Why Do You Need Title Insurance?

 

Title Insurance.

It’s a term we hear and see frequently – we see reference to it in the Sunday real estate section, in advertisements and in conversations with real estate brokers. If you’ve purchased a home before, you’re probably familiar with the benefits and procedures of title insurance. But if this is your first home, you may wonder, “Why do I need another insurance policy? It’s just one more bill to pay.”

The answer is simple:Image result for title insurance The purchase of a home is most likely one of the most expensive and important purchases you will ever make. You, and your mortgage lender, want to make sure that the property is indeed yours – lock, stock and barrel – and that no individual or government entity has any right, lien, claim to your property.

Title insurance companies are in business to make sure your rights and interests to the property are clear, that transfer of title takes place efficiently and correctly and that your interests as a homebuyer are protected to the maximum degree.

Title insurance companies provide services to buyers, sellers, real estate developers, builders, mortgage lenders and others who have an interest in a real estate transfer. Title companies routinely issue two types of policies – “owner’s”, which cover you, the homebuyer; and “lender’s”, which covers the bank, savings and loan or other lending institution over the life of the loan. Both are issued at the time of purchase for a modest, one-time premium.

Before issuing a policy, however, the title company performs an extensive search of relevant public records to determine if anyone other than you has an interest in the property. The search may be performed by title company personnel using either public records or more likely, information gathered, reorganized and indexed in the company’s title plant.

With such a thorough examination of records, any title problems usually can be found and cleared up prior to your purchase of the property. Once a title policy is issued, if for some reason any claim which is covered under your title policy is ever filed against your property, the title company will pay the legal fee involved in defense of your rights, as well as any covered loss arising from a valid claim. That protection, which is in effect as long as you or your heirs own the property, is yours for a one-time premium paid at the time of purchase.

The fact that title companies work to eliminate risks before they develop makes the title insurance decidedly different from other types of insurance you may have purchased. Most forms of insurance assume risks by providing financial protection through a pooling of risks for losses arising from an unforeseen event, say a fire, theft or accident. The purpose of title insurance, on the other hand, is to eliminate risks and prevent losses caused by defects in title that happened in the past. Risks are examined and mitigated before property changes hands.

This risk elimination has benefits to both you, the homebuyer, and the title company: it minimizes the chances adverse claims might be raised, and by so doing reduces the number of claims that have to be defended or satisfied. This keeps costs down for the title company and your title premiums low.

Buying a home is a big step emotionally and financially. With title insurance you are assured that any valid claim against your property will be borne by the title company, and that the odds of a claim being filed are slim indeed.

Isn’t sleeping well at night, knowing your home is yours, reason enough for title insurance?

Article by CLTA

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What Does ‘Days on Market’ Mean? How Buyers Can Take Advantage

In the real estate game, many buyers understand that knowing a home’s days on market (DOM) is absolutely critical intel. Why? Because the number of days a home spends on the market directly affects the price of a home. Plus, this information can be used to the buyer’s benefit to negotiate a lower price. Here’s how!

What does ‘days on market’ mean?

‘Days on market’ is the number of days that a property has been listed on the local multiple listing services (MLS) until a seller has accepted an offer and signed a contract. It can also be referred to as “time on market” or “market time.”

When browsing home listings, buyers should always take a look at the number of days on market to determine how other buyers are reacting to the property.

The Pinteresting Five: Statement Wallpaper

Make a statement with wallpaper! Go big and do a whole room or stay small and do just the ceiling or an accent wall. There are thousands of patterns to choose from geometric to stripes to florals to prints that look like tile.

All images via our Pinterest

Watercolor Colorful Tropical Mix Removable Wallpaper-Peel and | EtsyWatercolor Mint Leaves Wallpaper Wall Mural, Hanging Leaf Branch Wall Decal, Fresh Spring Elegant Wall Sticker Wall MuralsStunning Tessellation wallpaper design by Harlequin in marine blue and copper.Southeast Asian Rainforest Plant Wall Murals Wall Decor Green | EtsyKathy Kuo Home on Instagram: “Wallpaper Galore 😍 No better way to make a statement than with a stunning wallpaper like this! Who agrees 🙋🏼‍♀️ | Design: @palmandprep…”Here are 10 statement wall ideas set to make you swoon, from wall murals, statement wallpaper, to creating your own plant wall.ATELIER RUE VERTE , le blog: Collectif Project Inside / Une fresque murale pour une touche d'exotisme /

 

 

 

Size Matters: Tracking the Economy Through New-Home Square Footage

The U.S. housing market may not be synonymous with the business cycle, as a famous 2007 paper proclaimed, but the ups and downs in housing, which represents a big part of the economy, usually do offer hints about what’s going on more broadly.

That’s why economists closely watch housing market indicators like sales volumes and home prices — as well as how Americans are accessing the market and managing their obligations to mortgages, rental costs, taxes, and so on.

But small details about the housing market can say just as much about how well Americans, and the broader economy, are doing.

Typical new home size falls prior to and during a recession as home buyers tighten budgets, and then sizes rise as high-end homebuyers, who face fewer credit constraints, return to the housing market in relatively greater proportions.

The bigger question, as always, is about the specifics of what we’re seeing right now. The median size perked up at the beginning of this year, as the housing market shook off a difficult 2018.

But overall, sizes have been on a downward path since mid-2015.

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Current declines in size indicate that this part of the cycle has ended, and size will trend lower as builders add more entry-level homes into inventory and the custom market levels off.

Existing-home sales, which have only eked out a gain in two of the last 12 months, would say we’re past cycle peak but new construction should continue to trend up, which would suggest it still has legs left.

In the post-recession economy, entry-level buyers were unable to break in to the market. But now their pent-up demand could help elongate the housing cycle.

It may even help cushion the overall economy from a near-term downturn. We have no recession in our forecast for the foreseeable future.

FICO® Scores and Your Mortgage

Image result for fico score and mortgage

Years ago, credit scoring had little to do with mortgage lending. When reviewing the credit worthiness of a borrower, an underwriter would make a subjective decision based on past payment history.

Then things changed.

Lenders studied the relationship between credit scores and mortgage delinquencies. There was a definite relationship. Almost half of those borrowers with FICO® scores below 550 became ninety days delinquent at least once during their mortgage. On the other hand, only two out of every 10,000 borrowers with FICO® scores above eight hundred became delinquent.

So lenders began to take a closer look at FICO® scores and this is what they found out. The chart below shows the likelihood of a ninety day delinquency for specific FICO® scores.

FICO® Score Odds of a Delinquent Account
595 2 to 1
600 4 to 1
615 9 to 1
630 18 to 1
645 36 to 1
660 72 to 1
680 144 to 1
780 576 to 1

If you were lending a couple hundred thousand dollars, who would you want to lend it to?

FICO® Scores, What Affects Them, How Lenders Look At Them

Imagine a busy lending office and a loan officer has just ordered a credit report. He hears the whir of the laser printer and he knows the pages of the credit report are going to start spitting out in just a second. There is a moment of tension in the air. He watches the pages stack up in the collection tray, but he waits to pick them up until all of the pages are finished printing. He waits because FICO® scores are located at the end of the report. Previously, he would have probably picked them up as they came off. A FICO® above 700 will evoke a smile, then a grin, perhaps a shout and a “victory” style arm pump in the air. A score below 600 will definitely result in a frown, a furrowed brow, and concern.

FICO® stands for Fair Isaac & Company, and credit scores are reported by each of the three major credit bureaus: TRW (Experian), Equifax, and Trans-Union. The score does not come up exactly the same on each bureau because each bureau places a slightly different emphasis on different items. Scores range from 365 to 840.

Some of the things that affect your FICO® scores:

  • Delinquencies
  • Too many accounts opened within the last twelve months
  • Short credit history
  • Balances on revolving credit are near the maximum limits
  • Public records, such as tax liens, judgments, or bankruptcies
  • No recent credit card balances
  • Too many recent credit inquiries
  • Too few revolving accounts
  • Too many revolving accounts

Sounds confusing, doesn’t it?

The credit score is actually calculated using a scorecard where you receive points for certain things. Creditors and lenders who view your credit report do not get to see the scorecard, so they do not know exactly how your score was calculated. They just see the final scores.

Basic guidelines on how to view the FICO® scores vary a little from lender to lender. Usually, a score above 680 will require a very basic review of the entire loan package. Scores between 640 and 680 require more thorough underwriting. Once a score gets below 640, an underwriter will look at a loan application with a more cautious approach. Many lenders will not even consider a loan with a FICO® score below 600, some as high as 620.

FICO® Scores and Interest Rates

Credit scores can affect more than whether your loan gets approved or not. They can also affect how much you pay for your loan, too. Some lenders establish a base price and will reduce the points on a loan if the credit score is above a certain level. For example, one major national lender reduces the cost of a loan by a quarter point if the FICO® score is greater than 725. If it is between 700 and 724, they will reduce the cost by one-eighth of a point. A point is equal to one percent of the loan amount.

There are other lenders who do it in reverse. They establish their base price, but instead of reducing the cost for good FICO® scores, they add on costs for lower FICO® scores. The results from either method would work out to be approximately the same interest rate. It is just that the second way looks better when you are quoting interest rates on a rate sheet or in an advertisement.

FICO® Scores and Mortgage Underwriting Decisions

FICO® Scores as Guidelines

FICO® scores are only guidelines and factors other than FICO® scores also affect underwriting decisions. Some examples of compensating factors that will make an underwriter more lenient toward lower FICO® scores can be a larger down payment, low debt-to-income ratios, an excellent history of saving money, and others. There also may be a reasonable explanation for items on the credit history report that negatively impact your credit score.

They Don’t Always Make Sense

Even so, sometimes credit scores do not seem to make any sense at all. One borrower with a completely flawless credit history can have a FICO® score below 600. One borrower with a foreclosure on her credit report can have a FICO® above 780.

Portfolio & Sub-Prime Lenders

Finally, there are a few portfolio lenders who do not even look at credit scoring, at least on their portfolio loans. A portfolio lender is usually a savings & loan institution that originates some adjustable rate mortgages that they intend to keep in their own portfolio rather than selling them in the secondary mortgage market. These lenders may look at home loans differently. Some concentrate on the value of the home. Some may concentrate more on the savings history of the borrower. There are also sub-prime lenders, or “B & C paper” lenders, who will provide a home loan, but at a higher interest rate and cost.

Running Credit Reports

One thing to remember when you are shopping for a home loan is that you should not let numerous mortgage lenders run credit reports on you. Wait until you have a reasonable expectation that they are the lender you are going to use to obtain your home loan. Not only will you have to explain any credit inquiries in the last ninety days, but also numerous inquiries will lower your FICO® score by a small amount. This may not matter if your FICO® is 780, but it would matter if it is 642.

Don’t Buy A Car Just Before Looking for a Home!

A word of advice not directly related to FICO® scores. When people begin to think about the possibility of buying a home, they often think about buying other big-ticket items, such as cars. Quite often when someone asks a lender to pre-qualify them for a home loan there is a brand new car payment on the credit report. Often, they would have qualified in their anticipated price range except that the new car payment has raised their debt-to-income ratio, lowering their maximum purchase price. Sometimes they have bought the car so recently that the new loan doesn’t even show up on the credit report yet, but with six to eight credit inquiries from car dealers and automobile finance companies it is kind of obvious. Almost every time you sit down in a car dealership, it generates two inquiries into your credit.

Credit History is Important

Nowadays, credit scores are important if you want to get the best interest rate available. Protect your FICO® score. Do not open new revolving accounts needlessly. Do not fill out credit applications needlessly. Do not keep your credit cards nearly maxed out. Make sure you do use your credit occasionally. Always make sure every creditor has their payment in their office no later than 29 days past due.

And never ever be more than thirty days late on your mortgage. Ever.

Design Trends: Geometric Wallpaper

When it comes to decorating your home, furniture and accessories are regarded as a necessity. But to many designers, decorating a home starts with the walls of the room itself! Geometric wallpaper is a hot design trend for 2019 that is expected to continue to enjoy popularity in 2020 and beyond! Whether you go with a more classic pattern or something completely wild, wallpaper is one way to make a statement with your decor.

All images via our Pinterest 

6c12689592dbf57028d95a697cb8908aStunning Tessellation wallpaper design by Harlequin in marine blue and copper. bde3d3abb4c1cf54230e2220d11e9ee3dffec79f638243f713a46756ed943d2104929345220d86b8c698d605b76e8c2fFocale by Casadeco is a calming geometric wallpaper design shown here in light grey.

 

4 Reasons Why Applying for a Mortgage Online Might Not Be The Smartest Decision!

Applying for a mortgage these days can be accomplished entirely online—no need to schlep to a bank and suffer hand cramps filling out paperwork.

Instead, you can punch some basic info into an online mortgage site, and up pops a bunch of loan choices. An industry renowned for being slow and cumbersome is now wooing customers with the promise of ease, speed, and transparency. Rocket Mortgage, Quicken Loan’s online platform, for example, promises qualified customers approval in as little as eight minutes.

But taking out a six-figure loan is one of the most complicated and substantial financial transactions most people will ever make. Does it really make sense to handle it by pushing a few buttons on your smartphone?

Maybe for those with a typical 9-to-5 job and good credit.

If you are a salaried employee with no overtime, no bonus—no funky income, if you will—just a plain-vanilla borrower, then sometimes the online mortgage does work. You know: You have a five-year work history, you’re putting 20% down, and have an 800 FICO score.

But then there’s everybody else.

Here are some of the many reasons why those borrowers might consider taking more time with the process, including consulting with an experienced loan officer or mortgage broker.

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1. You want to shop around for the best loan

First and foremost, it’s always in a borrower’s best interest to comparison shop on rates and fees on a mortgage information website. Speed and convenience alone do not always translate into a better price for borrowers.

You should invest some time in it, do your research. Also, do your diligence on your credit. And think about how long you’re going to be in your home. The reason? The length of time you estimate you are likely to be staying in the home can be a factor in whether you apply for a fixed or adjustable rate loan.

Gaining an understanding of different loan programs is a smarter approach than just going online and filling out things. A lot of people really don’t know if they’re getting the right loan program, the right interest rate, the right down payment.

The research process may ultimately lead you straight to the speedy online mortgage site as the best option anyway. But you won’t know that unless you go out and take a look around.

2. You’re a first-time home buyer

Researching all your options is especially important if you’ve never purchased a home before. First-time buyers should always talk through important details like rates, points, and closing costs with an expert. After you’ve been through the process once, you have a better idea of what to expect and what information you’ll need to provide to make the process go smoothly.

Even those who have borrowed before may want to consult with someone if there is anything about their circumstances that might make qualifying more difficult. For example, a real person could be a helpful advocate for borrowers who are buying a second home or rental property, have spotty credit, or have inconsistent income.

3. You’re self-employed

About 15 million Americans are classified as self-employed, according to the Pew Research Center. While salaried workers generally only have to show the lender their W-2 tax forms to prove their income, self-employed workers should expect that they will have to provide the lender with more income documentation, such as tax returns from the last few years.

The fact is, some online lenders are more strict about documentation requirements than federal guidelines require, because they want to reduce their risk. That can make qualifying even tougher for a borrower who is already perceived as a higher risk—for example, applicants who have only been in their current job for a few months, or those who want to include overtime pay as evidence of their buying power. The lender will want to see proof that the overtime pay is consistent. Certain guidelines say you have to show you have it for 12 months or 24 months—it depends on the loan.

4. You want some extra handholding

Working with someone one on one may also help prevent last-minute problems when it comes time to buy that house. We can’t tell you how many clients who have come to me after they’d gone online and gotten a pre-approval from a lender. Then they go to purchase a house, and halfway through the transaction, the online lender says all of a sudden, ‘You can’t get approved.’ The client freaks out. And that’s when they get a hold of someone like myself.

Finally, there is the matter of personal preference. Not everyone likes the impersonal approach. Before applying for a loan, borrowers might consider whether they are the kind of person who appreciates a lot of help and attention in other shopping experiences. If you like a hands-on environment, like a Macy’s, you’re a different kind of shopper than someone who enjoys going to a warehouse club. Your expectations going in will influence how satisfied you are with the process.