Buying your first home is one of the most exciting times in life. Embarking on the path to being a homeowner is your dream, and in your heart you’re ready for it. It’s a big deal, and buying a home for the first time can be one of the scariest most nerve-wracking experiences of your life. But it doesn’t have to be.
You wouldn’t be human if you weren’t just a little stressed out by embarking on such a monumental endeavor. But you can take a lot of the fear and anxiety out of the equation by doing two things: Get prepared financially to take on a mortgage, and choose your home wisely. Let’s talk.
Get Financially Prepared
Getting your finances in order is first and foremost. You have to know where you stand going into the process and I suggest not shopping around and falling in love with any particular property until you know exactly what you can afford (this will help you avoid a potential heartbreak). When you have your number, you can set your shopping expectations from there.
Here’s what you need to do:
Check Your Credit Score: Check your FICO scores from the three main credit reporting bureaus (Equifax, Experian, and Trans Union) to get a clear picture of where you stand. If your scores differ drastically, expect that lenders will use the median score. If you have two scores that are the same, lenders will use that score.
Credit score websites will give you a generic idea of what your score is but lenders use a slightly different model to calculate the score they will consider. Generally speaking, if your credit score is above 740 you’re in good shape. Below that, you can work on raising your score. If you’re below 720 and into the 600’s you won’t be looking at the best interest rates on your mortgage.
According to the Fair Credit Reporting Act (FCRA), you are entitled to a free credit report every 12 months from each of the three bureaus. You can find out how to get your free credit reports on the Federal Trade Commission website.
Calculate your Debt to Income Ratio: Typically, a debt to income ratio of 43% or less is required to obtain a Qualified Mortgage. To calculate your debt to income ratio add up all of your monthly debt payments and divide that by your gross monthly income. If you’re over 43%, or hovering around that number, pay down some credit cards and loans if you’re able.
Consider Your Down Payment: Ask yourself – What do I have in the bank and what am I able to put down on a home? Experts suggest that a down payment of 20% is ideal. This not only lowers your monthly mortgage payment to begin with, it may help you to avoid paying Private Mortgage Insurance (PMI) which can lower your monthly payment even more.
Consider cost of ownership: After calculating mortgage rates and monthly payments think about it will cost to own the home you’re looking at. What kind of home are you getting into? What are your projected maintenance costs on that home? What will your property tax be? Is there a homeowners association with dues? These things will obviously add to your cost of ownership so think it through and be realistic.
Choose Your Home Wisely
Once you’re financially prepared, it’s time to start the home selection process (the place where your dreams and reality find a happy medium). Being smart about your purchase transcends income brackets and housing markets. Here are a few things to be smart about:
Get an Inspection: Before you can seriously consider a property you have to know what you’re getting in to. Review the inspection report carefully if one exists. If not, have an inspection conducted by a licensed professional before entering into any serious negotiations with the buyer. This is where a lawyer would come in handy.
Get a Lawyer!: All New England states as well as several other states across the country have laws mandating a lawyer be present during the closing of real estate transactions. Even if your state doesn’t require it, having a lawyer oversee the transaction is never a bad idea especially when you’re making what will most likely be the largest purchase of your life.
Stay Open Minded While Shopping: Consider tolerating little imperfections in exchange for a lower purchase price. If the home has all of the features that are difficult to find (like location and size), maybe you can deal with the ugly tile in the bathroom for a bit. It will cost you less to make minor improvements to a home after the purchase, then what you spend on a higher purchase price for the house with the “perfect bathroom”. Think about it.
Get Insured: It’s your new castle and the biggest investment of your life, so when you close the deal on your new home (congratulations) make sure you have the right Homeowners Protection in place for it.
If you’re embarking on the home buying process for the first time, good luck. Be smart, take your time, and make good decisions. A mortgage is a big move and a long road, so make sure to set yourself up well for the journey ahead.
Sinclair Risk Management has experts standing by ready to help you protect your real estate investments. Get in touch with us for questions, support, or a no-obligation Homeowners Insurance quote anytime.
Personal Lines Account Executive
High-net-worth individuals face a greater risk of being sued, especially when unemployment is high and economic growth is tenuous.
According to a survey by ACE Private Risk Services, 80% of households with $5 million or more in assets believe their wealth makes them a target for lawsuits. These are real fears. Under the doctrine of joint and several liability, any defendant can be held accountable for a plaintiff’s injury, so smart lawyers will target the defendant with the highest net worth.
In spite of this, less than 40% have coverage of more than $5 million and 21% have no coverage at all.
Many wealthy families leave themselves open to liability and preventable lawsuits for two reasons:
- They underestimate the cost of damages they could be forced to pay.
- They assume the cost of effective protection is higher than it really is.
It’s important to purchase coverage that prepares for the extreme cases, not just the likely ones. Trusts and foreign accounts can shield some assets from litigation, but courts have tremendous reach. The best way to protect yourself is with excess liability or umbrella liability insurance.
Both policies are far cheaper than most people realize. They often cost just a few hundred dollars per policy for millions of dollars of coverage. This cost can be offset with slightly higher deductibles in other policies.
People often confuse umbrella liability insurance and excess liability insurance. While both protect people and businesses from dramatic loses by giving them access to additional coverage, they have a few differences.
What is excess liability insurance?
Excess liability insurance is an extension for another type of liability insurance. When a claim is reported to your insurance company, the underlying primary policy is the first to pay. If there are more damages, the excess liability insurance picks up the rest (up to your policy limit).
Excess liability insurance adds additional coverage to only that policy. It can’t be applied to another policy. If coverage isn’t provided by your underlying policy, it isn’t provided by the excess liability policy either. Excess liability insurance usually pays for the legal costs of defending the claim.
What is umbrella liability insurance?
Umbrella liability insurance is similar to excess liability insurance, but it can be applied to multiple underlying policies. It can also cover claims that are not included in the underlying policies.
For an umbrella policy to cover a claim, clients need to pay self-insured retention. This is like a deductible, but it’s paid directly to the claimant.
It’s important to make sure your policies work together without gaps. For example, if your umbrella policy is set to pay damages in excess of $500,000, make sure your other policies cover you up to $500,000. If there’s a gap, you could be forced to pay.
For the best protection, combine your insurance policies with a single company. This reduces the overall cost of your insurance and provides a single, coordinated legal defense in the event of a lawsuit.
Personal Lines Account Executive
The hospice movement began in London, 1967, when physician Dame Cicely Saunders founded St. Christopher’s Hospice. The movement eventually came to the States by way of the Yale School of Nursing, where nurses combined medical, psychological, and spiritual treatments to comfort dying patients. They offered a dignified, painless way for patients to die.
Originally a social movement, hospice has now become a massive, multimillion dollar industry served by nonprofit and for-profit institutions alike. 52% are for-profit, 35% are nonprofit, and 13% are operated by the government.
Hospitals and healthcare organizations are increasingly adding palliative care options like hospice programs to their business models, and yours should too.
1. Since 1982, Medicare has provided hospice benefits to patients who have no more than six months left to live (as certified by two doctors). This reimbursement essentially makes hospice available to everyone. Congress seems content funding this endeavor indefinitely.
2. Hospice programs are especially profitable. These programs lend themselves well to careful business decisions in regards to staffing and the recruitment of patients. A 2005 study in the Journal of Palliative Medicine found hospice programs owned by large for-profit companies generate margins nine times higher than nonprofit hospice programs. Hospice programs are paid by Medicare and insurance providers by day, not per treatment (like most other forms of healthcare).
3. Hospice programs benefit greatly from doctor referrals. Patients and their families rarely shop for a hospice program as they would a primary care physician or specialist. They are overwhelmed and unwilling to make complicated decisions during this time. When a doctor, hospital or nursing home recommends a program, the patients and families usually accept this option immediately, without evaluating the program’s merits. Hospice programs that work closely with doctors in the same healthcare organization can collaborate on the best care practices that suit the patient and the business.
4. Volunteerism is popular in the hospice industry. At any given time, there are more than 400,000 volunteers providing certain levels of care, spending time with patients, and other duties. This is an extremely effective way of trimming costs while providing valuable, rewarding volunteer experiences to the community and bolstering the spirits of ailing patients.
5. This specialized niche of the healthcare industry is growing rapidly. Soon, the aging baby boomer population will be seeking hospice care from their healthcare providers in tremendous numbers.
Your hospice program doesn’t have to be heartless. Many programs allow patients to continue to receive treatment during hospice care. There have been many instances where hospice care has ceased because a patient has recovered significantly or resolved to continue treatment.
Without a doubt, developing a hospice program for your healthcare organization is a smart and effective way to meet the needs of your patients and achieve your business goals.
Risk Management Consultant