sales. ...

Marriage is a significant factor in buying or selling a home. Newlyweds may sell their current home to upgrade to a larger one or to be nearer their spouse’s workplace.
A new baby means a couple may sell to upsize for their growing family.
A job promotion means a couple can afford a bigger home, or they may be selling to relocate due to a job transfer.
A couple may sell their home to move closer to other family members, such as aging parents or adult siblings and their families.
Empty nesters may want to downsize to a smaller home where they can better manage maintenance.

On the downside, some home sales are prompted when sellers face distress....

Loss of a job forces some to sell and step down to a rental until their work situation improves.
Divorce forces some couples to sell.
A death may mean the family must sell the deceased’s home.
Financial distress may force people to sell and pay off debt using home equity.
Some homeowners may be intimidated by home maintenance. It may seem easier to sell than to replace an aging roof or HVAC system.

Your situation

As a seller, you are not obligated to disclose your reasons for selling unless it concerns any condition of the property that you are legally required to disclose or a lien situation that affects the property’s title. ...

As a buyer, you cannot pry into the seller’s situation. It is okay if he or she discloses it voluntarily, but do not press the seller or agent for personal information. The agent is bound by law to be discreet on such matters on behalf of his client....

Related – FAQs for First-Time Home Sellers...

Buying, Buying a Home,

How to Deal With Unpermitted Renovations

When you are buying a home, it’s important to determine whether any renovations or remodeling projects were properly permitted. It’s not uncommon for homeowners to undertake such work without the required permits and government inspections. A professional home inspector will be able to evaluate this as well as the quality of the job, but you can sometimes spot telltale signs of unpermitted work on your own. If you find it, what should you do? Here’s how to deal with unpermitted renovations....

Signs of unpermitted work

Room additions not level with the adjoining house. Sometimes ground slopes in such a way that there is no avoiding a step up or down when adding a room. But if there is little to no grade and the floor and ceiling levels don’t match up, you’re probably looking at substandard work done with no permit.

Cracked drywall around a doorway. This suggests a door was cut from an existing wall and has substandard framing. Particularly if the wall is load-bearing, this can stress the Sheetrock and cause significant, costly damage.

Improper placement of electrical outlets. Rooms cannot have more than 12 linear feet between electrical outlets. In wet areas such as bathrooms and kitchens, outlets must be GFCI outlets. If either of these standards are violated, the work is likely unpermitted and uninspected.

Bedrooms with no secondary means of egress. Fire safety codes require bedrooms to have a secondary means of egress to the outside. There must be either a window of minimum acceptable size or a second door in addition to the interior bedroom door that leads outside. A bedroom without a second means of egress was probably built or remodeled without a proper permit and inspection.

Improper bathroom window glass. Bathroom windows must have safety-grade glass, similar to safety glass on cars.

Sometimes work is done to professional standards, but the contractors do not pull permits. A professional home inspector will check with the city or county code enforcement agency to see if proper permits were pulled and work was inspected and passed. ...

What to do if unpermitted work has been done

If your inspector confirms work was done without permits and inspection, you should talk with your agent about your choices....

If you are applying for a mortgage, the loan underwriter will see the inspection report and flag the unpermitted work. Loan approval will be suspended until the work is inspected and approved. You can insist that the seller get the work inspected after the fact, obtain permits and get the necessary city or county approval. If the work was done well, it should pass, although there may be a fine by the code enforcement agency. If the work doesn’t pass inspection, it will have to be corrected. Should the seller be unwilling to correct the problem themselves, you can ask them for a price concession to reimburse you for doing the work yourself....

If you are purchasing for all cash, you can accept the house “as is” and deal with the unpermitted work later. However, if you don’t correct it, the permitting issue will arise again when you attempt to sell....

Indoor Living, Ownership,

Closing Your Bedroom Door Could Save Your Life

One simple action — closing your bedroom door before going to bed at night — could save your life. A practice known in the fire safety field as “close before you doze,” that simple act gives you precious minutes to escape in a catastrophic house fire....

The facts about fire

Today’s building materials and furnishings are more combustible than in the past because they’re made of synthetics. Additionally, modern homes are bigger than in past generations. These factors have cut escape time during a fire from almost 20 minutes a generation ago to about three minutes. Simple steps can make a big difference in survival. ...

Preventing house fires

No one wants to contemplate the horror of a devastating fire. But with simple preplanning, much can be done to prevent that calamity....

Do not allow flammable material near sources of heat and flame. No kitchen towels and hot pads near the stove, nothing stored close to the water heater, nothing that can ignite next to the fireplace. Do not run electrical cords under carpet, and do not overload plugs into a power strip. Never operate a grill inside the home.
Purchase and place fire extinguishers around potential fire areas: the kitchen, garage and outdoor grill.
Each year, there was no working smoke detector in half of all residential fire deaths, so make sure yours are working. A high percentage of deaths occur in the overnight hours when people are sleeping, making working smoke detectors vital. Test detectors, both for fire and carbon monoxide, several times per year and keep the batteries fresh. Your alarms should be interconnected so that if one alerts, they all do. Replace alarms that are 10 or more years old.
Develop an emergency plan before a fire strikes. You and your family members should plan one or preferably two escape routes to the outside from every room of the house. Coordinate a meeting place for all family members outside. Carry out surprise fire drills to test each person’s readiness.

What to do when disaster strikes

Having your bedroom door closed makes a huge difference in the time you have to respond to a fire. If your alarms are interconnected, a fire elsewhere in the house will sound the alarm in your bedroom....

The temperature in a room with a closed-door can remain at 100 degrees, whereas with the door open it can soar quickly to 1,000 degrees. Smoke and carbon monoxide also skyrocket with an open door. Smoke tends to stay higher in rooms, which means there is less smoke to pass under a closed door. ...

Here are some additional steps to keep your family safe....

Place unrolling ladders in the windows of upstairs rooms to use if escape routes through the house are cut off.
If a pet or family member does not make it outside, do not go back in the house to rescue them. Alert firefighters and they will find the loved ones. They are trained and have the protective gear to do so.

Related – Watch Out for Dryer Fires!...

Newer Posts

Older Posts

Read more articles in Buying, Selling, Ownership, or Money.