Home ownership is the “American Dream”. Having something that’s all yours, like a home where your personal style shows the world who you are, is an incredible feeling. Owning your own home allows you to create a safe and private place for your family to enjoy. One of the major bonuses of home ownership is usually an increase in living space. Financial and personal security plus the opportunity to be a part of a community are the basis of the “American Dream”.
There’s more to owning a home than personal satisfaction. You may be able to deduct the interest you pay on your mortgage loan from your federal income taxes and probably your state taxes. You may also be able to deduct city home taxes. Rent is typically not a personally deductible expense. Often, the amount of money spent on rent can be about the same, or even more, than the amount a homeowner spends on their mortgage loan.
Home ownership creates personal wealth. Each mortgage payment reduces the loan balance and builds your personal equity. Most homes tend to increase in value over time. Your personal equity can be borrowed against or will be converted to cash when you sell your home. Renters never build equity.
Typically, homes will increase in value each year. The increase in value will be money in your pocket when you sell. If you remain in your new home for a significant amount of time, you will find your monthly mortgage payment decreasing as a percentage of overall income.
Owning your own home can allow for more consistent monthly payments than renting. Rent typically increases year after year (and in some cases, month to month). Depending on the mortgage product that you select, mortgage payments, typically, remain constant or variable based on a known, objective index.
All this adds up to one conclusion. Owning your own home is a huge investment, not just financially, but emotionally as well. Good luck on finding your new home!
The real estate closing (or settlement) is the final stage in the process of buying a home. The real estate closing is a meeting at which the buyer and seller, usually accompanied by their respective lawyers and real estate agents, complete the sale. At this meeting, the buyer makes all the required payments and the seller produces all documents necessary for the transfer of marketable title and delivers a deed that transfers the title to the buyer.
At the real estate closing, closing costs (or settlement costs) are paid. Essentially, closing costs are the fees and taxes involved with transferring title to the real estate from the buyer to the seller. The closing costs include, but are not limited to, the following:
- Charges for establishing and transferring ownership. These include fees for the title search, title insurance, related legal fees, and for conducting the real estate closing.
- Amounts paid to state and local governments. These include city, county and state transfer taxes, recordation fees, and prepaid property taxes.
- Costs of getting a mortgage. These include fees for a survey, an appraisal, credit checks, document preparation, notary services, loan origination, loan commitment, loan processing, hazard insurance, interest prepayments, and lender's inspection fees.
The parties to a real estate sale may negotiate for who will pay certain closing costs. In the absence of an agreement, local custom calls for each party to pay those closing costs related to that portion of the transaction for which they are responsible. The sales agreement should indicate who will pay which closing costs.
Your lender is required by the federal Real Estate Settlement Procedures Act to provide you with a good faith estimate of the fees due at closing within three days of applying for a loan. At closing, the HUD-1 Settlement Statement will disclose the actual closing costs. Upon request by the buyer, the settlement agent must complete the HUD-1 Settlement Statement to the extent of the items then known to the settlement agent and make it available for inspection by the buyer one business day immediately preceding the real estate closing.
Buyers generally pay the following closing costs:
- The down payment
- Loan fees (points, application fee, credit report)
- Prepaid interest
- Inspection fees
- Appraisal
- Mortgage insurance
- Hazard insurance
- Title insurance
- Documentary stamps on the note
If the seller has not yet paid for the house in full, the seller's most important closing cost is satisfying the remaining balance of their loan. Before the date of closing, the escrow officer will contact the seller's lender to verify the amount needed to satisfy the loan.
Other seller closing costs may include:
- Broker's commission
- Transfer taxes
- Documentary Stamps on the Deed
- Title insurance
- Property taxes (usually prorated)
Part of the sale process involves determining who is going to pay the closing costs. In addition to negotiating the sales price, buyers and sellers frequently include closing costs in their negotiations. When a buyer and seller negotiate the sales price and the seller reduces the price, the seller will often expect the purchaser to pay the closing costs. Conversely, a buyer may want to save on up-front expenditures and agree to pay the seller’s full asking price in exchange for the seller paying all allowable closing costs. There is no right or wrong way to negotiate closing costs; just be sure that all the terms are included in the sales agreement.
At the real estate closing, certain closing costs are often prorated between the buyer and seller. The most common prorated closing cost is real estate ad valorem taxes. This is because real estate ad valorem taxes are typically paid at the end of the year for which they were assessed. To make this situation more equitable, the taxes are prorated between the buyer and the seller. For example, the buyer would only pay taxes for the months following the real estate closing date up until the date the taxes had to be paid. The seller would have to pay for the months up until the real estate closing date.
So, you’ve decided to take that proverbial plunge and live out the American Dream. You are ready to purchase a home and hopefully you will be able to take possession as soon as possible. All parties have agreed upon the terms and you have made all the necessary financial arrangements. There is one more important detail that must not be overlooked before the transaction can close, and that is a title search. A title search is a means of finding out that the person who is selling the property really has the right to sell it and that the buyer is getting all the rights to the property (title) that he or she is paying for. The search process is usually conducted by a licensed title abstractor or attorney examining courthouse records over the past 60 years. A title search doesn’t stop at making sure the seller owns the property. One of the most important parts of the title search is to determine if there are any unsatisfied mortgages, taxes, liens or judgments against the property or any previous owner. If a seller has an unsatisfied mortgage, lien or judgment against them, or if the property taxes are not paid, the property can not be sold without the outstanding item being paid or satisfied.
Moreland Lerman Law Group is very careful to ensure the buyer that a seller is the record owner of the property and that a title is not subject to judgments against the seller or previous owners. We dig back into the courthouse records up to 60 years to ensure that the title to the property you buy is free of any defects that could hinder your enjoyment of your new home.
Since rates have been at an all time low, you are probably considering the notion to refinance your home. Why not have the opportunity to save hundreds of dollars each month. With that refinance come the typical closing costs associated with any mortgage loan, including a new charge for title insurance.
Why do you need to purchase title insurance again even though you had already purchased the policy when you first bought your home and there was no change in ownership? It is because a separate policy is required by the mortgage lender to validate your mortgage and when it was made.
Even the most diligent search of the public records could fail to disclose a number of hidden, unknown title defects. Things such as a forged will or deed; a title transfer by someone under age; a married person conveying real estate without his or her spouse; fraudulent impersonations; secret marriages; undisclosed heirs to an estate; invalid divorces; or false affidavits. These are just a few of the problems that can suddenly surface. Without the protection of title insurance, you’ll be in jeopardy of losing your investment. There are two basic types of title insurance protection:
Loan Policy – Lender
A loan policy insures your lender’s security interest against loss due to defects in your title that was not discovered at the time of sale. The loan policy offers no protection for the homeowner, but is required as a condition to obtain a loan.
Owners Policy –Homeowner
Just as lenders want security with their title policy, you should protect the equity in you new home with an Owner’s Title Policy. For a low one time premium you can receive the protection of a title insurance policy against hidden risks or undiscovered interests. Your title insurance protection is a permanent assurance that your ownership and use will be defended promptly against claims at no cost to you, whether the claim is valid or not, up to the face amount of the policy.
Endorsements are used to change the coverage of the title insurance policy. ALTA policies and other forms of title insurance policies provide adequate coverage for a majority of the "simple" real property transactions. If the transfer of title is not "simple", the policy coverage needs to be added by endorsement to tailor coverage to meet the home owner's, the seller's, and/or the lender's needs. Endorsements can change any port or portion of the policy, although endorsements are usually used to extend or make policy coverage more comprehensive for a particular title issue. The following are some of the more commonly used endorsements (each endorsement is subject to approval in the state where it will be issued or used):
1 Endorsement: Assessments
In some states, ALTA loan policies do not insure against loss or damage caused by assessments for street improvements under construction or completed at date of policy which have or may gain priority over the lien of the insured mortgage.
3 and 3.1 Endorsements: Zoning
These endorsements, where not prohibited by state regulations, insure what zone is applicable to the property insured and what uses the zone permits. In addition, the 3.1 insures against loss or damage arising from a final decree of a court of competent jurisdiction which either 1) prohibits a specific use set forth in the policy or 2) requires the removal or alteration of a structure located on the property on the date the policy is issued because of violations of area, floor space or setback requirements in the law.
4 and 4.1 Endorsements: Condominiums
This endorsement insures that 1) the condo being insured qualifies as a condo by its creating documents under the applicable state statutes, 2) there are no violations of restrictive covenants which will cause a forfeiture of the title, 3) the liens for homeowners' association assessments will not have priority over the insured mortgage (4.1 limits title insurance coverage to the date of recording), 4) there will be no loss or damage to the insured by reason of the insured's interest not being separately assessed, 5) that there are no encroachments that will cause loss or damage to the insured owner or lender, and 6) that there is no right of first refusal to purchase that will create a loss to the insured.
5 and 5.1 Endorsements: Planned Unit Developments
This endorsement provides the same basic coverage as 4 and 4.1 as stated above for planned unit developments rather than condos.
6, 6.1 and 6.2 Endorsements: Variable Rate Mortgage
These endorsements insure a lender against loss or damage arising from the invalidity or unenforceability of the lien of the insured mortgage caused by changes in interest rates in variable or adjustable rate mortgages. The 6.2 endorsement is applicable to negative amortization mortgages and also insures that the negative amortization of interest to the principal balance will not affect the priority of the lien.
7 Endorsement: Manufactured Housing
When this endorsement is attached to an ALTA loan or owner's policy, it changes the definition of the word "land" in the policy and insures that the manufactured housing unit is real property and part of the land.
8.1 Endorsement: Environmental Protection Lien
This endorsement does not provide coverage for environmental protection. Rather, this endorsement gives affirmative coverage that no document in the public records discloses an environmental lien or notice of enforcement of a lien. It also insures that there are no super-lien statutes in the state where the land is located that could affect the priority of the lien for the insured mortgage.
9 Endorsement: Restrictions, Encroachments and Minerals
This is a lender's endorsement and is considered an all-inclusive endorsement. It assures that the covenants, conditions and restrictions that are shown in Schedule B of the title insurance policy are not violated, but if they are, the violation will not affect the priority of the mortgage or cause the loss of all, or part, of the title to the property. In addition, there are assurances that there are no violations of building codes relating to setback lines, nor other encroachments. Lastly, the endorsement assures against damage arising out of the right to surface entry resulting from mineral exceptions shown in Schedule B.
Moving can be very stressful and some of these easy tips can help make your move to your new home a little easier.
- Contact the post office and change your address.
- Contact a moving company to make the move easier. It is always best to get three bids.
- Make travel arrangements with air, hotel and car rental agencies. Remember if you have pets to let each place know what type of pet you have to make special arrangements.
- Contact the IRS to change your address.
- Send our change of address cards to all of your business and personal contacts.
- Make sure your previous employer has your new address to send your W2 forms.
- Contact all medical doctors to get copies of your records.
- Contact your local pharmacy and have your prescriptions moved to the new pharmacy.
- Contact your bank to see if your checking account can be used in your new city or do you need to open a new account and wire the funds.
- Contact all of your accounts that you receive bills or investment information to forward your statements to your new address.
- Contact the phone company to forward your phone number for a thirty day period.
- Inventory all of your belongings in writing and also photographed for insurance purposes before they are packed.
- Get a new safe deposit box in your new city and close out your existing box.
- Use up all of your food items that can not be packed and give the rest to charity or a neighbor.
- Cancel your electric, gas, water, newspapers, magazines, phone, cable and trash. Contact the new companies and have them set up.
- Before leaving your old home, check every closet, room and floor to make sure you are not leaving any valuables behind.
- When you get to your new city, remember to get your new driver’s license, auto registration and tags.
Tips for making a smooth transition between homes:
Moving Companies
Selecting a moving company may be one of the most important decisions to make in completing a move from one location to another. It may be helpful to research different moving companies with local and state licensing agencies to ensure that any company that may be selected is duly licensed and to see if there have been any complaints filed with any of those state and local agencies. You may also want to ensure that the moving company is properly insured in the event that damage or loss of your belongings occurs. Also, you may want to determine if you may require any special insurance through an independent insurance provider, this may be particularly important if you are planning to complete the packing and shipping personally.
Utilities
It may be helpful to inquire about the local utility companies a couple of weeks ahead of any arrival or move in dates, as some companies may require a few weeks of lead time to ensure that your utilities are properly connected at the time of your arrival. Some examples of utilities are the phone company providers, natural gas companies, oil delivery companies, electrical services, and cable providers. Also, don’t forget to terminate any existing utility services that you may have at your current dwelling, so as not to incur any charges after your move out date.
Schools
If you are in need of educational services, such as public school systems, it may be helpful to contact your local county or town school systems to determine what information or actions are required for timely enrollment into the school systems. Remember that you may need to have current school records forwarded to any new school systems and these transfers may take some time.
Homeowners Insurance
With a new home, you will need new homeowners insurance. It is wise to shop around for local insurance providers to compare both bottom line costs for insurance as well as to compare the benefits that each company may offer. You will also want to find the agent you are most comfortable with. Often, the coverage may vary between companies even though the annual costs are the same and there may be special provisions or coverage that makes sense in your new location.
Moreland Lerman Law Group will help assist in providing the necessary documentation needed to convey the property from one person to another. Whether it is a simple quit-claim deed from one party to another or the sale of the home, Moreland Lerman Law Group has all the knowledge, experience and resources to make this experience as pain free as possible.
It is common for a divorcing couple to divide their property and debts themselves (e.g., divorce agreement). However, if a couple cannot agree, a court will use state law to divide the property. Courts divide property under one of two basic schemes: (1) community property or (2) equitable distribution. There are nine community property states - Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. In addition, Puerto Rico is a community property jurisdiction. These states generally regard as community property all property that has been acquired during the marriage (e.g., all earnings during marriage and everything acquired with those earnings). Even if one spouse earns all the money to acquire the property, all the property acquired during the marriage is considered to be community property. While there are many differences between the community property states, all community property states operate on the theory that both spouses contribute equally to the marriage; thus all property acquired during the marriage is the result of the combined efforts of both spouses. Upon dissolution of the marriage, community property is generally divided equally between the spouses. Community debts are divided according to the same principles. However, community property states also permit a married person to treat certain earnings and assets as “separate property.” Upon dissolution of the marriage, this separate property is not divided, but is kept by the spouse who owns it. Generally, separate property includes property acquired before marriage, property received in exchange for separate property, compensation for personal injury, property acquired during marriage with premarital earnings or with the proceeds of the sale of premarital property, gifts made to only one spouse, inheritances obtained by only one spouse; and property acquired after separation. Generally, the separate property of a spouse remains separate property unless mixed with marital property or with the other spouse's separate property.
Most states employ "equitable distribution" in dividing property as a result of divorce. In equitable distribution states, assets and earnings accumulated during marriage are divided equitably (e.g., fairly) upon dissolution of the marriage. In practice, the court decides what is a fair, reasonable and equitable division of assets based on many factors including, but not limited to, how long the marriage lasted, what each spouse brought into the marriage, how much each spouse can or does earn, responsibilities for children, retraining, tax consequences, debt, and responsibility for the divorce. As a result, property is not always divided equally (e.g., strict fifty-fifty split).