When buying a home, whether it’s your first or third, you’ll be asked if you want a title insurance policy, and probably be looking at homeowner’s insurance policies too.  Although they may sound the same, especially both the lender’s and owner’s title insurance when combined with the homeowner’s insurance, they each serve very different purposes.

• A homeowner’s insurance policy can protect your home and your belongings in case of damage, but only based on what you agree to when signing. It could be natural disasters, malfunctioning appliances, or losing your home and valuables to fire or burglary.
• A title insurance policy protects your ownership of the house itself, but not the property, land or the items inside. Just your ownership.  But there are two kinds of policies.
  • Lender’s title insurance – this plan protects the lender if you have a mortgage or took out money to buy the property.
  • Owner’s title insurance – this option protects you and your investment in case someone lays claim to the property.

Am I Legally Required to Buy Homeowner’s & Title Insurance?

No, you are not legally required to buy a homeowner’s or title insurance policy.  But there are many things which can go wrong, and if you want to have your house and your land protected, you will want to consider both policies.  With that said, it is also not legally required to get a lender’s title insurance policy either, but it may be required by the lender if you want their money.

Just like how you want to protect your property, money and yourself; lenders including banks and investors want to protect their companies and their assets.  By loaning you money, a lender’s title insurance policy provides them with a security blanket in case something goes wrong.  Many lenders add a stipulation to the loan that you must purchase a lender’s title insurance policy, but it is not a legal requirement.  However, if you don’t get it, they may not give you the money to buy the property.

Now that you know why they are both important, there is another frequent question that comes up.  Can the insurance policies transfer to someone else?

Whether it is a significant other, a child, a friend or a family member, your title insurance policy cannot transfer over, but they can purchase a new policy during the closing when they inherit or purchase the home from you.  Homeowner’s insurance on the other hand may not need to be repurchased depending on the situation.

If the other person’s name is already on the property, you can also have them sign or be added to the policy.  Now if the worst happens, you won’t have to worry.  The other question is about transferring the two policies.

Title insurance cannot be transferred to a new home if you move or buy a new house.  It only protects the deed on the property it was meant to cover.  Your homeowners insurance policy however could be applied to a new home.  The insurance company that wrote the policy may need to adjust it, but the process is pretty simple.

There are a lot of similarities in the names owner’s title and homeowner’s insurance, but as you can see they are very different.  One covers your home and the items inside, the other covers your ownership of the land and house.  Neither one is legally required, although this could change at some point, but they are both recommended.

When you find the right home, or know what you’re looking to spend, you’ll need to find a mortgage lender.  But before you can get approved for a loan, you have to find the home you want to buy so that you can find out if you’ll be approved for enough to cover the cost of the home.

Sounds like a double edged sword huh?  Don’t worry, it’s actually pretty easy because you can have a lender provide you with a Good Faith Estimate (GFE) as long as you have a reasonable idea of what you are willing on a house or property at a maximum.  It is a fairly painless and quick process.  Having a Good Faith Estimate or GFE also lets sellers know you’re serious and will have the capital to purchase the property.  This is especially important in competitive markets.

The Process of Getting a GFE is:

1. Get prequalified thru lender
2. Shop for and find house
3. Submit contract (k) for sale
4. K gets approved
5. Fill out loan app (1003)
6. Lender approves 1003
7. Lender has 3 days after approval to issue to borrower GFE
8. Covers estimated closing and most importantly estimated monthly payment

But what happens if you don’t get approved for the amount you need, or the loan estimate doesn’t seem fair, you don’t have to worry.  You are able to get multiple GFEs from multiple lenders.

What is a GFE and What Does it Look Like?

A good faith estimate is a form that includes all of the fees, payments, and financial information that you will be provided with by a lender. As stated above, you are not limited to only one good faith estimate.  You can acquire a good faith estimate from numerous lenders and banks so that you can shop for a loan that helps you buy the property you want and meets your specific needs.

Which Fees Are Covered and Not Covered by a GFE

One common question is if a good faith estimate covers closing costs.  Yes, your good faith estimate is inclusive of closing costs, the loan, the terms of the loan and almost all other finances for buying a home and using a lender.  Some of the fees may be an estimate if you do not already have the property picked out, but if you do, it should be close to accurate.

However, title insurance, additional inspections, and other miscellaneous items may not be included.  You’ll want to talk to your real estate agent, or the closing and settlement agent to find out if there will be any additional fees that may not be covered by the lender or in the GFE.  This is because you can choose who your title, closing and escrow companies are.  By being able to choose you can potentially save money, and because you may not have one picked out when getting the GFE, the lender will only be able to estimate based on industry averages.

In some cases, and depending on how you negotiate when shopping, the seller of the house may be willing to pick up some of the costs outlined in the GFE, but that will depend on how quickly they want to sell, and also on your specific situation.

Where Can You Download a Sample GFE Form?

As mentioned above, the GFE is a form you are provided with.  You can find a sample, and also download a good faith estimate form on the HUD website by clicking here.  The good news is you do not have to fill this out yourself.  It is handled by the lender.

A good faith estimate is not as scary as it may look when you first see it.  Your real estate agent and closing company look at these regularly and should be able to assist you with any questions or concerns you have with the good faith estimate form.  If you don’t feel comfortable asking them, we’re also able to assist.  Contact us at info@atgtitle.com and one of our professional closing agents will be happy to alleviate any worries you have, and walk you through how we can help you with a hassle-free closing.

One of the most common concerns people that do not buy title insurance policies have after they have purchased their new home is, “what happens if?”.

What if the person who sold it to me owed money and there is a lien on the house that wasn’t detected?  What if they bought the home from a previous owner who had a child out of wedlock, and that child was an unknown heir and decides to make a claim?  There are a ton of concerns that can make you regret not buying a title insurance policy before you close on the home.  That leads us to one of the most common questions.

Can You Buy Title Insurance After Closing?

Yes, you can buy a title insurance policy after you have already closed on your new home, and you can still purchase a policy after all of the paperwork has been completed.  But waiting until after you close is not always a good option.

If you wait until after the closing of the house is complete, any issues arise after the closing, and before you buy the title insurance policy may not be covered.  That in between time frame is a lot of the risk you take on.

That’s why you’ll be encouraged to purchase a policy before leaving the closing appointment.  Having the policy before closing isn’t just for you to have a peace-of-mind, it is to help protect you for that in between period where you weren’t sure if you wanted a title insurance policy or not.  Here are a few examples of where buying a policy before closing, instead of after, gives you the protection for those “what if” questions.

Suppose the title company checked public records like they are supposed to, and everything was clean.  The closing appointment takes place and the deal is done.  A few months or a couple years later it turns out that someone filed a few papers wrong and went back into the files to correct the issue.  Now there is room for a problem which was previously undetectable and the title can be challenged.  Because this filing error happened after the closing, and before you purchased a policy, you may not be covered.

Another situation is if a previous owner (it doesn’t have to be the person you bought the house from) owed a contractor some money.  It could have been for repairing the foundation, fixing a wall or anything.  The accounting team discovers there is money owed and places a lien on your home.  Because this was something the title company could not detect, and you did not buy a policy before they cleared the deed, your new title insurance policy which was purchased after your closing may not protect you.

In answer to your question, yes can you buy title insurance after closing.  But it is not recommended because you’re leaving yourself a gap where if something arises, you may not be protected.  By purchasing a policy before you close, you can reduce this risk and enjoy your new home with a peace-of-mind and help prevent those “what if” thoughts that can cause stress and worry.

When buying a home or new property, you’ll be working with both a title company and a settlement agent.  Both sound similar, or that there isn’t much of a difference between their responsibilities when it comes to a title company vs a settlement agent, but both of them have very different responsibilities during the house buying process.

The title company is responsible for finding issues that could arise when transferring the title (proof of ownership) of the house or property you are buying.  A settlement agent’s job is to do the actual paperwork for transferring the ownership of the land.  Depending on the area and state you live in, the Settlement Agent may or may not also have to be a licensed attorney or lawyer.

Now here’s where it could get confusing when comparing a title company vs a settlement agent.

The settlement agent may work for the title company, and the title company may also handle your escrow and closing services.  But this isn’t always the case.

You as the home or property buyer have the right to choose your own title company, and to choose your own settlement agent.  They do not have to be from the same organization.  If you do choose to hire your own title company or settlement agent, you can save money by shopping around.  But there are risks involved with doing this.

Not all title companies and settlement agents provide the same level of dependability and service.  It is also not recommended to choose a settlement agent outside of the title company as it adds more people to the mix.  It also places two separate groups of people together that may not be familiar with all of the processes from each other’s companies or operations. By choosing a settlement agent that works for the the same title company you are using, it can help to make the closing quicker and easier.

One reason for this is if the Settlement Agent forgets a document.  Because the settlement agent and title company are already at their office, and it is the same company with the same system, they should be able to access the missing document and print a new version on the spot.  That is why your real estate agent may recommend one that is more expensive.  It will be a settlement agent and title company that they have a previous relationship with and trust, or they’ll have two selected that can work together seamlessly.  Dependability and reliability are both important if you want a hassle-free closing.

In short, the title company has the job of making sure that the seller is the rightful owner of the property, and the buyer will have what appears to be a clean title and the right to own it.  Once this is done, the settlement agent will complete all the necessary paperwork to make sure that you become the rightful owner of the property.

If you have any other questions about the differences between a title company vs. a settlement agent, email us at info@atgtitle.com or call us using the number at the top of the screen.  And of course we’ll be happy to give you a quote for title insurance and assist with your title, escrow and closing needs.

When you’re closing on a home you’re already expecting mountains of paperwork, confusing contracts that will be presented in legal jargon, and a lot of people asking you to sign things. Some of these people may have titles and work for companies you have never heard of, and that is where closings can get a bit nerve wracking.

The good news is you’ll have people at your closing who are there to explain what each document is, and why it is important.  What may not be clear are the people who have similar job titles, why they work at different companies, and why you need all of them.  One example of this is the underwriters.

You’ll be hearing about the “underwriter” multiple times, but you’ll see different peoples’ names next to the job title.  That’s because there are two people involved.  One will be underwriting your title insurance policy, and the other will be underwriting your loan from a bank or financial institution.  Both work closely with the title company, but they do very different things.

The two types of underwriters you’ll hear about when closing are:

• The financial underwriter – this is the person who will authorize or decline your ability to take out and get approved for a loan. They review the risk the financial institution will take on by lending you money.
• The title underwriter – this underwriter will examine the title and check for possible issues that could arise during and after you get the title for the house, building or property. If they feel the title will clear and you can take control, they’ll be able to approve you for a title insurance policy.

Both of the underwriters work independently of each other, but each play a vital role in a real estate transaction.

First you’ll be hearing from the financial underwriter.  They’ll be looking into your credit history, how much you have in the bank, and all the things which impact you financially from car loans to student debt, and even your employment status.

Once cleared, and you have negotiated on a price to buy a property or home, you’ll select a title, escrow and closing company.  Many times, the title company will be able to handle the escrow and closing as well.  If you opt in to buying a title insurance policy, this is when you’ll come into contact with the title insurance underwriter.

Their job is to look at the total risk in writing a title insurance policy to help protect you in case someone lays claim to your home after you close.  But it is also important to remember that they work for the title insurance company, not for you.

Their job is to protect the title company, by also making sure the title you are going to receive is as clean as possible.  If you don’t have any issues arise, the title company is safe too.  Because of this, if they are open to writing a policy, it can be an extra peace-of-mind that there is less of a risk for someone making a claim on your home.

Although both of the underwriters will be thrown around synonymously, they both play an important, but different role.  If you have any questions about the underwriters and your closing, one of our trained staffed members will be happy to assist you.  Simply call us at the number on the top of the page, or email us at info@atgtitle.com.

If you’re looking to sell an investment property, but realized the sticker shock of taxes, you’ve probably come across a confusing option called a 1031 exchange.  1031 exchanges are great for real estate investors because they can save you money, but you have to know the nuances and jargon that comes along with them.  This includes capital gains taxes, the process in which they work, as well as knowing each of your options with profits and losses.

Below you’ll learn the ins and outs of selling investment properties using 1031 exchanges without all of the legal jargon.  If you still have questions, contact us using the email address or phone number in the top right corner of this page, and one of our professional settlement agents will be happy to assist you.

What is a 1031 Exchange

1031 exchanges are when you take the profit from your current investment property, and apply it to your next investment property during the settlement process.  It is popular for real estate investors because it allows you to use the money on your next project without having to pay [Read more…]

Wet and dry funding states can be tricky whether you’re new to real estate or are an experienced agent.  Wet and dry states impact your bottom line which is why it is important to know which states are wet, which are dry and where you may want to focus your business.  If all of this seems confusing, don’t worry.  We’ve put together this blog post to help you learn what dry and wet funding states are so you can know what to expect based on where you do business.

First lets cover the differences between wet and dry funding.

Wet funding states require that all mortgage funds are distributed at the close of sale, along with all other necessary paperwork, such as escrow conditions and signed loan paperwork. Dry funding states require that all funds are distributed after the close of sale and only after all proper paperwork has been completed.

This important distinction directly affects when real estate commission checks are distributed to agents, and when the close of the sale is technically completed. Let’s further define what each type of funding represents and how it differs between states with a couple of examples.

Remember:

• Wet funds materialize (are dispersed) at the close of sale.
• Dry funds materialize (are distributed) after the close of sale.

Example of a Wet Funding State

Virginia is an example of a wet funding state. The “Old Dominion” state requires that an authorized settlement agent completes a number of procedures, including home inspections, title write-ups, and preparing settlement statements.

Once this work is completed funding can be distributed and a house can be closed. Stringent requirements also mandate that the money is cleared and all wire transfers are received before disbursements are made.  Additionally, wet funding states like Virginia require that real estate agents be on record in the county before they can disburse funds for the sale of a home.

New real estate agents typically don’t like wet funding because these strict requirements can be a significant barrier to garnering quick experience.

States Where Dry Funding Is Permitted

Only a few states allow for dry funding, including:

• Alaska
• Arizona
• California
• Hawaii
• Idaho
• Nevada
• New Mexico
• Oregon
• Washington

States like Alaska and California allow for both wet and dry funding, but the real estate agents themselves decide on which to ultimately use. Dry funding is often preferred by real estate agents because it does not require the real estate agent to be on record in specific counties before disbursing.  Dry funding also makes it much easier for real estate agents to operate in new markets and determine the speed of their transactions.  That is why dry funding states are prefered by real estate agents over wet funding states.  

Title insurance costs are calculated by multiplying the purchase price of your home by the rate per thousand your insurance company uses. The rate per thousand is a going rate that is used for every thousand dollars that is calculated for the value of your home.

A quick example: if the rate is 0.6% for every thousand, and you bought a $300,000 the title insurance costs would be $1,800.

Other companies, though, may use a bracket-style to calculate their premiers. For example, the percentage per thousand will differ for homes up to $100,000 vs homes with a value of $100,001 to $1,000,000.  Other factors will also affect the overall costs, including billed hours towards conducting a title search, examination, and addressing any title defects.

You may be wondering why title insurance costs seem so expensive at the close of sale. Title insurance costs are incorporated into the closing costs of a home and represent a one-time purchase. For this reason, title insurance costs do not fluctuate and can seem expensive to buyers who have just made a very expensive purchase on top of that.

Here are a few examples of situations where title insurance premiums may differ.

Example 1: High-value home purchase

Remember this simple factor: the higher the value of the home, the higher the title insurance cost. Higher value homes will generally be more expensive to insure, whether against title or property.

Home value is generally calculated by using a number of factors, including:

• Comparative market value of the home
• Demand in the market
• Current condition

If you’re purchasing a home with higher value, expect to pay more in title insurance costs.

Example 2: Refinancing a condo and how it’s calculated

Buyers are required by their lender to purchase a new policy when refinancing a condo or property. Typically, your Title Company will offer a discount from the original policy, 20-40% off policy depending on jurisdiction,  for a condominium, which is based on the value of the condo as well as the rate per thousand of your insurance company. Talk to your lender and or title company about how much a new policy will cost for your title insurance.