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. 

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.

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.

“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.

The post How to Choose Homeowners Insurance (And Lower Your Rate) appeared first on Cardinal Financial.

SMART Goals for Buying a House

Ever try to put furniture together without the instruction manual? Might have worked out. But, it just as likely ended with a backward side panel on your dresser or wobbly joints on your chair. One thing’s for sure, the process took longer than if you would have just followed the manual.

You can think of SMART goals for buying a house like instructions for making your dreams come true. Take a bit of time to map out your plan of action and your likelihood of success will shoot through the roof (probably the roof of your new house).

Here’s how to do it. Plan out each part of the SMART goal acronym and you’re on your way:
S- Specific
M- Measurable
A- Achievable
R- Relevant
T- Time-Based

Specific – What Do You Really Want?

Be specific and detailed about what, exactly, you want in a home. Knowing the particulars will help you plan the rest of your SMART goal. We’re not just talking bed and bath combinations—it’s much more than that. Is there a specific town or neighborhood you want to live in? Do you want some outdoor space? What about a dine-in kitchen? Or a dual vanity in the bathroom? Think critically about your lifestyle, your finances, and how your current place is or isn’t working for you. Then, map out your wants vs. needs.

Specific – I plan to buy a 2-bedroom home with a gated yard (for Buster, of course) and a work commute under 30 minutes.
Not Specific – I plan to buy a house.

Measurable – Get to Know Your Finances

One of the most powerful tools for success? Measurement. If you want to become a better long-distance runner, you’d track your mileage gains over time. The same is true for your SMART goals for buying a house. Measuring your progress is key (to your future front door).

Start by taking stock of your current credit score, existing debts, and savings for a down payment. From there, you can set measurement milestones. Consider picking one area of focus that could be most impactful to your home purchase. Don’t have a down payment accruing? That could be your 2022 focus. Think your student loans might seriously hinder your borrowing power? Commit to increasing your monthly payment (reduce the amount owed) by a set amount. Worried your credit won’t qualify you for a mortgage? Make a detailed plan to pay down your balance.

Measurable – I will save an additional $10,000 for my down payment by scheduling a monthly auto-deposit of $833.33 into my savings account.
Not Specific – I will save for my down payment.

Expert Tip: Not sure which financial factor to focus on? Reach out to a mortgage professional for a free home loan evaluation. They can help guide your goal-setting.

Achievable – What Can You Afford and When?

As far as we’re concerned, the A should come first. But, we guess ASMRT doesn’t roll off the tongue quite as well (try saying it – it isn’t pretty). This essential step exists to ensure you can accomplish your goal. Say you don’t have a down payment saved, but you’ll need at least 3% of the home’s value to qualify for a mortgage. Can you truly swing the monthly savings required to make that happen? Same goes for timing. When you think through all the details, does it really make sense to buy a home in 2022? If even one of your answers is, “no,” the S, M, R, and T don’t matter at all.

Relevant – Homeownership in Context

It’s worth considering your short-term plans and your long-term vision for your life. The “relevance” step of SMART goals for buying a house establishes where homeownership fits in. Is traveling the world a priority in the coming years? Well, wanderlust might push buying a place to the backburner. Committed to starting – or expanding – your family soon? Then, homeownership is about as relevant as it gets.

You don’t want to pull yourself (or your finances) in too many directions. One huge direction is enough, thank you very much.

Time-Based – When Can You Start Shopping?

You’ve been planning to organize your junk drawer for years. Somehow, the task always seems to get tucked under other, more appealing, time commitments. And that new exercise routine… starting it in 2023? Us too.

The problem isn’t that cleaning a drawer or exercising are unreachable goals. It’s just that you probably haven’t established a timeline for either. Time-stamped milestones can have a mansion-sized impact on making your homeownership dream happen.

Expert Tip: Don’t stop at setting your house-purchase date. Define deadlines for each step of your goal. Even better? Add each milestone to your calendar.

Time-driven –

• I will narrow down my search area to 5 neighborhoods by March.
• I will find a real estate agent and mortgage professional by April.
• I will improve my credit score by August.
• I will establish my home budget by September.
• I will start house hunting by October.
• I will own a home by December of 2022.

Less Time-driven – I will buy a house this year.

Making Your SMART Goal Happen

It turns out that SMART goals are more than smart. They identify crucial aspects of goal-setting and scaffold your success. Who’d have thought you’d become the author of your very own instruction manual? It’s time to do this home buying thing.

You can think of SMART goals for buying a house like instructions for making your dreams come true.

The post Smart Goals for Buying a House appeared first on Cardinal Financial.

What kind of refi should I get?

At the very beginning of the refi timeline, you’ll be faced with a fork in the road: rate-and-term or cash-out.

With a rate-and-term refi, you’ll get a new (you guessed it) rate-and-term without advancing any new money. If you’re looking to lower your monthly payment or pay off your mortgage sooner, a rate-and-term could be the right fit for you. After all, a lot could’ve changed since you first bought your home and you may qualify for better terms now than you did before.

Speaking of home equity, a cash-out refi* lets you turn that equity into cash. Keep in mind that because you’re taking cash out, you could end up with a higher monthly payment to cover this. If you’re looking to build even more equity with upgrades like a kitchen remodel or pool, a cash-out refi is a great way to fund those home improvements.

So, if you want a lower monthly payment, a rate-and-term fits the bill. If you want to leverage your home equity for more flexible funds, a cash-out could be the better option for you.

*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.

How do I start the refinance process?

The first thing you’ll do is reach out to your lender (or a few lenders if you want options) for a rate quote. You could have your quote within minutes, but take a few days to consider your options. With your lender chosen and quote in hand, it’s time to apply for your refi.

During the application process (which typically takes a few days to a couple of weeks), you’ll need documentation similar to what you provided for your purchase: recent pay stubs, W-2s, and bank statements to name a few. Once you’ve applied, your lender will put together some options for your new rate, then you’ll lock in your best fit.

In the next few weeks, your lender will verify and review all the information you provided in the application, just to make sure everything is accurate. This is called underwriting, and it’s also the point in the timeline where you’ll need a refinance appraisal.

Why do I need a refinance appraisal?

A refinance appraisal is key to qualifying for the new rate you want, and for determining how much cash you can actually get in a cash-out refinance. Over the life of your mortgage, your home has been building equity, whether that’s from upgrades you’ve made like installing new appliances or external factors like the housing market. An appraisal will tell you just how much value your home has accrued since you bought it.

At this point, your lender will order the appraisal for you, the appraisal company will send someone to assess your home, and you’ll get a professional estimate of its value. Depending on how fast the appraiser gets back to you, the whole process could take a few days to a couple of weeks.

Some refinance types, like a VA Streamline Refi (also known as an IRRRL or Interest Rate Reduction Refinance Loan) or an FHA Streamline Refi, won’t require an appraisal. These refinance loans are available if you’re refinancing from a VA loan to a new VA loan, or from an FHA loan to a new FHA loan. With a streamline refi, you’ll enjoy a faster process and less paperwork.

I got my refinance appraisal. What’s the refi timeline from here?

You’ve got your appraisal, which means you’re almost done. A few days before closing, your lender will send you closing disclosures. You should review these carefully to make sure everything is correct and ready to be finalized. Once you’ve reviewed the documents, your lender will help you set up a time and place for closing. You, your co-borrowers if you have them, and a lawyer or closing agent will need to be there.

On the big day, you’ll sign the final documents and pay any costs that haven’t been rolled into your new mortgage loan. If you’re getting a cash-out refi, you’ll receive the check at or within three business days of closing.

And that’s it! From rate quote to close, the whole process typically takes 30-45 days. The turn time between submitting your application and getting approved could take anywhere from a few hours to a few days, depending on how complex your loan is.

How soon will I need another refi?

While there’s no limit to the number of times you can refinance your home, you should wait at least long enough for something significant in your finances or the housing market to change. That could be any number of things, including reducing your debt-to-income ratio (the percentage of your monthly income spent on debt payments), building your credit score, or completing home upgrades.

So, how soon you’ll need another refi is different for everyone—you might never need to, or you may find yourself refinancing as early as six months down the line. Just remember that you’ll have to pay all the fees and closing costs associated with the process each time.

From rate quote to close, the home loan refi process typically takes 30-45 days. A dependable lender will make sure you’re in the loop for each and every one of those.

The post The Refi Timeline appeared first on Cardinal Financial.