What is Title Insurance?

Title Defect

Title insurance is a type of insurance that protects mortgage lenders and homeowners against claims questioning the legal ownership of a home or property. If disputes over title ownership arise after the purchase, the insurance policy pays for any legal fees to resolve them.

Unlike other types of insurance that help cover future mishaps, title insurance is designed to protect the policyholder from any past title discrepancies. For instance, when you buy car insurance, you are protected in case your car is in an accident. When you buy health insurance, you are protected against the cost of future medical care. Title insurance, on the other hand, protects an investment in real estate that might be at risk due to a past event, such as an undiscovered lien against the property.

Title insurance does not just protect you, as a purchaser of the property. Your mortgage lender will likely require you to have title insurance in order to protect their security interest in the property you are buying.

In any real estate transaction requiring a mortgage, the title company runs a public record search to ensure that the home being purchased is free and clear of any liens or ownership disputes. This process confirms the seller’s legal right to sell the home. If any defects in title, also known as “clouds”, are found during the title search, they are the responsibility of the seller. He or she may be able to cure the defects, or you can walk away during the sale. If defects in title are missed, however, you could be on the hook.

For example, a lien travels with the property, not the debtor. For example, let’s say a previous owner of your house had the kitchen remodeled. He failed to pay the contractor the $30,000 owed, and the contractor had a lien against the house for that amount.

If the title search failed to discover the lien, and you purchased the property, the lien would become your problem. Now that it is known, you will have to satisfy it, most likely out of the proceeds of the house if and when you sell it.

While this process usually goes smoothly, title insurance comes into play when disputes arise. Here are some of the more common title issues:

  • Title forgeries
  • Back taxes
  • Filing errors
  • Unknown heirs to the estate who claim ownership
  • Inconsistent or conflicting wills
  • Liens, commonly from unpaid home equity lines of credit (HELOCs) or contractor bills
  • Undocumented easements

There are two types of title policy; a Lender’s policy and an Owner’s policy.

A lender’s title policy is designed to protect the financial institution providing your mortgage from title claims that would put their stake in your home at risk. Lenders almost always require borrowers to purchase title insurance on the lender’s behalf as part of the loan-approval process. It’s considered a closing cost.

The owner’s title policy is designed to protect the homeowner in case of any claims against their ownership of the home. In most cases, owner’s title insurance is not required in a home purchase, but it is recommended. It can be paid for by the seller at closing, so you may want to negotiate for it when you are purchasing a home. Generally, in Michigan, the seller’s real estate agent will choose the Title Company that will provide the buyer’s owner’s policy and that Title Company will conduct the closing. The buyer may use the same Title Company for the Lenders policy, or the buyer can use a different Title Company.

If you are buying a home in cash or your lender doesn’t require title insurance, you can request that the seller provide a warranty of title, which states that they are the sole party with a right to sell the home.

How much does title insurance cost?

Title insurance policy costs often range between $500 and $3,500 for each policy but vary based on the purchase price, mortgage amount, the sales price of the home, and the extent of the coverage.

Your title insurance premium is a one-time charge that’s paid at closing. In addition to the insurance itself, you may be responsible for other related fees, like wire transfer fees, closing fees, and recording with the county (register of deeds).

You should watch out for unnecessary fees from title companies.  Anything outside of the title premium, title closing, recording, and wire transfer are unnecessary fees that you should NOT be paying.

In many states, you can compare the prices of different title insurance companies. But in Michigan all title companies are required to provide the same level of coverage at the same price, so shopping around isn’t required in terms of title premiums.

I hope you found this information informative and helpful. If you have any real estate related questions, I am always happy to talk with you, and I’m available via phone, text, email and social media.

To your health and happiness, Dani

Buying Incentives to Discuss with Your Mortgage Professional

mortgage_house
Federal homebuying incentives make taking out a mortgage easy and affordable. If you’re a first-time buyer worried about having to make a large down payment and upping your credit score before beginning the process, consider taking out a Federal Housing Administration (FHA) loan, which is meant for first-timers. FHA down payments could be as low as 3.5% and you don’t have to worry about having impeccable credit to get prequalified. Plus, part of your closing costs could be covered or supported by another federal incentive.

The Department of Housing and Urban Development (HUD) Homeownership voucher is an option available for first-time buyers who have at least one member of the household working full-time and are willing to participate in a homeownership counseling program. The voucher is offered to those who meet a low-income requirement.

Other opportunities include those available to rural residents, service members or veterans, and state-level incentives. The U.S. Coronavirus Aid, Relief, and Economic Security (CARES) Act currently offers mortgage assistance as part of the pandemic economic stimulus package.

Source: Level One Bank

For more information on these programs, give me a call today! Dani

The Overlooked Financial Advantages of Homeownership

The Overlooked Financial Advantages of Homeownership | MyKCM

There are many clear financial benefits to owning a home: increasing equity, building net worth, growing appreciation, and more. If you’re a renter, it’s never too early to make a plan for how homeownership can propel you toward a stronger future. Here’s a dive into three often-overlooked financial benefits of homeownership and how preparing for them now can steer you in the direction of greater stability, savings, and predictability.

1. You Won’t Always Have a Monthly Housing Payment

According to a recent article by the National Association of Realtors (NAR):

“If you’ve been a lifelong renter, this may sound like a foreign concept, but believe it or not, one day you won’t have a monthly housing payment. Unlike renting, you will eventually pay off your mortgage and your monthly payments will be funding other (possibly more fun) things.”

As a homeowner, someday you can eliminate the monthly payment you make on your house. That’s a huge win and a big factor in how homeownership can drive stability and savings in your life. As soon as you buy a home, your monthly housing costs will begin to work for you as forced savings, coming in the form of equity. As you build equity and grow your net worth, you can continue to reinvest those savings into your future, maybe even by buying that next dream home. The possibilities are truly endless.

2. Homeownership Is a Tax Break

One thing people who have never owned a home don’t always think about are the tax advantages of homeownership. The same piece states:

“Both the interest and property tax portion of your mortgage is a tax deduction. As long as the balance of your mortgage is less than the total price of your home, the interest is 100% deductible on your tax return.”

Whether you’re living in your first home or your fifth, it’s a huge financial advantage to have some tax relief tied to the interest you pay each year. It’s one thing you definitely don’t get when you’re renting. Be sure to work with a tax professional to get the best possible benefits on your annual return.

3. Monthly Housing Costs Are Predictable

A third item noted in the article is how monthly costs become more predictable with homeownership:

As a homeowner, your monthly costs are most likely based on a fixed-rate mortgage, which allows you to budget your finances over a long period of time, unlike the unpredictability of renting.”

With a mortgage, you can keep your monthly housing costs steady and predictable. Rental prices have been skyrocketing since 2012, and with today’s low mortgage rates, it’s a great time to get more for your money when purchasing a home. If you want to lock-in your monthly payment at a low rate and have a solid understanding of what you’re going to spend in your mortgage payment each month, buying a home may be your best bet.

Bottom Line

If you’re ready to start feeling the benefits of stability, savings, and predictability that come with owning a home, let’s get together to determine if buying a home sooner rather than later is right for you.

Ready to start looking for a new home? Begin your search at https://nexthomevictors.realgeeks.com/dani-hallsell/ .  Have a real estate related question? Call, text or email me; I answer questions for free!

Dani

Three Reasons Why Pre-Approval Is the First Step in the 2020 Homebuying Journey

Three Reasons Why Pre-Approval Is the First Step in the 2020 Homebuying Journey | MyKCM

When the number of buyers in the housing market outnumbers the number of homes for sale, it’s called a “seller’s market.” The advantage tips toward the seller as low inventory heats up the competition among those searching for a place to call their own. This can create multiple offer scenarios and bidding wars, making it tough for buyers to land their dream homes – unless they stand out from the crowd. Here are three reasons why pre-approval should be your first step in the homebuying process.

1. Gain a Competitive Advantage

Low inventory, like we have today, means homebuyers need every advantage they can get to make a strong impression and close the deal. One of the best ways to get one step ahead of other buyers is to get pre-approved for a mortgage before you make an offer. For one, it shows the sellers you’re serious about buying a home, which is always a plus in your corner.

2. Accelerate the Homebuying Process

Pre-approval can also speed up the homebuying process, so you can move faster when you’re ready to make an offer. In a competitive arena like we have today, being ready to put your best foot forward when the time comes may be the leg-up you need to cross the finish line first and land the home of your dreams.

3. Know What You Can Borrow and Afford

Here’s the other thing: if you’re pre-approved, you also have a better sense of your budget, what you can afford, and ultimately how much you’re eligible to borrow for your mortgage. This way, you’re less apt to fall in love with a home that may be out of your reach.

Freddie Mac sets out the advantages of pre-approval in the My Home section of their website:

“It’s highly recommended that you work with your lender to get pre-approved before you begin house hunting. Pre-approval will tell you how much home you can afford and can help you move faster, and with greater confidence, in competitive markets.”

Local real estate professionals also have relationships with lenders who can help you through this process, so partnering with a trusted advisor will be key for that introduction. Once you select a lender, you’ll need to fill out their loan application and provide them with important information regarding “your credit, debt, work history, down payment and residential history.”

Freddie Mac also describes the ‘4 Cs’ that help determine the amount you’ll be qualified to borrow:

  1. Capacity: Your current and future ability to make your payments
  2. Capital or Cash Reserves: The money, savings, and investments you have that can be sold quickly for cash
  3. Collateral: The home, or type of home, that you would like to purchase
  4. Credit: Your history of paying bills and other debts on time

While there are still many additional steps you’ll need to take in the homebuying process, it’s clear why pre-approval is always the best place to begin. It’s your chance to gain the competitive edge you may need if you’re serious about owning a home.

Looking for a reputable local lender to get your pre-approval started? Call, text, email or PM me today! 

Dani

Taking the Fear Out of the Mortgage Process

Taking the Fear Out of the Mortgage Process | MyKCM

A considerable number of potential buyers shy away from the real estate market because they’re uncertain about the buying process – particularly when it comes to qualifying for a mortgage.

For many, the mortgage process can be scary, but it doesn’t have to be! 

In order to qualify in today’s market, you’ll need a down payment (the average down payment on all loans last year was 5%, with many buyers putting down 3% or less), a stable income, and a good credit history.

Once you’re ready to apply, here are 5 easy steps Freddie Mac suggests to follow:

  1. Find out your current credit history and credit score– Even if you don’t have perfect credit, you may already qualify for a loan. The average FICO Score® for all closed loans in September was 737, according to Ellie Mae.
  2. Start gathering all of your documentation– This includes income verification (such as W-2 forms or tax returns), credit history, and assets (such as bank statements to verify your savings).
  3. Contact a professional– Your real estate agent will be able to recommend a loan officer who can help you develop a spending plan, as well as help you determine how much home you can afford.
  4. Consult with your lender– He or she will review your income, expenses, and financial goals in order to determine the type and amount of mortgage you qualify for.
  5. Talk to your lender about pre-approval– A pre-approval letter provides an estimate of what you might be able to borrow (provided your financial status doesn’t change) and demonstrates to home sellers that you’re serious about buying.

Bottom Line

Do your research, reach out to professionals, stick to your budget, and be sure you’re ready to take on the financial responsibilities of becoming a homeowner.

Ready to start looking for a new home? Begin your search at https://nexthomevictors.realgeeks.com/dani-hallsell/ .  Have a real estate related question? Call, text or email me; I answer questions for free!

Dani

How Property Taxes Can Impact Your Mortgage Payment

How Property Taxes Can Impact Your Mortgage Payment | MyKCM

When buying a home, taxes are one of the expenses that can make a significant difference in your monthly payment. Do you know how much you might pay for property taxes in your state or local area?

When applying for a mortgage, you’ll see one of two acronyms in your paperwork – P&I or PITI – depending on how you’re including your taxes in your mortgage payment.

P&I stands for Principal and Interest, and both are parts of your monthly mortgage payment that go toward paying off the loan you borrow. PITI stands for Principal, Interest, Taxes, and Insurance, and they’re all important factors to calculate when you want to determine exactly what the cost of your new home will be.

TaxRates.org defines property taxes as,

“A municipal tax levied by counties, cities, or special tax districts on most types of real estate – including homes, businesses, and parcels of land. The amount of property tax owed depends on the appraised fair market value of the property, as determined by the property tax assessor.”

This organization also provides a map showing annual property taxes by state (including the District of Columbia), from lowest to highest, as a percentage of median home value.How Property Taxes Can Impact Your Mortgage Payment | MyKCMThe top 5 states with the highest median property taxes are New Jersey, New Hampshire, Texas, Nebraska, and Wisconsin. The states with the lowest median property taxes are Louisiana, Hawaii, Alabama, and Delaware, followed by the District of Columbia.

Bottom Line

Depending on where you live, property taxes can have a big impact on your monthly payment. To make sure your estimated taxes will fall within your desired budget, let’s get together today to determine how the neighborhood or area you choose can make a difference in your overall costs when buying a home.

Thinking about buying a home? Download my free Buyers Guide, “Things to consider when buying a home”.

Dani

Streamlining the Lending Process

shutterstock_518887978-e1496213898460

If you are starting a search for a new home, most likely you will need to get a home loan. The process might seem overwhelming if you have not obtained a loan in a long time, even more so for first time home buyers. The lending process does not need to be difficult, and by being prepared, you can streamline the process and ensure you can get the best loan for your needs.

  1. Choose a Lender: The first step is to find a lender. You might start at your bank or credit union. Another good source for referrals is your REALTOR®, family, and friends. The lender should have access to a variety of programs as well as the government options; VA and FHA programs.
  2. Be Prepared: Before you meet with the lender, gather the information you will need. Generally, you will need to provide current pay stubs, W2s, bank account statements, and the last two years of your tax returns. If you are divorced and, or, have child support obligations, bring the final court document with you as well.
  3. Understand Your Limits: Typically, you will be able to borrow up to 31% of your gross monthly income. Also, the lender will require that you have no more than total monthly debt of 36% of your gross income. Be prepared to disclose all your debt, even if it does not appear on your credit report. Your loan officer is your advocate and there to help you succeed.
  4. Please Don’t Make Any Credit Changes: Once you have started the loan process, it is critical that you make no changes to your credit. Postpone any big purchase, do not apply for new credit of any kind and do not pay off any credit cards. It’s also important not to change jobs during the approval process, even if it’s for more money. Before you do anything, talk to your lender.

Getting a home loan is not as difficult as it was a few years ago, but it is essential to plan early and do the right things. Once you decide to buy a home, speak to a lender immediately and then follow their advice, and you will find the loan process simple to manage.

Ready to buy and/or sell a home? Call, text or email me! If you are active on social media, please look me up on Facebook, LinkedIn, Twitter and Instagram using the icons on the bottom right of this page.
Dani

Home Buyer: The Internet Can’t Replace Your Real Estate Agent

November-Blog-1-960x640

We live in the information age and the Internet offers advice on every topic; real estate is no exception. With more and more home buyers starting their home search online, they are bombarded with advice and information-it can be easy to think that you can learn everything you need to know just by reading articles online.

The truth is that your real estate agent does much more than answer your questions and open doors with a special key. A professional real estate agent will be there every step of the way. They have the experience necessary to navigate the complicated home buying process and solve common hiccups that present themselves in every real estate transaction.

Your real estate agent is a local professional. They know the local housing inventory, what is happening in the community that may affect home prices, and they have access to the local Multiple List Service that provides the latest homes for sale (real time), and sold homes.  They have a network of professionals who will work as a team to help you through the process. These include such professionals as lenders, title companies, transaction coordinators, home inspectors, contractors and handymen, home warranty companies and moving companies.

Most importantly, your agent is your ally in the home buying process. They negotiate on your behalf, armed with experience and understanding of customary charges, costs, and terms. They will ensure that the price you pay for the home is fair for the conditions and neighborhood. They will negotiate repairs, if needed and make sure you are protected with the proper contingencies.

The Internet offers lots of great information, but the most critical step you can take when buying a new home is hiring a local professional real estate agent. Their knowledge and expertise can’t be found by reading an article or two online.

Ready to buy and/or sell a home? Call, text or email me! If you are active on social media, please look me up on Facebook, LinkedIn, Twitter and Instagram using the icons on the bottom right of this page.
Dani

Home Buying Myths

blog-3-960x640

Buying a home can seem like a massive undertaking. You don’t need to be a first time home buyer to find the process overwhelming. There is so much information available, how can you tell what’s right and what’s a myth? Understanding the difference can help you make the best decision for you and your family goals.

Here are few home buying myths, and the truth behind them.

  • The first step is finding the Right House: Before you head out shopping, speak with a lender to understand your financial options and the monthly payment you can afford.  There is nothing more disheartening than finding the “home of your dreams,” only to find out it is out of your price range.
  • You can’t buy a home without perfect credit: The truth is there are many loans available which still offer reasonable interest rates for those without that ideal credit score.  Once again, start your home buying process by speaking with a lender.
  • You need 20% down payment: First time home buyers can use FHA financing for as low as 3.5% down. There are other programs too, such as VA and some conventional loans with less than 20% down.
  • Interest rates are going up; I can’t afford a home: Back in the 1980’s interest rates were up to 18% and people still bought and sold homes! No matter what the interest rates are, your lender will tell you what you can afford to buy considering principal, interest and tax payments.
  • You don’t need an Agent: An agent not only knows the market and can help you with value, but also customary charges, negotiations, and solutions to common hiccups. Your agent will also be your liaison with lenders, Title companies, home inspectors, Home Warranty companies and home contractors.
  • New homes don’t need a home inspection: Every home should have a home inspection by a licensed inspector to check for existing or potential problems.

Buying a home is one of the most important financial decisions you are likely to make in your lifetime. Take the time you need to understand the process and learn from the professionals; don’t assume that everything you read is right.

Ready to talk with a lender? Send call, text or email me! If you are active on social media, please look me up on Facebook, LinkedIn, Twitter and Instagram using the icons on the bottom right of this page.
Dani

Buying Your Dream Home When Inventory is Low

wooden-figure-of-white-house-and-keys_t20_waA0B0-960x640

If you are actively searching for a new home, you know that low inventory of homes for sale has made things difficult for buyers.  In a “Seller’s Market” there are not many homes for sale, and when a new home comes on the market, it is met with multiple offers.  Not only do these homes sell within days, but often over asking price.

If you are a buyer in this market, you may feel overwhelmed. However, with a solid strategy, you can still find your dream home, even when inventory is low.

  • One Step at a Time: Home buying is not a one-time moment, but a series of steps. Make decisions as they come, as you move through the process; make sure each discovery is one you can live with. Your REALTOR should provide you with a Home Purchase Process to help with the buying process.
  • Start with a Lender: Understand your financial possession and lending options before looking for a new home. There is nothing more disappointing than finding the “home of your dreams,” and then discovering that you cannot qualify for the loan to buy it.   Most buyers have an “idea” of how much they can afford to buy, but a lender can tell you what mortgage you can qualify for and the monthly payments with principal, interest, and taxes.  You will also receive a Pre-approval letter from your lender so the seller will feel comfortable accepting your offer when submitted.
  • Write a Competitive Offer: You don’t want to over-pay for a new home, but if the property is priced at Market Value and you want it, offer that amount. If you don’t, the next buyer will.
  • Keep Contingencies to a Minimum: Stick to the basics: home inspection, well and septic, attorney approval, and finance approval. If you are buying with FHA financing, you may ask for 3% towards your closing cost, and if you have a home to sell, you may include a 72-hour contingency.
  • Write a Clean Offer: Make it easy for the sellers to say “Yes!”.

Ready to look at new construction options? Please send me a message using the box to the right, or call, text or email me! If you are active on social media, please look me up on Facebook, LinkedIn, Twitter and Instagram using the icons on the bottom right of this page.
Dani