When you buy a house, you are making a huge investment – one of the biggest, other than buying a business, that you will make in your life. In the second quarter of 2019, the median listing price of homes in Florida was $265,000, an increase of 3.3 percent from the second quarter in 2018. Even if you buy a medium-sized home, you are going to be shelling out hundreds of thousands of dollars. That’s an investment that you should protect. The first step in protecting your investment is to do a title search to make sure the house you are buying has a good title. The second step is to purchase title insurance.
The Lender Buys a Title Insurance Policy
Most lenders buy a title insurance policy that the buyer pays for. However, that policy does not protect your interests. It only protects the lender if the title is defective or if the title search company or attorney doing the title search made a mistake. If you want to protect your interests, you need to purchase your own title insurance policy.
The Proper Coverage
Just as with any insurance policy, it covers only what is defined in the policy. If you ask a closing agent to procure a title insurance policy for you, the agent is generally adept at choosing a good insurance policy. However, you should always check the policy to ensure it covers everything you need it to cover. Insurance policies list “exceptions.” These are items the insurance company won’t cover. Your real estate attorney will be able to explain the exceptions to you and how they might affect you.
When you buy a title insurance policy, you pay just once for the policy. You do not have to pay premiums every year or every month. A title insurance policy stays in effect even after you sell the property.
Most title insurance policies cover items the title searcher might miss, including:
The property is owned by someone other than the person selling the property;
Forgery on documents;
Fraudulent documents pertaining to the title;
Incorrect signatures on the title;
Errors in recording the title, including defective record-keeping or other defective records;
Missed judgments or other encumbrances on the property, including outstanding liens or lawsuits; and
Restrictive covenants, such as an easement that was given but not recorded. The restrictive covenant must be such that it reduces your enjoyment of the property or reduces the value of the property.
You can accept a warranty of title from a seller, but that involves more paperwork and is often risky, especially if you can’t find the owner once a defect in the title shows up. It’s better to spend the money to get a title insurance policy.
Buying your first home is exciting and you will spend a lot of time working with your real estate agent. However, before you begin searching for the right agent, here are some helpful hints to help you get started off on the right foot and make sure you are ready to purchase a home.
Check Your Credit Report
One of the most important things you can do before you start the home mortgage process is to verify the information on your credit report. Errors in your credit can result in higher interest rates or denial of credit. You can access your credit report free from all three major credit agencies. Review all items for accuracy and if you find any errors, take the time to have them corrected.
Familiarize Yourself with Loan Programs
There are many loan programs to help first time buyers. Depending on your specific situation, you may be eligible for a loan guarantee from the Veteran’s Administration, the Federal Housing Administration or other loan programs. Before you meet with a loan officer for the first time, take the time to understand what loan options you may qualify for. Keep in mind, many states have first-time buyer programs, which can be of benefit to you as well.
What You Should Know About Down Payments
If you suddenly hit a windfall lottery winning or are considering borrowing money on your credit cards to fund your down payment, slow down. There are specific requirements for down payments including the “seasoning” of the funds. Before you apply for a mortgage, make sure you know about down payment gifts, how to document the funds you are using for your down payment and other rules, which may pertain to your specific situation.
Understanding Mortgage Application & Loan Terms
Your home will be the most substantial investment you make in your lifetime. Make sure you are being an informed consumer and familiarize yourself with the most common mortgage application and loan terms. The application form for a home mortgage is a Fannie Mae Form 1003 or Freddie Mac Form 65. Once you have filled out this application, you will also receive a good faith estimate (GFE) from the mortgage lender. You will also be learning other words like points, annual percentage rate, closing costs and escrow. Do not be afraid to ask your lender to explain what these all mean to you.
Loans are often quoted in years and term. For example, a 30-year fixed rate mortgage is exactly what it sounds like. You are accepting or applying for a mortgage, which will be paid over 30 years at the same interest rate as you see at closing. Other terms may be more confusing, for example an adjustable-rate mortgage may be quoted as 5/5, which means the rate is fixed for the first five years and adjusts every five years thereafter. Make sure you understand these terms before you sign any loan documents.
Preapprovals Increase Bargaining Power
Once you have determined what you can afford to pay for a home mortgage, which can be determined using any number of mortgage calculators found online, you should apply for a preapproval. Do not confuse a preapproval with a prequalification, they are not the same although oftentimes you will hear them used interchangeably. Here is the difference:
- Prequalification — this process involves you providing the lender with information pertaining to your income and current expenses. You give the lender an idea of the strength of your credit and based on information provided, they can give you an estimate of how much you can borrow at what interest rate.
- Preapproval — this process is significantly different because you will provide the same documents you would provide for a full mortgage application. The lender will request up to three years of your tax returns, bank statements, they will pull your credit, and they will verify your bank activity. Once this process is complete, the lender will give you a letter that tells you exactly how much of a mortgage you qualify for to use when shopping for your home.
The preapproval process gives you bargaining power because you are able to meet with your real estate agent knowing that provided there are no changes in your financial situation or your credit, you are guaranteed a mortgage in the amount of the preapproval at the terms listed.
When you start the home buying process, there is a lot to learn. Most first-time buyers will be required to take a first-time home buying course before their lender will move forward. Your real estate agent can also provide you with a lot of information you will need to get started on solid footing on the path to home ownership.
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Looking to put together an offer on a house? Ultimately, you'll want to submit a competitive first offer. By doing so, you can speed up the process of acquiring your dream residence.
When it comes to submitting a competitive home offer, however, it is important to understand what differentiates a "fair" proposal from a subpar one.
To better understand how to submit a competitive proposal, let's take a look at three best practices that every homebuyer needs to consider before making an offer on a house.
1. Evaluate the Housing Market
If you plan to buy a house, you'll want to examine the real estate market closely. That way, you can identify housing market patterns and trends and plan accordingly.
For example, if you find there is an abundance of high-quality houses available, you may be entering a buyer's market. In this market, there likely is a shortage of homebuyers, which means a competitive offer at or near a home seller's asking price is sure to grab this individual's attention.
On the other hand, if you notice that homes are selling quickly in a city or town, you may need to prepare for a seller's market. If you pursue houses in a seller's market, you may need to act quickly due to the sheer volume of buyers competing for the same residences.
Clearly, a comprehensive housing market analysis can make a world of difference for homebuyers. With in-depth housing market insights at your disposal, you'll be better equipped than other buyers to submit a competitive first offer on any residence, regardless of the current real estate market's conditions.
2. Get Your Finances in Order
What good is a competitive home offer if you cannot afford to buy a residence? If you secure a home loan, you can narrow your home search to properties that you can afford. Then, you'll be able to submit a competitive offer that ensures you won't have to break your budget to purchase your dream residence.
Also, if you're unsure about how your financial situation will impact your ability to buy a house, you should consult with banks and credit unions in your area. These financial institutions can help you get pre-approved for a home loan, establish a homebuying budget and much more.
3. Collaborate with a Real Estate Agent
When it comes to submitting a competitive home offer, it pays to receive expert homebuying support. Fortunately, you can hire a real estate agent who is happy to help you put together a competitive home offer.
A real estate agent can provide housing market data that you may struggle to obtain elsewhere. Plus, this housing market professional can offer unbiased home offer recommendations to ensure you can get an instant "Yes" from a home seller.
Collaborating with a real estate agent is a great option for homebuyers in all cities and towns. Reach out to local real estate agents today, and you can get the help you need to submit a competitive offer on any residence.
After you receive an offer to purchase your residence, determining the best course of action often can be difficult. Because if you make the wrong decision, you risk missing out on an opportunity to sell your house and maximize its value.
Ultimately, it may prove to be beneficial for a home seller to submit a counter-offer. There are many reasons why a seller may choose to provide a counter-proposal, and these include:
1. A homebuyer's initial offer to purchase fails to match your expectations.
Although a homebuyer's initial offer to purchase your residence fell below your expectations, you can always submit a counter-offer to find out if a buyer is negotiable. That way, you may be able to work with a buyer to find a common price that is suitable for all parties.
When it comes to selling a house, there is no harm in submitting a counter-offer. Remember, the worst response a home seller will receive to a counter-proposal is a simple "No." And even in the worst-case scenario, a seller can move forward with the property selling journey and await an offer to purchase that matches his or her expectations.
2. You are flexible about the price of your house.
As a home seller, you probably realize that what you originally paid for your house is unlikely to match your residence's current value. But even if you set a competitive initial asking price for your home, you may still want to negotiate a counter-offer if a buyer's initial proposal falls short.
The housing market constantly fluctuates, and a sector that favors sellers today may favor buyers tomorrow. Thus, if you are flexible about the price of your house, you can always negotiate a price with a buyer that accounts for the present state of the real estate sector.
3. You want to get the best-possible price for your residence.
The goal of the home selling journey is to obtain the best price for your home, regardless of the real estate market's conditions. Therefore, rather than accept or reject an offer to purchase, it may be beneficial to see if you can receive a better proposal from a buyer.
As you move along the home selling journey and review an offer to purchase, you should not hesitate to collaborate with a real estate agent. With a real estate agent at your side, you can receive plenty of guidance throughout the home selling journey.
Typically, a real estate agent will help you list your residence and promote it to prospective buyers. He or she will set up home showings and open house events and keep you up to date about any offers to purchase your residence. Then, when you receive an offer to purchase, you and your real estate agent can work together to determine how to proceed.
Hire a real estate agent – you'll be glad you did. By employing a real estate agent, you can get the help you need to fully analyze an offer to purchase your residence.