Real Estate Word of the Day: Underwriting

Underwriting: When an individual or business entity seeks funding for a real estate project or purchase, the loan request is scrutinized by an underwriter to determine how much risk the lender is willing to accept. These underwriters are not to be confused with securities underwriters, who work to determine the offer price of financial instruments. Real estate underwriters take into consideration both the land and the borrower.

The United States Department of Housing and Urban Development defines underwriting as “the process of analyzing a loan application to determine the amount of risk involved in making the loan; it includes a review of the potential borrower’s credit history and a judgment of the property value.”

In most real estate loans, the property itself is used as collateral against the borrowed funds. Underwriters generally use a debt-service coverage ratio (DSCR) to determine if the property is able to redeem its own value. If so, the loan is a more secure proposition, and the loan request has a greater chance of being accepted.

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3 Things a New Homeowner Should Know About Their Roof

As a brand new homeowner, your home is one of your biggest investments, and one of your biggest responsibilities. In order for the value of your home to increase, you will want to protect your investment with a well thought-out maintenance routine. While you probably won’t be spending every weekend washing the windows of this house you now own, you will probably want to come up with a plan for caring for your home so that it will remain an asset, rather than becoming a long-term liability.

This plan should not only include seasonal maintenance items, such as cleaning out gutters and trimming overhanging tree branches, but should also include a plan for how you are going to cover the costs of proactive repairs before aging portions of your home start screaming for your attention.

Since one of the biggest threats to a home is moisture, keeping precipitation out of your home is of utmost importance. Your roof, of course, is your first line of defense against water getting into your home. Today, we would like to discuss three things new homeowners should know about their roof.

1. Roofs Don’t Last Forever

The lifespan of a roof is typically 10 to 15 years. While home inspections are not required in most states, it is in a buyer’s best interest to have an inspection performed, because knowing the age and condition of a home’s roof can be helpful when putting in an offer for purchase. For example, if the existing roof is already nine years old, the buyer may be able to negotiate a few thousand dollars off of the asking price, due to the fact that the roof will soon need to be replaced. A home inspection will include details about the roof, including any soft spots that the inspector may notice. If the exact age of the roof is not recorded in the inspection, it is not out of line for a buyer to kindly, but firmly, press for this information.

2. Be Proactive With Known Deficiencies

It is in a new homeowner’s best interest to take care of issues with their roof as soon as deficiencies are noted. Procrastination is never an option, as a leaky roof will never repair itself. There are times, however, when it may appear that way. For example, if you should notice water dripping inside your home, and, during a rain shower several days later, notice that you no longer detect moisture in that same area, do not assume for a moment that the leak has been rectified. Sometimes, moisture from rain or another type of precipitation may be diverted from its point of entry to a second point of discovery.

It is also important to mention that just because you may notice water entering your residence at one location, does not necessarily mean that a leak exists in the roof directly above the area where moisture is detected. If moisture was able to get in once, and a repair has not been made, moisture is still able to gain entrance, even if its location in your home is seemingly unapparent.

3. Sometimes What Covers Your Home May Be Covered by a Warranty

If prior owners of your home recently had the roof replaced, that roof may be under a warranty that is transferable to future owners. If the roof is under a non-transferable warranty and a problem is noted before the sale is completed, the seller may be willing to use that warranty coverage to address any current concerns. If the warranty is transferable, be sure to obtain necessary paperwork and information from the seller.

To learn more about replacing the roof on your home, or for information about roof repair services, contact your local roofer.