October 2007
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In this Issue:
What the Fed Decision Really Means (Please feel free to post your comments at the bottom of the newsletter.)
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What the Fed Decision Really Means
For more two months now, the secondary mortgage market has been spooked by the increasing number of loan defaults, as well as the overall economy. This has led to tighter underwriting standards, including requiring stronger credit scores and larger down payments for anyone applying for a mortgage. Some borrowers are unable to refinance or take advantage of historically low long-term interest rates.
By lowering the Fed Funds Rate, the Federal Reserve is hoping to quell investor jitters and loosen the stranglehold on credit in the secondary markets. So what does that mean for you?
The decision to lower the Fed Funds Rate has the "potential" to lower interest rates on items such as credit cards, car loans, and most importantly, adjustable rate mortgages, meaning more people should have access to very favorable financing, opening the door to home ownership and refinancing opportunities.
The impact should be positive on the mortgage market as a whole, but the move should definitely bring some life back to the secondary market, easing up on the loan approval requirements that had become so extremely tight in recent months.
For consumers now seriously considering buying a home or refinancing an existing mortgage, the best move would be to talk to a reputable lender who can look at your current financial situation, evaluate your goals, and determine the best course of action. For some, the time may be right to grab that home mortgage. For others, it may be best to stay put and see where the market goes from here.
Whether the Fed will lower rates again is anyone's guess, but we are already seeing near record low mortgage rates now, so any drop in future rates will only spur more refinance activity, as it historically has whenever rates go down, meaning loan processing time will lengthen. So now may be your best opportunity to get a new mortgage if you're ready to get in to that home of your dreams now.
5 Common Insurance Mistakes
1 - Not Shopping Around The most common mistake people make is not shopping around before buying. Going to one agent and letting them handle all of your insurance is the common move. Whether it's out of fear, or boredom, or laziness to shop around, this move can cost you BIG TIME!.
When you're shopping around, it's best to look at not only prices, but at a companies' reputation for paying claims. You should also check out the companies' complaint ratio. State insurance departments sometimes publish this information, as well as the web site for the National Association of Insurance Commissioners. http://www.naic.org/cis/index.do
2 - Not Knowing Your Policy A big mistake made by most insurance buying consumers is not knowing what's in the fine print of a policy. Many people don't know what their deductibles are and don't realize what's NOT covered until disaster strikes. A common mistake is to have a homeowner insurance policy without flood coverage, since most home owner insurance policies do not cover rising water.
3 - Not Buying Enough Coverage Another common mistake people make is to only obtain coverage on the cost of a home they just purchased. For example, you buy a home for $250,000 and deduct $40,000 for the cost of the land (land is not covered on homeowner policies), meaning you buy $210,000 worth of coverage on your dwelling. But the cost to rebuild that home, should disaster strike, could be far more than $210,000. Be sure to ask your insurance agent how much insurance you need to FULLY REPLACE the home, should it be destroyed. The cost of building today may be far greater than what you paid for your home, so making sure you are covered to replace the home at today's rate to build is a smart move. But don't take your insurance agent's word for it. Check with your local homebuilder's association to get an idea of the cost per square foot to build in your area. This will give you a better idea of how much coverage you need.
4 - Buying Unnecessary Insurance This doesn't necessarily mean just home owner insurance. Many people buy insurance for specific illnesses, like "cancer coverage." Read the fine print before you pay for things like that, or you could be paying double for the same coverage you already have.
If you're insured through a major medical policy, you may not receive additional benefits from these types of extra coverage.
Identity theft insurance is a common place where people buy extra coverage, when often times, their home owner insurance policy already protects them against identity theft. Credit cards also often some protection in this area, so be sure to read the fine print when it comes to buying specialized insurance that you may already be covered for elsewhere.
5 - Not Updating Your Coverage Just as many people don't buy enough coverage to begin with, not updating your policy can also be a big mistake.
If you update your home (room addition, major remodeling, etc), make sure you update your insurance to cover the increased value of your home.
If you're moving from a house to an apartment, consider getting renters insurance to protect your belongings against fire or theft. The person who owns the place you're renting will have the structure insured, but your possessions are your responsibility.
The same goes for other types of insurance as well. If you are a dual income family and both spouses have insurance coverage at work, look at both policies and decide if it's more cost-effective for you to be covered under one, or if it's best to covered individually.
Don't Let Water Destroy Your Home
STOP THE SOURCE: If water is coming from a pipe or hose, shut of the main water valve to the house. Be sure to know where that main valve is. When the water is pouring in is not a good time to be looking for the valve!
If water is coming through the roof, get into the attic and, as an immediate measure, lay down heavy (4-mil or heavier) plastic sheeting and set buckets to catch the water. Keep some sheeting on hand, just in case. As with the shut off valve, when the water starts coming in through your roof is not the time to run to the hardware store to buy sheeting.
CONTACT YOUR INSURANCE AGENT: As your insurance agent for phone numbers of emergency plumbers, roofers, and/or drywall specialists, who are pre-approved by your insurance company. Many insurers have a preferred contractor list to control their costs.
Also ask them (ahead of time) how best to document any damages for claims… how soon an adjuster will be sent to your home… and what kind of rental equipment (if needed) will be covered (like fans or steam cleaners that reduce the damage, etc.)
PUMP OUT STANDING WATER IMMEDIATELY: Try to get any standing water pumped out of your home with the first 12 hours. After that, damage becomes much more significant. Before pumping out water, have an electrician inspect the area for electrical shock hazards.
Don't try to use any appliances that were submerged until you dry them out and have them checked by an appliance repair person. This service is usually covered by your insurance policy.
REMOVE/CLEAN SOAKED MATERIALS: If your carpets is just damp, not soaked, rent a commercial blower and position it to blow air underneath the carpet. To get under the carpet, simply grab one corner of it with a pair of pliers and pull. The carpet should pull away from the tack strip on the floor very easily.
If the carpet is soaked, first remove the water with a wet/dry shop vac, or better yet, have a commercial carpet cleaner extract that water for you.
Once the carpet is dry to the touch, hire a professional carpet installer to re-stretch and reinstall the carpet for you. If not re-stretched after drying, your carpets will wear out more quickly.
Furniture: Dry your furniture with towels or cotton rags. If white spots or a cloud film develop on wood furniture, rub the surface with a damp cloth dipped in turpentine or camphorated oil — be sure to test an inconspicuous area first. Wipe dry and polish with furniture polish.
DRY OUT THE WALLS AND FLOORS: As with drying the carpets, rent or buy a floor-blower fan and buy a dehumidifier. Blowers are needed for the initial drying… the dehumidifier for long-term moisture control. Both are available at home-improvement stores.
Turn on your heating system to speed up drying, but use caution if your oil tank or burner were submerged and make sure to have them inspected before use.
If you don't get rid of all the moisture right away, there's a chance that mold and mildew will form. This is most commonly seen as black spots on walls and ceilings. If you see these spots, scrub them with a household detergent solution, then wipe with chlorine bleach (about a half cup per gallon of water).
EXAMINE THE STRUCTURE FOR WATER DAMAGE: If you haven't already identified it, look for the source of the flood and any hidden damage it may have caused. If water was coming in through the roof, look for loose or worn-out flashing. This is one of the most common culprits in roof leaks.
To find holes, check for drip trails or spots of light coming in through the attic. Stick a wire though any holes to mark the spot on the outside for your roofer to fix.
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A lot of attention has been paid recently to the Federal Reserve's decision to lower the Federal Funds rate by a half percent - but what does that decision really mean for consumers? The answer is not simple.
Insurance is what you buy in case the unthinkable happens. Unfortunately, when you need it is too late to make sure you haven't made these 5 common mistakes. Make sure you don't make any of these while buying protection against a disaster.
Scenes like this one are horrific indeed, but flooding doesn't have to come from headline-making hurricanes or floods to cause expensive damage in your home. Every day, hundreds of homeowners face other water damage from things like a pipe bursting inside a wall, or a washing machine hose cracking, or a toilet starting to leak. Here are a few steps to take to keep water from destroying your home. 
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