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Trends Behind Increasing Homeowners Insurance

by Allyson Hoffman

Most homeowners are very concerned at the rate of which their homeowners insurance had continued to rise in recent years, many at alarming rates. Raising rates are not the only concern, some new home buyers are facing challenges finding companies to cover their property at all; and existing homeowners are seeing policies cancelled after years of rate increases.

So why the sudden increase in property insurance and denials?

  1. First of all buyer beware – of Chinese drywall and other inferior materials. Recently, Consumer Reports has highlighted an issue with faulty Chinese drywall. Bought cheaply, thousands of complaints are stating that the product is not only inferior and likely to fall apart, but is actually a health hazard. The problem is not widespread, but presents enough of a trend that insurers are covering their bases by excluding it from coverage or raising rates as a preventive measure against possible claims.
  2. Location, location, location – and if your dream home is on a coastal waterway, be prepared to pay more for your homeowners insurance. What’s more, insurance companies are requiring separate deductibles for coastal property – primary insurance and secondary wind, water or specifically hurricane risk. If you file often, be prepared to go without; frequent claims cause insurers to cancel or not renew.
  3. Lower home prices are also driving rates up and replacement or rebuilding coverage down. Even if the value of your home falls, shop around for the best price on covering your home in the event of a disaster, and make sure your coverage is adequate.
  4. And if things aren’t bad enough, bad credit scores continue to drive up rates on homeowners insurance (as well as auto and other insurance). People with poor credit are considered to be a high risk for responsible behavior and an indicator of future financial trouble. With unemployment rates high and home prices falling, poor credit is driving up rates across insurance plans.

Understand your current homeowners policy and the coverage you are paying for. Shop around – it pays off to compare and switch insurers for better rate plans. And remember, all kinds of market trends can factor in what you pay – and what you get for.

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North Shore 4th Of July Events

by Allyson Hoffman

Summer is going fast! It is hard to believe that it is almost the 4th of July. The North Shore area has some of the best Independence Day celebrations in the country. Below are some of the exciting events that you and your family can enjoy. Have a safe and fun holiday!

City of Chicago's Fourth of July Fireworks
Location:  From Foster to Montrose
Lawrence & Lake Shore Dr.
Chicago, IL
Cost:  Free
Time:  9:00 p.m.  (15 minutes long)
Info:  Fireworks can be viewed on the North Side from Foster to Montrose.  Display will occur up and down Chicago's 26 miles of lakefront.
 
 
Evanston Fireworks
Location:  Clark Street Beach; 400-499 Clark Street, Evanston, IL
Cost:  Free
2:00 p.m.:  Parade from Central Park Avenue East on Central Street to Ashland Avenue
7:30 p.m. - 9:10 p.m.:  Palatine Concert Band will play patriotic music
9:15 p.m.:  Fireworks
 
 
Glencoe Fireworks/Festival -- Glencoe Park District
999 Green Bay Road, Glencoe, IL
Location:  Lakefront Park
8:00 a.m.:    2 mile fun run from Train Station
10:00 a.m.:  All-Media Art Fair on Village Green
10:00 a.m.:  Family games at Kalk Park
2:00 p.m.:    Parade
6:00 p.m.:    Park & Ride from Village parking lot & train station
6:30 p.m.:    BBQ meal at the beach
6:30 p.m.:    Children's entertainment by Magician Jeff Bibik
7:00 p.m.:    Music
9:00 p.m.:    Fireworks on the beach
 
 
Skokie Fourth of July Parade & Fireworks Festival
12:00 noon:  Parade (bands, drill teams, clowns, tumblers, live animals, vintage autos & more).  Runs north from Oakton Community College on Lincoln Avenue to Oakton Street, then east from downtown to Oakton Park.
5:00 p.m.:  Festival at Niles West High School.  Features food, drinks and live bands until dusk.
Dusk:  3-D fireworks.  The first 10,000 people get a free pair of 3-D glasses.  Location - Niles West High School

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Image courtesy of wintersixfour/morguefile.com

Why Debt-To-Income Ratio Is Important

by Allyson Hoffman

When homebuyers apply for a mortgage, the lender will look at what is called a debt-to-income ratio.  This is an important aspect and the loan could be denied if the ratio is too high. Below is more information on why is it important to you and how it effects your financing.

Debt-to-income ratio is simply a comparison of the money you earn to the money you owe. It includes credit card debt, existing mortgages, auto loans, and any other personal debt.

Your mortgage lender will look at your Debt-To-Income (DTI) to evaluate your ability to afford your new mortgage. You should have a good idea of what your DTI ratio is before you approach a lender or consider buying a new home.

You ultimately want to achieve a low DTI ratio. A high number means that you have less disposable income and less ability to maintain the home once you purchase it. With foreclosures at an all time high, lenders are not willing to assume any additional risk in lending.

Most lenders seek DTI ratios in the 20-36% range or lower, with no more than 28% of debt dedicated to the mortgage itself. While some lenders will consider higher ratios, DTIs in the upper 30% range are considered high risk.

There are several different calculators available online to help you determine your ratio, and you can always check with your financial institution for guidance on determining your DTI ratio.

Here’s a simple formula:

  1. Add all your monthly payments (mortgage or rent, car, credit cards, any other debt payments)
  2. Add your gross income (before taxes), bonuses, alimony, or any other outside income and divide by 12
  3. Then divide the total number in (1) by the final number in (2)
  4. The result is your DTI ratio


Whether you are ready to buy a new home or are just interested in your financial health, it’s a good idea to know your DTI and understand the steps to lower your ratio and become as close to debt-free as you can.

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Going Green With Tankless Water Heaters

by Allyson Hoffman

More and more homeowners are starting to go green in many ways, both for the environmental benefits as well as the economical savings. In addition potential homebuyers are looking for houses that offer efficient and economical operating systems. Tankless water heaters are the latest technology to help save money and the environment.

The DOEtells us that hot water usage, specifically heating the water, is the 3rd largest day to day expense in the home. If you are looking to be more energy efficient and cut back on utility expenses, you may want to go tankless.

Conventional water heaters keep your water hot 24/7, while an on-demand system, using the tankless approach, only heats water when you need it. An efficient gas burner quickly heats cold water traveling through the system to a preset temperature.

There are several common manufacturers of tankless water heaters – check out www.smarterhotwater.com, sponsored by Rheem. They tell us that annual costs for conventional water heating and storage (average) can be as much as $285, where the costs for tankless are more than $100 less per year on average.

So why haven’t we all converted? Tankless water heaterscost more up front – sometimes as much as twice more than traditional water systems. But adoption is growing as consumers become more and more concerned with efficiency and long term value for their dollars. Here’s a few reasons to consider going tankless:

1. Energy friendly and efficient. On demand systems can reduce energy costs as much as 25%.
2. Reliable and convenient. You get a continuous supply – imagine never running out of hot water!
3. Sleek and small. No more bulky tanks taking up valuable storage. Typical tankless heaters aren’t much bigger than a small suitcase.
4. Life expectancy.  Tankless water eaters are built to last  - 20 + years or more.
5. Versatility. It’s size and operating system allow you to place nearly anywhere in your home that is convenient for you.

Tankless water heaters are expensive, as noted and can be expensive to retrofit. If you are purchasing a new home, or buying a home that you plan to say in for a long time, the savings and benefits are worth the expense. If you are in a short term arrangement, the conventional water heaters may still be all you need for now. Also, avoid electric style tankless heaters – the gas units are much more efficient and affordable.

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Image courtesy of Roger Mommaerts/Flickr.com

Fannie Mae and Freddie Mac Continue To See Default Rates Rise

by Allyson Hoffman

Fannie Mae and Freddie Mac, the mortgage lending giants are facing pressure on their position on principal reductions that is out of step with the Obama administration’s directives to expand principal write downs.

The result of this reluctance to get with the program? Nearly 60% (average of both) of their loans were in default a year after modification, compared to 40% of bank mortgages (who are actively reducing principal on their own loans).

Pressed to comment on whether or not they will consider this tactic, both companies and the Treasury Department have been silent.

Both Fannie and Freddie were placed into federal conservatorship in 2008, getting a $127 billion Treasury boost in the process. Their reluctance to agree to the Obama administration’s mandate to consider principal reductions may just be prolonging the inevitable, and it looks like they are running out of time. Housing experts agree that it’s time they get with the program, including putting into play the $75M they have already set aside for preventing foreclosures. The longer they wait, the number of loans backed by Freddie and Fannie that are in default continue to rise.

Obama’s Hardest Hit Fund has tasked ten states with coming up with reasonable efforts to assist unemployed and underwater homeowners. The $2.1B fund should help states put some teeth into their efforts to get Fannie and Freddie to agree to match reductions or provide other relief assistance.

Time will tell, but the rates of default and redefault at F&F continue to rise as time goes by.

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Displaying blog entries 1-5 of 5

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Allyson Hoffman
RE/MAX Villager
1245 Waukegan Road
Glenview IL 60025
847-310-5300
Fax: 847-400-0881

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RE/MAX Villager
1245 Waukegan Road
Glenview, IL, 60025

(847) 310-5300
Allyson@Allyson.com

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