First Time Home Buyer

The Ins And Outs of Home Insurance

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What Is Home Insurance?

In most cases, when you use financing to purchase a new home you will need to purchase home insurance (also known as homeowners insurance) before the transaction closing date. Home insurance covers the lender’s investment as well as your own in the case of things like disaster, damage, fire, vandalism, theft, and more, depending on your policy. It is also designed to cover your liability for any accidents that occur on your property. (To learn more about what home insurance in Oregon does and does not cover, visit the Oregon Division of Financial Regulation website section on Home Insurance.)

The Ins And Outs of Home Insurance - Mathew Mattila Mortgage

Purchasing home insurance through an agent you know, like, and trust can not only help you get the best rates but also means you have someone to discuss potential claims with if and when something does happen to damage your home or injure someone on your property. Another benefit of working with an agent is that most of them will take the time to educate their clients about how to keep their home from having a loss, to begin with. The Insurance Institute for Business & Home Safety is a great online resource for this type of information as well. 

How to File a Home Insurance Claim

We recommend getting up to 3 estimates to see how much the repair will cost and then we consider the deductible and the impact on premium

– Debbie Clinton, Farmers Insurance

When damage or an accident occurs in your home or on your property and the cost to mitigate the damage is beyond your financial means, you may need to file a home insurance claim.

To begin the claim process:

  • Contact your agent. (Document all conversations.)
  • If there has been a theft or vandalism, always notify the local police and file a police report.
  • Protect your property from further damage. If need be, make reasonable repairs so that the damage does not get worse. (Keep all of your receipts and do not make permanent fixes until the insurance adjuster has documented the extent of the damage.)
  • Provide a detailed inventory to the claims adjuster showing the damaged property and the amount of loss claimed – this will help expedite payment.

It’s a good idea to already have a list or inventory of your possessions to submit to your home insurance agent (logged with item numbers, serial numbers, and purchase price – receipts can help immensely in these cases as well). Waiting until the disaster or theft has already occurred to try to inventory your possessions will only add stress to the situation and it will make it harder for you to present a strong case for reimbursement. Using an app is a quick and easy way to take photos of your possessions and log the information in a manageable format. Try Sortly or Memento Database.

Debbie at Farmer’s says, “We recommend getting up to 3 estimates to see how much the repair will cost and then we consider the deductible and the impact on the premium. If it isn’t clear whether the damage is a covered peril or not, we highly recommend filing a claim to let the adjuster do a full investigation of the cause of loss.”

When Not to File a Claim

If the cost to repair the damage is less than or only slightly more than your deductible, it may make more sense to pay out of pocket for repairs or make the repairs yourself.

Having home insurance doesn’t necessarily mean you should file a claim every time something is damaged or even for a theft. While this may seem counterintuitive, it’s important to understand that insurance companies are legally allowed to raise your premiums even after a single claim, regardless of the cost of that claim. A 2014 report by CNN found that monthly home insurance premiums increase by about 9% after a single claim of any kind. Liability claims such as a personal injury claim are the most expensive, incurring an approximately 14% increase.

Claims for things like theft or vandalism also tend to lead to a costly increase in premiums. Frequent claims for these issues indicate a dangerous neighborhood and are a red flag to your insurance carrier.

Given that the average homeowner files a claim about once every ten years, home insurance companies will also raise a consumers rates if a second claim is filed on a home insurance policy within a period of time less than that ten-year benchmark – and second claims can send premiums skyrocketing an average of 20%.

All insurance companies report to a database called the Comprehensive Loss Underwriting Exchange, or CLUE, which tracks property and auto insurance claims for each consumer. Your insurance record is updated each time you make a home insurance claim, even if the claim is denied and even if there is no payout. This data is then used to determine coverage availability and how much to charge – so switching insurance companies won’t necessarily get you better rates once a claim has been filed. (Note: you can get a copy of your C.L.U.E report from LexisNexis Personal Reports by requesting it online or by mail.)

With all of this in mind, if the cost to repair the damage is less than or only slightly more than your deductible, it may make more sense to pay out of pocket for repairs or make the repairs yourself. Save the home insurance claims for the catastrophic losses and extensive damages you simply cannot afford to cover.

My personal home insurance agent, Debbie Clinton at Farmers Insurance, is always available to me to talk through a potential claim without actually filing one. 

Recently, when one of the bathrooms flooded in my brand new custom home I was able to call Debbie directly to discuss the damage and strategically decide not to file a claim. Having that conversation, instead of filing the claim just to see if it would be worth it, saved me both time and money. I was able to decide to absorb the out-of-pocket expense and move forward with the necessary repairs to my very soggy bathroom and hallway without adding a flag to my insurance report (which would have increased my premiums.)

Being a homeowner myself, and being in the real estate and mortgage industries, I’m always happy to make recommendations to the folks I know, like, and trust – like Debbie. If you’re looking for recommendations, get in touch – I’m here to help.

The Home Loan Process

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The Home Loan Process - Portland Oregon Mortgage

Here’s a brief overview of what to expect in the home loan process when we work together:

Step 1: Pre-qualification

Pre-qualification is a relatively quick initial step in the process of attaining a mortgage loan. Getting your pre-qualification helps you determine what you can afford so you can set your home search parameters appropriately from the start. If you’re thinking about purchasing a new home, I suggest you learn about how things like your credit score can impact your home loan numbers.  If you’re ready to get started on the home loan process now; click the link to fill out my secure online loan application form and I’ll get back to you right away to discuss the numbers so you can start shopping in earnest!

Step 2: Pre-approval and underwriting

Obtaining a pre-approval will allow you to quickly and confidently present your strongest offer to the seller when you find a house you love. I’ll help you lock in the best home loan rate possible and will take all the necessary steps to move your funding from start to finish without stress, keeping you informed and educated throughout the process. If you run into any questions or concerns during this early phase, I’m here with answers and support.

Step 3: Find your new home

With your qualified pre-approval letter in hand, you can now start shopping for your new home. If you need referrals to great real estate agents in the Portland, Oregon or Vancouver, Washington areas, I’d be happy to connect you with one of my exceptional colleagues. Even with the right agent, you may find a home you want to make an offer on quickly, or it may take a bit longer. If things in your life change during the home-shopping period, we’ll work together to make sure your loan information stays up to date.

Step 4: Make an offer

This is one of the most exciting times in the home buying process! Everyone from your agent to your mortgage broker is on your team and rooting for you and working together to help make it happen. Once you’ve found a home you love, your realtor will work with you to submit a competitive offer and real estate contract, along with our pre-approval letter to ensure your offer is taken seriously.

Step 5: Close the deal!

As we approach the closing date on your new home, we’ll ensure all final conditions of the sale are signed off and proceed towards a successful closing. It’s my goal to help get you the financing secured for your new home without any stress – and I’m on your team until the keys are in your hand and you’re all settled in.

If you’re ready to start the home loan process I’d love to learn more about what your goals and dreams for home ownership are. Give me a call anytime, or start your home-loan prequalification now by submitting your info directly to me using this handy online form.

Mortgage Do’s and Don’t’s

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When you plan a trip, you most likely spend time researching your destination, your method of transportation, where you’ll stay, any local events you might be interested in, the best places for a dinner out or a glass of wine. If you’re traveling with family or with kids, you’ll spend time finding special interests and activities for them. You might price shop hotels or plane tickets. You might map out different roads. However you get there, the point is, you put a lot of time, energy, and money into planning your trip so that it goes off without a hitch; so that you can truly enjoy the experience of traveling.

The home loan process is no different really and deserves an equal amount of time and attention invested to ensure you can fully enjoy the process of shopping for and finally moving into your new home. Securing a mortgage loan so that you can buy a home doesn’t have to be stressful. To help you through the mortgage process, use this quick-reference list of Do’s and Don’t’s to follow when applying for a mortgage:

Mortgage Do's and Don't's | Mathew Mattila Mortgage Professional, Portland Oregon

DO

  • Provide all documentation for the sale, including sales contract, closing statement, employer relocation/buy-out program (if applicable) to your mortgage professional.
  • Keep all original documents organized, and have access to all of your pay-stubs, bank statements, and other important financial documents.
  • Keep an eye on your credit report. Learn more about how your credit report can impact mortgage rate.
  • Provide your earnest money deposit from your own personal bank account or acceptable gift funds. Ideally, these funds have been in your personal bank account for a minimum of three months prior to seeking the home loan.
  • Continue to save money to the bank account you provided for verification of assets.
  • Notify your mortgage professional if you plan to receive a monetary gift toward closing.
  • Notify your mortgage professional of any employment changes such as recent raises, promotions, transfers or pay status changes such as salary to commission.
  • Alternately, be sure to notify your mortgage professional of any loss of income.
  • Stay employed if employment income is being used for loan approval.
  • Notify your mortgage professional regarding any changes to your employment status.
  • Make regular, timely payments on all current debt obligations, including any current mortgages, car loans, student loans, or credit cards.
  • Notify your mortgage professional of an unexpected depletion of the funds needed to close.
  • Notify your mortgage professional of changes in your contact information.
  • Notify your mortgage professional if you expect to make a financial deposit that is not related to your regular payroll, pension, SSI, or income tax refund.
  • Notify your mortgage professional if you expect to receive a financial gift from a relative, employer, union hall or non-profit organization.

DON’T

  • Close or open any asset accounts or transfer funds between accounts without receiving the correct documentation required for your loan.
  • Change jobs or employers without inquiring about the impact this change might have on your loan.
  • Deposit any monies outside of your payroll deposits, particularly cash or sale of personal property. Many guidelines require substantial documentation as to the source of these deposits.
  • Open or increase any new or existing liabilities, including credit cards, student loans or other lines of credit during the loan process.
  • Make major purchases prior to or during your contract, such as new car, furniture, appliances, etc. as this may impact your loan qualification.
  • Advance any cash from credit cards or borrow funds for closing.
  • Change your legal name.
  • Take any unpaid time off from work, such as unpaid vacation time, as the change in income for that period can negatively impact the loan process.
  • Alter any of your legal or financial documents in any way.

If you have questions or concerns about any of the points listed here, please don’t hesitate to get in touch with me.

If you’re just getting started shopping for a home in the Portland, Oregon or Vancouver, Washington areas, check out this online Mortgage Calculator and learn more about how much you can afford to spend on a new home purchase.

Should You Continue to Rent or Is It Time Buy a Home in Portland?

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Renting a home or apartment can certainly have advantages over homeownership. If you have a good property with a great landlord and a rent you can afford it might seem pointless to purchase a new home in the Portland area, especially with home prices spiking in certain neighborhoods. Renting (usually) means someone else must plan for, execute, and pay for repairs, upgrades, and upkeep. When you rent, you’re off the hook for the big-ticket issues that can crop up with home ownership. On the flip side, you’re subject to regular rent increases, little control over your environment, and no real guarantee the apartment or house you’ve been calling home will continue to be the place you make your coffee each morning once your lease comes to an end.

According to Zillow at the time of this post, the median price of homes currently listed in Portland, Oregon is $429,900 while the median rent price in Portland is $1,935.

For renters who are considering buying their first home, a $430K mortgage might feel daunting and even impossible at first glance, especially when compared with the average $1900 a month for rent. But it’s not that simple, and the only way to sort out whether or not purchasing a new home makes financial sense for you is to do the math.

Should you rent or buy a home in Portland Oregon

Rent or Buy?

Here are two calculators to help you crunch the numbers: Zillow’s Rent vs Buy Calculator; Discover has another calculator with a unique format that’s kind of fun to play with.

Play the Numbers Game

Of course, the amount of cash you bring to the transaction for a down payment will impact the overall cost of your loan, so use the most accurate numbers possible with these calculators, but do play around with them to see what would change in this equation if you managed to put down just $5k or $10k more.

Also important to remember, your credit score, and the credit score(s) of anyone on the loan with you, will impact what size loan you qualify for as well as how much interest you pay over the life of your mortgage – and that’s something these calculators can’t take into account in real time.

Check Your Credit Score

Check your credit score now so you have an idea of where you stand and what you’re working with. If you have an ‘excellent’ score, coming in at 800 or above, you’ll qualify for the best mortgage rates. A score of 700 or higher is considered ‘pretty good’ and will still qualify for decent rates. Scores below 700 can present more of a challenge to the transaction and you’ll pay for it in higher interest rates on your mortgage loan. This handy calculator at MyFico will help you understand exactly how your FICO® score can impact the interest you’ll pay on your loan.

While you’re doing the homework and preparation toward the purchase of your new home, why not start working toward a better credit score as well? Even a small jump in your credit score may help with saving a bit on the principal of your mortgage.

According to The Motley Fool: “On a $250,000 mortgage, the difference between a 620 credit score and an “excellent” 760 adds up to more than $86,000 in interest savings over the life of a 30-year loan.”

If you knew that a little bit of work on your credit score over the next few months could save you $86,000 over the life of your mortgage loan, would you do it? Well, now you know.

Ultimately, the only way to determine if purchasing a home is a better financial option for you than renting is to sit down and go over the numbers with a local mortgage professional.

Talk to a Mortgage Professional

If you feel you’re ready to move forward with the process of buying a new home, get in touch. Together, we’ll take a closer look at how each of the different factors like credit score, down payment, and current expenditures and debt will come into play when it comes to the size and cost of your new mortgage. I may even be able to give you the insight you need on raising your credit score before you take out the loan, in order to help you get a better overall value on your new mortgage.

Not the right time for you purchase a new home? If you played with the Rent or Buy calculators linked above and it’s just not coming out in your favor, if your credit score is low, or you feel you don’t have the overall budget to make the jump from renting to buying right now, I’d encourage you to get in touch with me anyway. I’ll give you the information and tools you need so that you can start working your way toward achieving your goal of home ownership.