Tuesday, November 8, 2011

Shaking Up Our Homes in Oklahoma

By now, everyone in Oklahoma has felt one of our recent earthquakes or their aftershocks. Tens of thousands of people have reported to the US Geological Survey that they have experienced the recent seismic activity in our state. It's not enough that the Sooner State has had to endure record snow falls, record high and low temperatures, drought, F5 tornadoes, largest hail, highest wind speed, etc. (and that's just in 2011 alone), Oklahoma also has a long history of shifting and shaking and, while we are far away from the "Big One", many of our homeowners are now wondering how their homes are affected.

Because my expertise is mortgages not insurance, I have turned to some trusted professionals that we work with that are experts in homeowners' insurance.

Not all companies offer earthquake insurance. The least expensive coverage is available as an endorsement on your current policy. If your current provider does not offer this, you can get a stand alone policy from a different company but it will cost at least twice as much. 

Estimates for premiums range from $40 to $150 for most Oklahoma homes. Cost is based on many factors such as deductible, amount of coverage, replacement cost coverage, etc. Brian Dudgeon of Farmers Insurance in Stillwater wrote a policy Monday "for a $300,000 home and the policy cost $81 for one year."

Although deductibles range from 2% to 10%, OKC Farmers agent Robert Chaplin says that the price difference is minimal, so 2% provides the best value. 

Value, however, is what you should seek from your insurance dollar. Joshua Lakey of Brookside Market Insurance Agency, an Allstate agent in Tulsa, points out that you should review your entire market basket of insurance to evaluate if earthquake coverage is right for you. For example, a $200,000 home with a 2% deductible would need to sustain more than $4000 worth of quake damage before you would see benefit from this type of coverage.

Lastly, there is a waiting period. Joey Capps, a Farmers agent in OKC, says it depends on proximity to the epicenter. Each company is different, but typically there is a 5-7 day waiting period if your home is located within 40 miles of the epicenter. This waiting period resets if there are aftershocks that measure 5.0 or greater on the Richter scale.

As with mortgages, everyone's needs and circumstances are different. If you have specific questions, contact your agent or one of the trusted professionals that contributed to this:
Oklahoma City - Joey Capps, Farmers Insurance, (405) 759-7100
Oklahoma City - Robert Chaplin, Farmers Insurance, (405) 751-9453
Stillwater - Brian Dudgeon, Farmers Insurance, (405) 707-9200
Tulsa - Joshua Lakey, Brookside Market Insurance Agency (Allstate), (918) 574-2400

Thanks also to my Fairway Mortgage colleagues in Oklahoma for their help compiling this information.
Oklahoma City - Jerry Ashford, (405) 517-4959
Oklahoma City - Jim Steward, (405) 821-1031
Stillwater - Pam Shipman, (405) 372-5363

Next, we will review how earthquakes affect mortgage underwriting.

Tim Epps
Sr. Loan Officer
Fairway Independent Mortgage Corp

Tuesday, November 1, 2011

Rent Versus Buy Debate Revisited

Buy a house now! Keep renting - Wait out the market!

How many times have you read a similar article about the pros and cons of buying a home versus renting. Of course, there are many points on each side of the debate that are very valid. Each point must also be evaluated by the audience on the merits to their own particular circumstances. 

The attached document shows graphically where the numbers fall. It is based on the following variables: FHA 30 year fixed rate purchase loan, credit score of 640 minimum, normal property taxes and homeowners' insurance, property appreciation & rent increases of 2% per year. Most people stay in their homes 5 years but the longer term benefits after 12 years are also illustrated. 

Even though the monthly payment of $919 is more than the expense of renting at $800, the amount of monthly expense is lower when buying when factoring in the tax deductibility of mortgage interest, mortgage insurance, and real estate taxes. Further, since the principal amount of your payment is actually going toward your equity, the net amount of your monthly housing expense is even less.

The home price used in the example of $125,000 would actually rent in a range of $1000 to $1200 per month. See? You can buy more house than you are renting now and do it for less money!

Most home prices in Oklahoma have remained very stable throughout the burst of the bubble in most of the rest of the country. There are some bargains out there and you should engage a REALTOR® to help you find those bargains.

But before seeking help finding a home, you need to find out how much you can afford. This leads to the best bargain in housing today. Rates continue to be at historic lows, and I will write in an upcoming post about the potential cost of waiting out the real estate market for the lowest home price possible.

Every person's situation is unique. As much as we would like things to be cut-and-dried, I can't recommend anything to any prospective buyer without first having some conversation about your needs, your goals and your circumstances.

Call today to get your self on the Path2Buy your new home.

Tim Epps
Sr. Loan Officer
Fairway Independent Mortgage Corp