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This article was published on: 03/01/2004

All You Need to Succeed:
For Your Buyers

7 ways to save on homeowners insurance
If you already have an insurance policy:
What to keep from your closing
10 questions to ask lenders
A real estate salesperson can help you . . .
House hunting checklist: Prioritize your wants and needs
Help from REALTOR VIP® Program partners

7 ways to save on homeowners insurance

Homeowners insurance premiums are expected to rise 8 percent in 2004, according to the Insurance Information Institute—on top of 2003’s 7 percent increase. More prevalent storms, hurricanes, floods, and wildfires are the biggest culprits behind the increase. Blame mold claims and stock market losses by insurance companies, as well. To obtain insurance at a good rate:

1. Review the Comprehensive Loss Underwriting Exchange (CLUE) report on the property you’re interested in. CLUE details the property’s claims history for the most recent five years, which insurers may use to deny coverage. Make the sale contingent on an home inspection to ensure that problems identified in the CLUE have been repaired.

2. Seek insurance coverage as soon as your offer is approved. You must obtain insurance to buy. And you don’t want to be told at closing that the insurer has denied your coverage.

3. Maintain good credit. Increasingly, insurers are using credit-based insurance scores to determine premiums.

4. Buy your homeowners and auto policies from the same company and you’ll usually qualify for savings. But make sure the discount really yields the lowest price.

5. Ask about other discounts. For example, retirees who are home more than working people may qualify for a discount on theft insurance.

6. Seek group discounts. If you belong to any groups, such as associations or alumni organizations, they may have deals on insurance coverage.

7. Investigate a government-backed insurance plan. In some high-risk areas, federal or state government may back plans to lower rates. Ask your agent.

If you already have an insurance policy:

  • Review your policy limits and the value of your possessions annually. Some items depreciate and may not need as much coverage.
  • Insure your house for replacement cost, not market value. Beware: Many insurance companies are eliminating guaranteed full-replacement costs for homes.
  • You can usually obtain discounts of at least 5 percent for a smoke detector, burglar alarm, or dead-bolt locks.
  • Retrofit your house to protect against natural disasters common to your area.
  • Raise your deductible. Avoid making claims under $1,000.

What to keep from your closing

If you’ve never bought a home before, get ready to sign a lot of paper—most of it in duplicate. What of this stack of documents is particularly important to stow away?

  • HUD-1 settlement statement. Itemizes all the costs—commissions, loan fees, points, hazard insurance—associated with the closing. You’ll need it for income tax purposes if you paid points.
  • Truth in Lending Statement. Summarizes the terms of your mortgage loan, including the annual percentage rate and recision period.
  • Mortgage and note. Spell out the legal terms of your mortgage obligation and the agreed-upon repayment terms.
  • Deed. Transfers ownership to you.
  • Affidavits. Binding statements by either party. For example, the sellers will often sign an affidavit stating that they haven’t incurred any liens.
  • Riders. Amendments to the sales contract that affect your rights. Example: The sellers won’t move out until two weeks after closing but will pay rent to the buyers during that period.
  • Insurance policies. Provide a record and proof of your coverage.

Sources: Credit Union National Association; Mortgage Bankers Association; Home-Buyer’s Guide (Real Estate Center at Texas A&M, 2000)

10 questions to ask lenders

Your relationship with a lender can potentially last 30 years. That’s a long time to be unhappy. To find a lender and loan that fit your needs, ask lending companies:

1. What are the most popular mortgage loans you make? Why?

2. Which type of mortgage plan do you think would suit us? Why?

3. Are your rates, terms, fees, and closing costs negotiable?

4. Will I have to buy private mortgage insurance? If so, how much will it cost, and how long will it be required? PMI is usually required if you put down less than 20 percent. Most lenders will let you discontinue the policy when you reach 20 percent equity by paying down the loan. But you’ll likely have to initiate that change. Lenders are required to cancel your PMI only when you reach 22 percent equity.

5. Who’ll service the loan—your bank or another company?

6. What escrow requirements do you have? Examples: number of days in advance of closing that money has to be deposited; form money must be in, such as cashier’s check.

7. How long is your lock-in period (the time that the quoted interest rate will be honored)? Will I be able to obtain a lower rate if rates drop during this time?

8. How long will the loan approval process take?

9. How long will it take to close the loan?

10. Are there any charges or penalties for prepaying the loan?

Source: Real Estate Checklists & Systems, Used with permission.

A real estate salesperson can help you . . .

  • Locate a suitable property. Although many homes are viewable on the Internet, the salesperson will probably have already seen many of them in person and will quickly be able to help you determine which might be right for you. The salesperson can also schedule and attend showings with you.
  • Determine what you can afford. How much house you can afford depends on several factors, including your monthly income and cash savings. At today’s interest rates, most buyers can afford a house worth two to three times their annual income. A salesperson can help determine whether you have enough income and downpayment to qualify for a mortgage on the house you want. A salesperson can also link you with sources of downpayment assistance, such as state and local government programs for first-time buyers.
  • Envision changes. A salesperson can recommend changes that wouldhelp a home fit your needs and provide names of vendors qualified to do the work.
  • Help find financing. Prequalifying for a loan greatly quickens the buying process. A salesperson can direct you to several reputable lenders before you actually make an offer on a house.
  • Negotiate a favorable contract. Salespeople often prove their worth during negotiations. Armed with information on comparable sales, the salesperson can help you navigate the world of offers, counteroffers, bidding wars, and contract deadlines. A salesperson helps write the actual offer, too. This includes structuring any contingencies that must be met before the final sale, such as selling a home, obtaining a mortgage, or passing an inspection.

Important note: When you hire a buyer’s agent, be sure the person is a REALTOR®. REALTORS® are members of the NATIONAL ASSOCIATION OF REALTORS® and, therefore, bound by its strict Code of Ethics.

Source: REALTOR® Magazine Online

House Hunting Checklist: Prioritize Your Wants and Needs

The home features you want aren’t always the same as the ones you need. Use this checklist to help separate needs from wants. And consider how you’ll live in the house today and in years to come as you accommodate growing children or elderly parents.

Click here to go to the checklist

Help from REALTOR VIP® Program partners

Obtain homeowners insurance through REALTOR VIP® Partner Liberty Mutual. Share publications, such as It Pays to Work with a REALTOR® and Why Rent When You Can Buy, with buyers and sellers. Information on REALTOR VIP® partners available at

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March 2004 Cover Feature: ALL YOU NEED TO SUCCEED

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