Deductible

Apache is functioning normally

Apache is functioning normally

That is the question…

I’ve been trying to avoid writing about this subject for a week or two now, mainly because it’s so controversial, so overanalyzed, and really hard to sum up in one neatly edited post on this website.

Aside from that, one’s opinion of the mortgage interest deduction will surely be swayed by whether or not they own a home, if they have a mortgage on said home, how much money they make, if they itemize deductions, if they’re a realtor or a homebuilder, and so on.

But first a little background on the mortgage interest deduction, known as the MID.

Currently, homeowners are able to deduct mortgage interest on both primary residences and second homes, just as they are real estate property taxes.

However, in order to take advantage of the MID, homeowners must itemize their deductions, and those deductions must exceed the standard deduction to actually benefit the homeowner.

Secondly, there are caps on the MID – only the first $1 million of home acquisition debt is deductible ($500,000 if married and filing separately).

And for home equity debt, only the first $100,000 is deductible. There are a lot of finer details, but I don’t want to derail the conversation into complicated tax topics. Save that for your CPA.

What the Mortgage Interest Deduction Costs

Now let’s talk about cost. The MID is reportedly the largest deduction in the tax code, accounting for $470.4 billion in tax deductions in 2008, per the Reason Foundation.

In 2008, itemized tax deductions totaled $1.26 trillion, with 36% of that total coming from the mortgage interest deduction.

Put simply, the MID costs the government billions upon billions each year, maybe even close to $100 billion in lost revenue annually.

For this reason, the MID has a giant target on its back, as the government scurries to balance their books before the impending fiscal cliff.

By the way, the Reason Foundation is decidedly against the MID, and actually believes it should be eliminated entirely.

Who Benefits and Who Doesn’t?

Not everyone enjoys the widely beloved tax break. In fact, only a small subset of the population can take advantage of it.

Obviously, those who rent apartments or homes see no benefit. And those who have already paid off their mortgages, but own, see no benefit, at least, not anymore.

Additionally, those who are close to paying off their mortgages see little benefit, as interest is front-loaded on mortgages, so savings are mainly experienced early on.

Interestingly enough, those who opt for interest-only mortgages or serially refinance their mortgages benefit the most from this deduction.

So one could argue that those who actually strive to pay off their mortgages don’t stand to benefit as much from the MID.

On top of that, only about 33% of taxpayers itemized their deductions in 2009, and of those, 20% did not take advantage of the mortgage interest deduction, per Reason.

As you can see from their tax table above, young wealthy homeowners stand to benefit the most from the MID.

In short, they’ve got the biggest mortgages, the highest tax bracket, and pay the most interest as a percentage of their total mortgage payment because their loans are so fresh.

Artificially Inflated Home Prices?

The Reason Foundation cites three main reasons why they are against MID, including the argument that it doesn’t increase homeownership, that it promotes the use of mortgage debt, and inflates homes prices.

Of course, their mid-2011 study is well-timed, considering the horrendous housing crisis that took flight just years earlier, effectively wiping out recent homeownership gains.

The Reason researchers also dispel the myth that getting rid of it would reduce home prices by as much as 15%, a claim made by the National Association of Realtors.

Instead, they believe it only props up prices by three to six percent. The disparity reflects including homes at all price points, not just higher priced homes.

But that’s still no incidental number.

There are a ton of figures and well-groomed stats out there, all of which serve different agendas.

If you look at the National Association of Realtor’s website, they’ll tell you that 65% of homeowners who claim the MID make less than $100,000.

They’ll also tell you that repealing the MID is a tax increase, which will hurt families with children the most.

And that homeownership leads to cleaner communities, better educated children, less crime, etc., etc.

For the record, NAR is one of the biggest supporters of the MID, largely because it makes home buying more attractive, which real estate agents tend to like…last I checked.

Or take the National Association of Home Builders, who argue that the MID has been in the tax code for nearly 100 years.

Why would it all of a sudden need to be purged from tax policy? Surely we’ve balanced budgets before.

Is Now the Time to Tinker?

Clearly there are some decent arguments for making changes to the mortgage interest deduction, which effectively subsidizes housing, but you have to wonder if right now is the time to meddle.

In case you hadn’t noticed, the housing recovery is far from “for real,” and just one wrong turn can set off a whole other downturn.

There have been several proposals for changes to the MID, including a lower cap at say $500,000 instead of $1 million and/or a tax credit, or the elimination of the deduction for second homes and HELOCs.

While all the plans may have merit, they all come with consequences as well, including near-term, unknown damage to the housing market.

In other words, the changes might be bad for home prices now, but ideally good for them later, especially if the economy is healthier.

The question is whether the housing market can stomach such a change at the moment, at a time when the government is doing all it can to prop up sagging prices.

Heck, the housing market isn’t exactly humming along, even with the intense manipulation of mortgage rates.

And if the MID is messed with now, and results in lower home prices, even if less severe than the doomsayers fear, the result could still be material.

We’re talking millions of homeowners who just got above water grabbing for their snorkels again, or just giving up and mailing in the keys.

Even if changes to the MID target the wealthy, they could have far-reaching unintended consequences that affect homeowners at all price points.

For example, a retiree with no mortgage would feel the brunt when it came time to list their home…for less.

And middle-class homeowners in pricier metros throughout the nation would have less incentive to buy than rent, despite everyone thinking, “they’re rich anyway.”

There’s also the emotional loss of the MID, which could scare away prospective buyers, even if they didn’t stand to lose anything at all.

To sum it up, the hope is that whatever changes do come are gradual and well conceived, as to not set off another firestorm in the housing market.

Source: thetruthaboutmortgage.com

Apache is functioning normally

Apache is functioning normally

Well, it has been about a week since I shared my opinion on the much-disputed mortgage interest deduction.

Since then, plenty of folks have weighed in on the subject, so I thought I’d cover a handful of them in one convenient post.

41% Want the MID Reduced

First up is the United Technologies/National Journal Congressional Connection Poll, released today, which found that 41% of respondents think the MID should be reduced for ALL taxpayers.

Meanwhile, 21% think the MID should be reduced for those earning over $250,000 annually, and 31% don’t think it should be reduced at all.

Another poll, the Christian Science Monitor/TIPP survey, asked readers if they were to eliminate one popular tax deduction, which would it be.

Of the five choices available, the mortgage interest deduction ranked third (19% of respondents), bested by the deduction for charitable giving (25%) and the deduction for state taxes (22%).

Very few seemed interested in messing with the deduction for employer-sponsored health insurance (14%) or the retirement savings deduction (8%).

Tax Credit Instead?

Looking back at a poll from October released by the National Low Income Housing Coalition, many favor (56%) a tax credit instead of the current deduction.

The hypothetical credit would replace the MID and provide the same percentage benefit, regardless of how much a household brings in.

At the same time, 63% said they supported capping the maximum mortgage amount at $500,000 for which one could get a deduction.

The idea here is to make the MID more beneficial for low- and middle-income earners, as opposed to being top heavy, as it currently exists.

As you can see from this colorful graph furnished by the Reason Foundation, the richest homeowners in the nation benefit much, much more than those who make very little.

Of course, they pay more in taxes, so one could argue that it is somewhat relative, but that’s an argument for another day.

There’s also the “geographic inequality” of the MID, as mentioned by Emily Badger over at The Atlantic.

She cites an older study from researchers at Pennsylvania’s Wharton School, who found that the MID is enjoyed mostly in wealthy metros such as Los Angeles, New York, Boston, and San Francisco.

Again, this is due to home prices being much higher in those areas, so those paying that much more in mortgage interest benefit more via the deduction.

Homebuilders Concede, Somewhat

Then are the homebuilders, who are decidedly for keeping the MID intact.

Jerry Howard, head of the National Association of Home Builders, told The Hill that toying with the MID was “a ludicrous concept.”

He added that it’s the “last thing Congress should be considering” when working to stabilize the economy, and that it should be “taken off the table.”

However, yesterday Toll Brothers CEO Doug Yearley told Fox News that a “modest tweak to the MID” would be “okay.”

It’s unclear what he means by “modest,” but it’s certainly a breakthrough for a homebuilder to even concede that much.

Yearley also stressed that it would be “unfortunate if they did it now,” seeing that we’re in the early stages of a housing recovery, and touching anything now could lead to unintended consequences.

He also added that he didn’t’ think the MID would ever be entirely eliminated.

Finally, the LA Times has some interesting “letters” from readers regarding their opinion of the MID.

One longtime homeowner and Realtor argued for a $50,000 annual interest cap, meaning any interest paid over $50,000 wouldn’t be deductible.

And another homeowner seemed to feel conscience-stricken for getting the “unfair subsidy” that benefits homeowners and hangs renters out to dry, suggesting a “10-year phase out period” of the mortgage interest deduction.

So as you can see, opinions differ based on individual circumstances and priorities, and even those who benefit from the MID are willing to give it up.

(photo: Marcin Wichary)

Source: thetruthaboutmortgage.com

Apache is functioning normally

Apache is functioning normally
Many or all of the products featured here are from our partners, who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations.

On average, homeowners insurance in the United States is $1,424 annually and about $118 per month. This price varies based on the state you live in, along with other factors like previous home insurance claims, credit score, and the age of your home.

If you’re buying a home, there are a lot of cost considerations, from the monthly closing costs to the mortgage payments and interest rate. One factor many people often overlook is the additional cost of home insurance. To properly budget for your new dream home, it’s helpful to know the average cost of home insurance in your state.

Today, we’ll go over the average insurance cost for each state, which companies have the best rates, and what factors can affect your rates. By learning more about home insurance, you can find the best deals to save money and enjoy the experience of moving into your new home. If you’re considering moving to a new state, this information may also help influence your decision.

Table of contents: 

Homeowners Insurance Facts

The cost of your homeowners insurance is affected by various factors. The cost of homeowners insurance can vary by state because some states are more prone to natural disasters than others. For example, Florida is more prone to hurricanes than other states, so the average cost is higher than in a state like Nevada.

As you’ll learn, homeowners insurance can range from less than $1,000 to over $3,000 per year. Here are some key facts about homeowners insurance in the United States: 

  • The average annual cost of homeowner’s insurance in the United States is $1,424.
  • The state with the cheapest homeowners insurance at $382 per year is Hawaii.
  • Oklahoma has the highest homeowners insurance rates, averaging $3,659 annually.
  • Portland, Oregon, is the most populous city with the lowest average annual insurance rate at $686 per year.
  • People with a credit score of 740 or higher have the lowest average insurance rates at roughly $1,207 per year.

Average Cost of Home Insurance by State

The overall average cost of home insurance in the United States is $1,424 annually or $118 per month.

The following chart and table show the average cost of home insurance for each state and includes Washington, D.C. These prices are based on $250,000 for dwelling coverage. 

Top 5 States With the Cheapest Homeowners Insurance Rates

Hawaii has the lowest annual rate of $382 per year, which is 73% lower than the national average. Vermont, Delaware, Utah, and Oregon are also in the top five states with the lowest homeowners insurance rates, and each is close to 50% lower or more than the national average.

  • Hawaii: $382 per year
  • Vermont: $658 per year
  • Delaware: $679 per year
  • Utah: $696 per year
  • Oregon: $723 per year

Top 5 states With the Most Expensive Homeowners Insurance Rates

The states with the most expensive homeowners insurance rates in the country are Oklahoma and Kansas at $3,659 per year and $3,083 per year respectively. Some of the other states with the highest rates include Nebraska, Colorado, and Arkansas.

According to Insurance.com, these states have high rates because they’re more likely to experience tornadoes, hurricanes, hailstorms, and other natural disasters.

  • Oklahoma: $3,659 per year
  • Kansas: $3,083 per year
  • Nebraska: $2,951 per year
  • Colorado: $2,152 per year
  • Arkansas: $2,123 per year

Average Cost of Homeowners Insurance by City

The city you live in may also determine the cost of your homeowners insurance rates. In addition to the possibility of natural disasters, population, crime statistics, and local materials and labor costs are also factors.

The following cities are the 25 largest cities in the United States, organized alphabetically. The table includes their average annual and monthly rates.

How Much Does Homeowners Insurance Cost by Company?

As with all forms of insurance, it’s typically a good idea to shop around for the best rates. Your rates may change depending on the provider based on the size of your home, claim history, and additional factors. And keep in mind that the level of coverage will also change the cost of your insurance premiums.

The following table shows 11 of the country’s most popular homeowners insurance providers sorted by annual rates.

4 Factors That Can Affect Homeowners Insurance Rates

Outside of your home’s location, some other factors can determine the cost of homeowners insurance. We’ve listed four of the most common factors that could affect your insurance rates.

1. Credit Score

Some states may look at your credit score to help determine your rates. Your credit score may be a factor because a low credit score or bad credit history can be considered a risk factor. 

There are some exceptions. According to Experian®, states like California, Hawaii, Maryland, and Massachusetts prohibit using credit scores as a determining factor for insurance rates.

Credit Score:

Poor (300-579)

Fair (580-669)

Good (670-739)

Excellent (740-850)

Average Annual Rate:

$3,274

$1,571

$1,428

$1,207

2. Claims History

Similar to automotive insurance rates, if you have an extensive history of home insurance claims, this can raise the price of your rates. Although you have less control over the damage that may happen to your home, insurance companies require higher premiums to help cover the costs of damages or injuries.

This table shows what types of claims may raise your rate based on the average amount paid out for the claim. The average payouts are taken from the Insurance Information Institute’s research for dwellings with $250,000 in coverage.

Type of Claim

Average Dollar Amount of Claim Paid Out

Average Annual Rate After a Claim

Wind

$11,650

$1,570

Liability

$30,324

$1,749

Theft

$4,415

$1,763

Fire

$77,340

$1,773

3. Deductible Amount

Your deductible is another factor to consider. Some people opt for a higher deductible because it lowers their rate. Should something happen to your home, you’ll have a higher out-of-pocket expense due to that higher deductible. This is helpful to remember as you budget around your home insurance costs.

Another consideration is that while you may save money while paying for your homeowners insurance, you may face financial hardships should you need to file a claim.

Deductible Amount

Average Annual Rate

$1,500

$1,368

$2,000

$1,273

$5,000

$1,111

4. Age of Home

If you own an older home, it may be more expensive to repair the home if it’s damaged. Older homes typically have higher rates due to these higher costs for repairs. The repairs are often more expensive, and the contractors may need to bring the home up to the most current building and safety codes. The first year of recorded data was in 1959.

What Does Homeowners Insurance Cover?

Knowing what your homeowners insurance policy covers can help you better prepare for situations when you might need to use it. With a better understanding of what is and isn’t covered, you can protect yourself from the potential of financial losses if you need to file a claim.

Depending on which insurance provider you choose, they may offer some or all of the following coverages.

  • Dwelling coverage: The averages listed throughout this post are based on the dwelling coverage of $250,000, which means the insurance will cover up to $250,000 in repairs. Should you get a policy with a higher dwelling coverage amount, more repairs will be covered.
  • Additional structures: Basic dwelling coverage covers damages to your home, but if you have other structures like a guest house, shed, or detached garage, you’ll need this extra coverage. This coverage is often 10–20% of the dwelling coverage’s limit.
  • Medical payments: If someone who doesn’t live in your home gets injured on your property, you can get coverage for their medical payments. Medical payment coverage usually ranges from $1,000 to $5,000 of coverage.
  • Personal liability: Personal liability coverage can be between $100,000 and $500,000, which is for property damage to someone else’s property or if you’re legally liable for injuries on your property. Personal liability coverage may also cover legal fees if someone were to sue you after being injured.
  • Loss of use: If your home gets damaged to the point where you cannot live there until the repairs are done, this coverage will help cover living expenses. Loss of use coverage can range from 10% to 30% of dwelling coverage. 
  • Personal property: Ranging from 50% to 75% of your dwelling coverage, this provides coverage for the personal property in your home, like clothing, furniture, and electronics. If you have this coverage, be sure to read the details because it may have a max limit of coverage on certain types of items. 

What Characteristics Affect Homeowners Insurance?

Earlier, we went over different factors that can affect your homeowners insurance, like your credit score and history of claims. Home and location characteristics may also give you lower or higher rates.

Home Characteristics

Various characteristics of your home and how it’s built may make it more at risk for damage. As with other forms of insurance, if there are higher risks, they can increase your rates.

One of the common characteristics affecting your rates is the condition of your roof. Your roof is a primary part of your home that protects the inside of your home. If you have an older roof that may not withstand harsh weather or is made from poor materials, you may have to pay a higher insurance rate.

Some insurance providers may also have higher rates for special features. Some of these include having a pool, hot tub, sauna, or any other feature that may cause an injury.

Location characteristics

Earlier, you learned how the average home insurance cost varies from state to state, and much of this has to do with the area’s characteristics. In addition to weather risks, home insurance rates are often higher in areas prone to wildfires. Some insurance providers calculate risk based on how close the home is to fire stations and fire hydrants.

Another location characteristic that home insurance providers look at is crime rates. Home insurance policies may have theft coverage, but in higher crime areas, the rates will be higher due to a higher likelihood of break-ins. Sometimes, you can lower your insurance rates by installing security measures like cameras and alarms.

8 Ways to Lower the Cost of Your Homeowners Insurance

Your mortgage is the primary expense for your home, and it’s important to factor in the cost of your homeowners insurance as well for budgeting purposes. Fortunately, there are ways to lower your homeowners insurance through different methods. Here, we’ve listed different ways you can get better rates for your home insurance.

  1. Improve your credit score: Many states allow insurance providers to use your credit score as a factor. By improving your score, you can likely lower your rates.
  2. Bundle your policies: You may be able to bundle your home and car insurance for a better price on both.
  3. Do some renovations: An old roof or out-of-date parts of your home may increase your rate, so it might be worth it to do some renovations.
  4. Opt for the higher deductible: Although you’ll have to pay more when you file a claim, a higher-deductible policy can save you on your annual rate.
  5. Compare insurance quotes: There are many different homeowners insurance providers, so it may be helpful to shop around to find the best price.
  6. Try an independent agent: You don’t have to work with an insurance company directly. Some independent agents are licensed insurance professionals who can offer you a good deal.
  7. Get the right coverage: Educate yourself about what coverages you need and which you don’t. Some people may pay for coverage they won’t need to use.
  8. Check for discounts: There are a variety of discounts you could get in addition to bundling your policies. Your provider may offer a loyalty discount, an alarm system discount, or a claims-free discount.

Methodology

The primary source of this data comes from Bankrate. To conduct their analysis, Bankrate uses the data provided by Quadrant Information Services. The data comes from various insurance providers across all 50 states as well as Washington, D.C., for 2023. 

The average rates use the following base insurance profile: 

  • Homeowner: Male, 40 years of age
  • Dwelling coverage: $250,000
  • Personal property coverage: $125,000
  • Liability coverage: $300,000
  • Loss of use coverage: $50,000
  • Medical payments coverage: $1,000

Repair Your Credit Before Getting Homeowners Insurance

Depending on your state, your credit score may play a significant role in your homeowners insurance rates. By improving your credit score, not only can you potentially save on your home insurance rates, but your credit score can also help you when purchasing or refinancing your home.

Credit.com offers a free credit report card that provides you with an analysis of your credit health. You can also utilize our ExtraCredit® subscription for additional credit reporting and other services.

Source: credit.com

Apache is functioning normally

Apache is functioning normally

Regardless of how you celebrate, the right credit card can help you hold on to more of your cash this holiday season.

Chase Freedom Flex℠

  • Wholesale clubs.

  • Select charities.

Discover it® Cash Back and select Discover cards

  • Amazon.com.

  • Target (in store and online).

Both cards earn 1% back on all other non-bonus-category spending. You must activate the 5% categories to be eligible for bonus rewards.

Chase cardholders can activate bonus categories online or in the Chase app by Dec. 14, 2023, and bonus rewards can be earned retroactively. For eligible Discover cards, bonus rewards can be earned starting from the date cash-back categories are activated online.

Here are some tips to maximize your bonus categories this quarter:

Overall tip: Set your default payment method

Whether you’re earning cash back with Chase or Discover, you’ll want to set your card as the default payment method for each eligible bonus category. This will ensure you don’t miss out on bonus rewards when you pay.

PayPal is widely accepted by online merchants, and even by some brick-and-mortar stores. Regardless of where you use it, add the Chase Freedom Flex℠ to your PayPal account and set it as your primary payment method, if you haven’t already.

Shopping on Amazon or Target.com? Set your Discover it® Cash Back or other eligible Discover card as the default card in those accounts.

Optimizing the Chase Freedom Flex℠

Use PayPal, both in-store and online

Most people associate PayPal with online shopping — but did you know you can also use PayPal to checkout in-store at some major retailers like Best Buy and Walmart, and even for in-flight purchases with United Airlines? According to PayPal, the payment platform is now accepted at millions of small and large merchant locations globally. That huge acceptance footprint should make it even easier to maximize your rewards this holiday season. Just be sure to set your Chase Freedom Flex℠ as the preferred payment card in your PayPal app so you don’t miss out on that bonus cash back.

🤓Nerdy Tip

Rewards won’t “stack” if you make one transaction across multiple bonus categories. For example, if you make a qualifying charitable contribution through PayPal, you’ll only be eligible to earn up to 5% cash back on that transaction.

Buy in bulk at wholesale clubs

From cleaning supplies to bulk food items and beyond, wholesale clubs like Sam’s Club and BJ’s offer a great way to stock up on supplies you’ll use well after the holiday season. With some thoughtful spending, you can lock in that bonus cash back for items you won’t use until 2024. Just be aware of exclusions: You won’t earn bonus cash back on gas or other in-club services like cell phone plans, insurance or travel packages.

Another major caveat: Costco stores don’t accept Mastercard, meaning you can’t use the Chase Freedom Flex℠ (which runs on the Mastercard payment network) for in-club purchases. However, you can still earn bonus cash back by using your card through the Costco website. This works even for purchases you make online but pick up at your local store.

Make a charitable donation

The holidays are a perfect time to give back. If your personal budget allows for charitable giving, you can earn bonus cash back for using your Chase Freedom Flex℠ to make a donation to select charities (see below for a complete list). Be sure to account for any transaction fees you may incur for using a card before making the donation. If the fee is greater than the rewards you’ll earn, you’d be better off writing a check. Depending on your tax situation, donations to a qualifying charity may be tax-deductible, leading to additional savings.

List of eligible charities

  • American Red Cross.

  • Equal Justice Initiatives.

  • Feeding America.

  • Habitat for Humanity.

  • International Medical Corps.

  • International Rescue Committee.

  • Leadership Conference Education Fund.

  • NAACP Legal Defense and Educational Fund.

  • National Urban League.

  • Thurgood Marshall College Fund.

  • United Negro College Fund.

  • UNICEF USA.

  • United Way.

  • World Central Kitchen.

  • Out and Equal.

Chase Freedom® and Chase Freedom Flex℠ bonus rewards categories for 2023

Q1 (Jan. 1-March 31)

  • Grocery stores.

  • Fitness clubs and gym memberships.

Q2 (April 1-June 30)

  • Amazon.com.

Q3 (July 1-Sept. 30)

  • Gas stations and electric vehicle charging.

  • Select live entertainment.

Q4 (Oct. 1-Dec. 31)

  • Wholesale clubs.

  • Select charities.

Optimizing the Discover it® Cash Back

Earn cash back from your couch

In today’s busy world, Amazon has become synonymous with convenience. From electronics to pet food, you can shop from your couch for almost anything at the world’s largest retailer. And through the last quarter of 2023, paying with an eligible Discover card can earn you bonus cash back.

Qualifying purchases include those made on Amazon.com and through the Amazon app, including digital downloads, Amazon Fresh orders, Amazon Local Deals, Amazon Prime subscriptions and items sold through third-party merchants.

If you don’t need to make an immediate purchase, reload your Amazon gift card balance and grab that bonus cash back for a future purchase. Amazon also sells a selection of third-party gift cards. If you’re making a purchase at another retailer, first see whether Amazon sells a gift card to that retailer. You could earn bonus cash back on the gift card purchase, then use the gift card with the other merchant.

Target bonus cash back

Jeans? Groceries? A new flat-screen TV? Whatever you’re looking for, there’s a good chance Target sells it. And for the fourth quarter of 2023, purchases made in Target stores, at Target.com and on the Target app all qualify for bonus cash back with your eligible Discover card. If you’re shopping online or in the app, be sure to make your eligible Discover card the default payment method.

Gift cards make for a perfect stocking stuffer, and Target stores carry an extensive selection of third-party gift cards. Just head to the gift card rack and get rewarded for rewarding your friends, loved ones or colleagues.

Discover bonus rewards categories for 2023

Q1 (Jan. 1–March 31)

  • Grocery stores.*

  • Drugstores.

  • Select streaming services.

Q2 (April 1–June 30)

  • Restaurants.

  • Wholesale clubs.

Q3 (July 1–Sept. 30)

  • Gas stations.

  • Digital wallets.

Q4 (Oct. 1–Dec. 31)

  • Amazon.com.

  • Target, including Target.com and the Target app.

*The grocery stores category does not include grocery purchases at Walmart or Target or at other superstores or wholesale clubs.

Source: nerdwallet.com

Apache is functioning normally

Apache is functioning normally

A jumbo loan is a type of mortgage that surpasses the Federal Housing Finance Agency (FHFA) limitations and is used to finance expensive properties.

If you’re looking to purchase a property or a home in a more expensive area, it’s important to understand how jumbo loans work. Many individuals use jumbo loans to finance properties that exceed conventional loan limits. So, what is a jumbo loan, and who requires one? 

In this article, we’ll go over what jumbo loans are, how to qualify, and other considerations. 

What Is a Jumbo Loan?

A jumbo loan is a type of mortgage that surpasses the limitations the Federal Housing Finance Agency (FHFA) set for Freddie Mac and Fannie Mae. These two companies secure the majority of mortgages in the United States. Since Freddie Mac and Fannie Mae cannot guarantee these loans, there’s a higher risk for the lender and therefore, stricter requirements to qualify. 

What Is Considered a Jumbo Loan?

The limit for a jumbo loan differs from state to state and even county to county. In most parts of the United States, the jumbo loan limit is $726,200. However, more expensive areas have higher thresholds for a jumbo loan. For example, Orange County, California has a jumbo loan threshold of $1,089,300. 

How Do Jumbo Loans Work?

Jumbo loans work like traditional mortgage loans with set terms and a repayment schedule. Both fixed-rate and adjustable-rate jumbo loans are also available. Since jumbo loans can be risky for the lender, the requirements to qualify are stricter. 

Get matched with a personal
loan that’s right for you today.

Learn
more

How To Qualify for a Jumbo Loan

Below are factors you’ll need to qualify for a jumbo mortgage loan. 

Good Credit Score

While there’s no hard and fast rule, most lenders will require a credit score of 700 or above to qualify for a jumbo loan. The average credit score in the United States is 714, which is doable for most Americans. 

If you don’t have a good credit score but are looking to qualify for a jumbo loan, there are steps you can take to improve your credit score. 

Large Down Payment 

While the minimum down payment requirement for a jumbo loan is just over 10%, a lower down payment often comes with higher monthly payments and interest rates. Most lenders require a 20 to 35% down payment.

The exact down payment the lender requires may also differ depending on the loan size, your credit score and other factors. 

Low Debt-to-Income Ratio

Another factor that lenders will look at is your debt-to-income ratio, which is the monthly debt you owe divided by your gross monthly income. Most lenders require a debt-to-income ratio below 43% to receive a jumbo loan.

Enough Cash Reserves

You will need to show proof that you have enough cash reserves, or liquid assets, to cover about 6-18 months of mortgage payments. 

Extensive Documentation

Last but not least, lenders often require you to provide extensive documentation such as bank statements, pay stubs, and tax returns. These documents show the lender that you have steady income that is unlikely to change. 

Jumbo Loan Pros and Cons

There are a variety of pros jumbo loans can provide to future home buyers including: 

  • The ability to purchase a luxury property. Jumbo loans provide you with the funds you need to purchase your dream home in your desired location.
  • Competitive interest rates. Jumbo loan rates are similar and sometimes even slightly lower than traditional loan rates. 
  • A single loan. Without jumbo loans, homebuyers would need to take out multiple mortgages. 
  • The finances to make renovations. You can take out a jumbo renovation loan to cover the cost of the home plus any renovations you do. 

On the contrary, jumbo loans have the following cons that you should be aware of: 

  • High costs. With a larger loan comes higher payments. Plus, you’ll likely have to pay higher closing costs and insurance. 
  • Strict qualifications. Jumbo loans have stricter qualifications that you might not be able to meet.
  • Large down payments. Jumbo loans typically require you to put a high percentage down. 
  • Limited tax breaks.  The Internal Revenue Service (IRS) only allows you to deduct interest on mortgages up to $750,000. As a result, interest on a portion of your jumbo loan likely won’t be tax deductible. 

Jumbo vs. Conforming Loan Rates: Is There a Difference? 

In the past, jumbo loans had higher interest rates than conforming loans. However, in 2022, jumbo mortgage rates fell below conforming loan rates. While these rates have since even outed, jumbo loan rates have remained competitive with conforming loan rates, as seen in the graph below. 

Jumbo Loan FAQ

Below, we’ve answered some common questions about jumbo loans. 

What Are Jumbo Loan Limits?

While jumbo loan baseline limits vary from place to place, they range from $726,200 to $1,089,300 in more expensive areas. 

Are Jumbo Loans More Expensive?

While they have comparable interest rates to traditional loans, they may be more expensive since they have higher payments and closing costs. 

What Is the Down Payment on a Jumbo Loan?

The minimum down payment for a jumbo loan is 10.1%. However, most lenders require a down payment of 20 to 25%. 

Should You Apply for a Jumbo Loan? 

If the home you’re interested in purchasing exceeds the conforming loan limits in your area, a jumbo loan could be your best financing option. However, this option is only available to those with the financial resources to meet the strict qualifications, so it’s important to evaluate your financial situation to determine if it’s right for you. 

Start by checking your credit score for free to see if you meet the minimum requirement for a jumbo mortgage. 

Source: credit.com

Apache is functioning normally

Apache is functioning normally

This article originally appeared on RickOrford.com and has been republished here with permission.

Car owners throughout the U.S. almost always need to have a car insurance policy. With the financial considerations involved and the risks drivers face on the road, it’s important to weigh the cost of car insurance carefully. Do you think your car insurance is too high? If so, you can find cheap car insurance by shopping around. 

In certain ways, your car insurance costs may be a reflection of you and your driving habits. Auto insurance providers often base the rates they charge on important factors. Some of these include your credit score, where you live, your driving record, and the type of car you drive. Therefore, if your premiums recently shot up or seem too high, you need to determine the possible reasons for it. 

Reason #1: You Have Bad Credit

In most states, auto insurance companies use your credit score when calculating your car insurance premiums. Therefore, if you have a poor credit score, you may end up having to pay higher insurance premiums. However, the cost increase may depend on the auto insurance provider you choose and where you live. 

According to the Insurance Information Institute, credit-based insurance scores are confidential ratings based on the insured individual’s credit information. Many insurance providers use credit scores in combination with other factors to help determine premiums. This is typically the case for insurance lines such as personal car insurance. 

Reason #2: Poor Driving Record

Before giving you a car insurance policy, all insurance providers will want to know your complete driving record. This includes your traffic violations and accidents you had in the past. Even if the handful of accidents you had did not happen recently, you might still have to pay higher insurance premiums. The same applies to traffic violations. 

However, if you have a clean driving record, you should enjoy lower insurance premiums. When it comes time to renew your policy, your insurance provider will check your driving record for DUIs, accidents, speeding tickets, and other traffic violations. 

Your premiums may increase by as much as 20% after a speeding ticket. A DWI or DUI will cost you significantly more. You will also have to pay steep fines and attorney fees, in addition to an average premium increase of up to $800. 

The reason for this difference in rates is that drivers with poor records are more likely to make more claims in the future. 

Reason #3: Coverage Levels and Types

The type of coverage you choose and the level of insurance you have can greatly influence your insurance rates. Every state decides its own rules and requirements for minimum coverage requirements on any type of policy. 

For example, some states have basic minimum requirements for property damage and bodily injury coverage. Others require additional coverages such as underinsured and/or uninsured motorists and personal injury protection or medical payments coverage. 

A state like South Carolina, for instance, requires drivers to carry the following:

  • A minimum coverage of $25,000 per person for bodily injury
  • $50,000 per accident
  • $25,000 in uninsured motorists’ coverage and property damage coverage within the same limits

Since the minimum requirements for drivers differ by state, you may start with different rates and coverages just on a basic liability insurance policy alone. Furthermore, if your car has a lien, you may need to have additional coverage or higher limits, which would affect your annual rates. 

The answer to the question “Why is my car insurance so high?” may lie in the type of coverage you have. Generally, the more coverage your car has, the more you should expect to pay.

For example, do you have a full coverage insurance policy, which includes collision and comprehensive coverage? If so, it may cost you about 170%  more in premiums than a policy with liability coverage only. 

Reason #4: Your Claim History

Even if you only have a couple of accidents on your driving record, the resulting payouts will impact your insurance premiums. Of course, a driver with a couple of minor fender benders is a significantly lower risk than one who previously totaled several cars. 

Whether the accidents were your fault or not, the number of claims you file will have an impact on your insurance rates. A no-fault accident can lead to a 10% increase in your premium and remain on your record for up to three years. 

However, some states do not allow insurance providers to increase premiums after a no-fault accident. However, filing a claim for such an accident will still count towards your total number of claims. 

Related read: How an Accident Can Affect Your Credit Score

Reason #5: Your Car

When setting premium rates, car insurance providers consider the type of car to be insured. Some types of cars are more likely than others to keep occupants protected in the case of an accident. This results in lower insurance rates.

However, drivers of high-powered cars such as sports cars are statistically more likely to drive recklessly. This makes these drivers more likely to cause accidents, resulting in higher insurance rates. 

According to some studies, safer and bigger cars, such as small SUVs and minivans, tend to have the most reasonable rates of insurance. Smaller cars, on the other hand, have surprisingly high rates. One reason for this could be because they tend to sustain more extensive damage in a crash. 

Reason 6: Where You Live

Car insurance costs vary widely across the United States. If you reside in Michigan, one of the most expensive states for auto insurance, you can expect to pay several times more than people living in Maine, for example. 

Various factors affect insurance rates in each state. These include the number of uninsured drivers, condition of the road network, minimum coverage amounts, and more. That said, you need to understand that insurance rates can vary within a state or city as well. 

For example, if you live in an area with narrow roads that frequently lead to accidents, you may have to pay more for insurance than you would if you lived elsewhere. Those who live in areas with high rates of auto thefts tend to pay more for car insurance as well. 

Reason #7: Your Age or Gender

“Why is my car insurance so high?” This is a question many younger drivers tend to ask. According to the Insurance Information Institute, mature drivers tend to have fewer accidents than less experienced drivers, especially teenagers. This is the reason less experienced drivers pay more for car insurance. 

Also, your insurer will charge you more if you let teenagers and young adults below 25 drive your car. If you have young drivers on your insurance policy, you may end up paying higher premiums.

Your gender may also affect how much you pay for car insurance. Statistically, men tend to get into more accidents and have more DUI-related accidents. Furthermore, they tend to have more serious accidents than women. These are the reasons why women tend to pay less for car insurance than men. 

Young men are likely to pay a lot more for auto insurance. A 20-year-old man, for example, may have to pay about 16% more on his insurance premium than a woman of the same age.

However, as drivers age, the difference in rates tends to even out. Often, older women pay slightly more for car insurance than men of the same age. However, in this case, the difference in rates is quite small. 

Reason #8: Your Insurance Company

Your car insurance may be expensive because your insurance provider charges higher rates. Rates vary dramatically among different insurance providers. Therefore, you could be paying significantly more than necessary. 

According to one study, among the top ten auto insurance providers nationwide, the average price of basic coverage for a good driver is about $440 for six months. However, that same driver could be paying just $309 from one company or as much as $625 from another of the top companies.

Therefore, if you have a good driving record, you could save up to 51% in insurance savings by switching companies. 

Reason #9: Your Driving Patterns

Simply put, you and your insurance provider are at higher risk the more often you’re on the road and the further you drive. If you travel great distances to and from work, driving your car may eliminate some of the inconvenience. You just listen to your favorite music or podcasts to pass the time as you drive to work every day. 

However, you may be paying a higher insurance premium for that convenience. When you apply for insurance coverage, your insurance provider will want to know where you work and where you live. This will help them have a better idea of how far you drive regularly. 

Reason #10: You Have Low Deductibles

When buying car insurance, car owners typically choose a deductible. This is the amount they would need to pay before the insurance provider picks up the tab in the event of theft, an accident, or any other type of vehicle damage. 

Depending on the type of policy you choose, your deductibles may range from $250 to $1,000. However, there’s a catch. Generally, the lower your deductibles are, the higher your annual insurance premium is. 

Reason 11: You Pay for Coverage You Don’t Need

If you think your car insurance is too costly, you need to take a closer look at your policy. Do you need to pay for things such as car rental coverage and roadside assistance? Although such coverage can provide some convenience, they are not the most important things to pay for. 

Reason #12: You Have Gaps in Your Car Insurance

Many auto insurance companies consider the continuity of a car owner’s auto insurance. If you’ve had lapses or gaps in your car insurance history, you may be pegged as a high-risk car owner. As a result, your premium rates may increase by as much as 8% per year. The rate increase goes up to 35% if the coverage lapse extends beyond 30 days.

These penalties may also vary depending on your auto insurance provider. Make sure you ask your provider about how an insurance lapse would affect your premium rates.

The Bottom Line

To find out why your insurance rates seem to be expensive, you must first understand how auto insurance companies determine your rates. Fortunately, in most cases, you can do something about your unnecessarily high car insurance premiums. This may involve adjusting your driving habits or filing fewer claims, if possible.

In addition to shopping around for the best auto insurance rates and the right policy, you should look for discounts as well. These discounts may be applicable to drivers with good records, student drivers, and members of the military. Check your provider’s website to determine the types of discounts they offer. 

The more information you have, the easier you can identify the factors contributing to your car’s high insurance rates. 

Source: credit.com

Apache is functioning normally

Apache is functioning normally

Car insurance can be confusing. First, there are all the policy considerations: Do you want a policy with comp and collision? How much liability should you carry? Do you need uninsured motorist coverage? Even once you make decisions on all these things, the bill that arrives can be difficult to understand—exactly what goes into the pricing for your car insurance premium? Here’s what car insurance companies don’t want you to know about premium pricing.

  • Your car insurance may not be tied to the driver.
  • The type of car you drive matters.
  • Prior claims and questions raise rates.
  • You can check your report for errors.
  • Your credit score impacts your car insurance costs.
  • Where you live impacts your premium account.
  • Your age affects your car insurance premium.
  • Gender, marital status, job and education level can affect premiums.
  • If you bought your car with a loan, your premium may be higher.
  • You can lower your insurance rates.
  • You have options if insurance denies your claim.

Is Car Insurance Tied to Car or Driver?

Technically, car insurance is tied to the car. That means if you let someone else drive your car, your insurance may kick in if there is an accident. Not all insurance policies cover all uses of your vehicle, though, so read the fine print on yours before you allow someone else to drive it. You may also be able to exclude drivers who live with you from your policy if you don’t ever want them driving your car and don’t want them impacting the cost of your policy.

>> Find Car Insurance Quotes. 

Does It Matter What Kind of Car You Drive?

The total value of your car, what type of vehicle it is and what type of safety rating it has all factor into the cost of your policy. Other factors can include how many miles you drive each year, where you park your car, and how many expensive extra features your car has.

Does Your Driving Record Affect Your Insurance?

Every claim you make—and even if you ask an insurance agent about making a claim—gets entered into a database that your current and future insurance carriers can access. If you have had any recent accidents or traffic violations, you may be more expensive to insure than someone with a clean driving record. If you’ve made any recent claims, your insurance premiums will likely go up. And if you shop around for a new company, they’ll have access to your records and will take your driving record into consideration.

Can You Check Your Insurance Reports?

Your insurance companies share information with two databases: the Comprehensive Loss Underwriting Exchange (CLUE) and the Automated Property Loss Underwriting System (A-PLUS). These databases are run by outside agencies—LexisNexis runs CLUE and Verisk Analytics runs A-PLUS—and any claims you make stay in your report for five to seven years, depending on the database.

The Fair Credit Reporting Act entitles you to one free copy of your report every 12 months. You can dispute inaccurate or incomplete information on your report. You are also entitled to notice about any negative decisions based on information in your report. Requesting your reports does not affect your credit score.

  • Request your CLUE report from LexisNexis online or call 866-312-8076.
  • Request your A-PLUS report from Verisk by calling 800-627-3487.

Does Credit Score Impact Your Car Insurance Cost?

In most states, your credit score can impact the cost of your car insurance. The only states that don’t allow car insurance companies to use credit score as a factor in pricing are California, Massachusetts and Hawaii. Statistical studies from the Federal Trade Commission and other research organizations show a correlation between credit score and how much a person is likely to cost a car insurance company. In short, someone with a poor credit score is seen as a greater risk, so the insurance company may charge more for the insurance to help cover expenses related to future claims.

Does Where You Live Impact Your Premium Amount?

Where you live can impact your car insurance cost. In 2018, for example, the average car insurance premium in Michigan was 64% higher than the national average. Other states with car insurance premium averages on the high end included Louisiana, Florida, Rhode Island and Connecticut. States with the least expensive average car insurance premiums included Vermont, Ohio, Virginia, Idaho and Iowa.

Does Age Impact Your Premium?

When it comes to what car insurance companies don’t want you to know, this one isn’t super secret. Age does impact your premiums, with the youngest and oldest drivers typically paying the most on average.

The youngest drivers pay the most for insurance. Premiums are highest at the age of 18 and decline steadily until the driver turns 25. In the eyes of carriers, drivers then enter adulthood, during which time premiums stay pretty flat for the next 30 years or so, until the age 55. Premiums inch up slowly between ages 55 and 65 before jumping way up around the age of 75.

In addition to your age, your gender, marital status, education level and even your job can affect your insurance rates.

If You Bought Your Car Via a Loan, Is Your Insurance Cost Higher?

If you don’t own your vehicle outright, then you may pay more to insure it. If you own a vehicle outright, you’re only required to carry liability on it. Liability is the part of your insurance policy that kicks in to cover damage caused to other people’s cars or property in an accident you’re at fault in.

When you have a loan, the bank is concerned about protecting its investment. That means it may require you to carry comp and collision as well. This is the part of an auto policy that covers damage to your car in an accident you’re at fault in. A policy with this added coverage is more expensive than one without it.

How Can You Lower Your Car Insurance Costs?

No matter your age, gender, or location, you can potentially lower your car insurance via a variety of methods. Here are some tips your car insurance company doesn’t want you to know to put into action to save on premiums.

  • Drive carefully. Not only does driving carefully help you avoid rate-raising accidents, but many companies also provide good driver bonuses when you haven’t had an accident or filed any claims for a certain amount of time.
  • Pay your bills on time. Paying your bills on time goes a long way toward improving your credit score, which can improve your rate depending on where you live. Paying your bills on time also demonstrates trustworthiness to your insurance company, which means you may be able to negotiate for a lower rate.
  • Ask for discounts. When it comes to your insurance rates, it doesn’t pay to be shy. Ask your insurance company about discounts, including multi-driver or multi-car discounts, good student discounts or safe driver discounts. You may be able to score a large portion off your premium because you’re a good student or you follow all the traffic laws.
  • Review your credit report. Know what’s on your credit report and what you can do to drive up your score. Once you’ve improved your score, ask for a new quote for car insurance.

>> Need to review your credit report? Sign up for the free Credit Report Card.

  • Consider a higher deductible. Look carefully at your coverage and consider whether you can tweak anything in your policy. If you can afford to cover $2,000 in damages if you get in an accident, consider changing your deductible from $500 to $2,000 to save on your monthly premium.
  • Shop around for a better rate with other insurance companies. The insurance market is highly competitive, and you may find a better rate with an online company or through a broker that works with multiple companies. If you find a better rate, go back to your current company to see if they’ll match or beat the offer.
  • Choose your next vehicle carefully. Because the type of car you drive affects your insurance rates, do your research before your next purchase. Look for a car with plenty of safety features (but without too many other bells and whistles) that will get you a lower rate.

What Happens When Car Insurance Denies a Claim?

Of course, you don’t just pay for car insurance for the fun of it. If you get into an accident, you expect the insurance to step in and help cover the expenses. If your insurance company denies your claim, you have some options for appealing the claim.

  • Contact the insurer. After you’ve reviewed your claim denial, reach out to the insurance company directly. You may be able to explain your claim better or gather additional information to help you understand the reason for the denial.
  • File an official appeal. Most insurance companies will have an appeals process clearly set out online. You’ll want to write a clear, direct letter that explains why the evidence you originally gathered and submitted with your claim contradicts the insurance company’s decision to deny the claim.
  • Talk to a legal professional. If you feel that your insurance company is denying your claim in bad faith, talk to a legal professional about your options.

Bringing Down the Total Cost of Car Ownership

Car ownership is expensive. Make sure you pay attention to all the potential expenses to get the best possible deal overall—and don’t forget to shop around for the best rates before locking yourself in.

>> Ready to buy? Find your rates.

Source: credit.com