The case for title insurance!

February 9th, 2017


Here are some reasons why title insurance is important:

Fraud Protection

Title insurance will protect home owners from claims made against their property, whether they are responsible for it or not. This includes mortgage balances that are unpaid, improper foreclosures, and any fraud made by the home’s seller.

Fraud is more accessible to people now more than ever, and real estate isn’t safe from many fraud strategies as well. Forgeries have become easier in this techy era and criminals are more free to sell homes that they don’t actually own. Getting a title insurance will protect you from many frauds like these.

Insurer’s Services

Title insurers are pros when it comes to discovering everything that is suspicious with a property. They do exhaustive research to ensure that your transaction is a legitimate one. And in case it isn’t, the insurance would still cover the buyer for any loss.

One Time Payment

Although the title insurance may require a large drop of money, the payment is made just once. Unlike other policies that require regular payments, title insurance just needs a one time payment made at closing. Mortgage lenders usually require borrowers to pay for their title insurance, so it won’t exactly be a big jump if you get your own policy as well.

These are just few of the advantages getting a home insurance can bring you. And in general, anything that can steer you away from future problems in home ownership is probably worth a shot. Speak with a professional to get better understanding as how you can protect your home from any future dilemmas.

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Three definitive reasons why you need to buy a home in 2017!

January 26th, 2017


1. Rates are rising

In 1981, when mortgage rates hit 18% and seemed to rise every day, single-digit rates seemed like an impossible dream.

Last August, however, rates on 30-year mortgages bottomed out at 3.55%. Now that the Federal Reserve finally decided to raise its key interest rate, mortgage rates have been climbing slowly. Today, the average rate is just above 4%; by 2019 or 2020, rates could easily climb to 6%.

“All signs point to this trend continuing,” says Richard DeNapoli, managing director for Coral Gables Trust and a former Florida real estate commissioner.

Before you freak out, take heart: Rising rates aren’t necessarily a deal breaker for buyers. The National Association of Realtors® calculated that a rise from 4.2% to 5% would increase average monthly mortgage payments by $90—not nothing, but not a catastrophe, either. And if you take the long view, those higher rates are still historically low.

“For buyers there still is opportunity,” says Danielle Hale, managing director of housing research for the NAR. “For those who are still able to get into the market, these low rates continue to be helpful.”

Another upside: When rates go up, competition and prices often go down.

“I’d tell buyers not to panic, because higher mortgage rates eventually cause sellers to be more flexible on pricing,” DeNapoli says.

2. Inventory is shrinking

In November 2016, there were only 1.85 million homes for sale. That’s a nearly 10% drop from the year before. And it continues a trend of steady decline since just before the housing crash, when inventory peaked.

Real estate experts predict that inventory will continue to shrink, at least for the foreseeable future. That means that in most areas of the country, buyers have more homes to choose from today than they will next year.

Or even next month. If you get moving now (during the winter, which is largely considered to be real estate’s off-season), you’ll have less competition for those homes than you will in the peak spring and summer months.

Bottom line: Every day you wait to start looking for a new home, you face stiffer competition for fewer homes.

“If you think it’s bad right now, wait until April to August,” Smoke says.

3. Home prices are still rising

The bad news for buyers is that home prices now stand higher than before the 2007 crash, increasing 5% from 2015 to 2016. And housing experts expect an additional 2% to 3% jump in 2017, DeNapoli says.

“Prices continue to go up; we have yet to see that ceiling,” says Trevor Levin, a real estate agent with Nourmand & Associates in Los Angeles. “I think they have room to grow.”

How high prices will rise and how long they’ll remain high is anyone’s guess. Rising mortgage rates and the new Trump administration have introduced “uncertainty” into the real estate market, Levin says.

“And uncertainty is never ideal,” he says.

The good news? If you jump into the market pronto, you just might make it before those doors close.

With rates trending upward, here’s how to win!

January 19th, 2017


How to get the best mortgage rate

Here are some ways that you can improve the rate you are quoted:

Shop around. Mortgage rates often vary from lender to lender, just like gas prices vary from station to station. Borrowers should put as much effort into finding the best mortgage for themselves as they do finding the best home. Compare rates, points, and fees.

Ask for discounts. Leverage potential rate discounts from financial companies that already provide you services. Your loyalty could be worth a better rate. You’ll never know until you ask. So ask.

Improve your credit score. If your credit is less than excellent, increasing your score by 25 basis points could result in a rate that’s lower by 10 basis points. Higher credit scores mean lower risk to lenders, and lower risk translates into lower rates.

Pay for a discounted rate. Lenders will often offer a lower rate for a fixed fee paid upfront called a discount point. You can do the math to see if the cost of the discount is worth the lower payment you would receive as a result.

Put more money down. The payment is a function of the loan amount, which is what is left over when you subtract the down payment from the purchase price. The more you put down, the less you’ll pay going forward.

Consider a different loan product that has a shorter duration for the fixed rate. These “hybrid loans” combine features of a fixed-rate loan with those of an adjustable-rate loan. A 5/1 hybrid will offer a fixed rate for the first five years of the loan but will then move to align with market rates each year after the loan’s fifth anniversary. The average 5/1 conforming loan rate today is over 110 basis points lower than the average 30-year conforming rate.

The reason the rate is so much lower is the borrower is taking on the longer-term rate risk. So there needs to be a trade-off. Is the future rate risk worth the lower upfront rate?  A 10/1 hybrid would maintain a fixed rate for 10 years, the normal tenure that many people live in their homes these days. In other words, for many borrowers, the 10/1 could result in the best deal in terms of interest.

Pay less. Let’s get real. Sellers are not going to be very receptive to taking a lower price just because your financing costs increased. But they might be more open to providing some funds for closing costs, maybe a discount point worth. To a buyer, $1,000 more on the price paid over a 30-year mortgage is worth a lot less than the same $1,000 provided at closing by the seller.

Yet to the seller, they net the same. Just be careful that the appraised value will support the higher price.

The other way to pay less, of course, is to simply find a lower-priced home. But you knew that already, right?

And here’s the good news

While all this might sound quite bleak, there is an upside to future borrowers as a result of higher rates: It’s getting easier to get a mortgage.

The Credit Availability Index reported monthly by the Mortgage Bankers Association is at its highest level since 2007, when 30-year mortgage rates were above 6%.

With higher rates, lenders are encouraged to take on more risk as they can make more money. Likewise, if they want to maintain their mortgage business, they have to more aggressively court the purchase market in order to replace the volumes they have been doing in the refinance market.

That means potential borrowers should be seeing more love from lenders even with low down payments, lower credit scores, and higher debt-to-income ratios.

However, rates will likely be volatile day to day until we see more certainty about future fiscal and monetary policy in the U.S. If you are planning to buy, monitor rates specific to your area daily.

Just keep this in mind: The long-term direction of rates is now decidedly higher, so you’ll want to act sooner rather than later to lock in a mortgage rate that will enable you to buy the home of your dreams.

Accepted an offer then got a better one? Here’s what to do!

January 5th, 2017


Review your contract

When a seller accepts an offer, that doesn’t mean the deal is truly done. For one, did you sign a contract? Until you’ve got your John Hancock on that document, a home is still technically available, says Julia Towle of Avant Realty Group in Massachusetts.

This contract—often called a home purchase agreement—defines the responsibilities of each party, deadlines, and specific contingencies. Once it’s signed, anyone backing out could face Lady Justice.

“It’s important to fully understand the language in the sales contract to ensure each party is aware of their responsibilities and repercussions for breaching such obligations,” says Towle. That usually includes the nondefaulting party’s right to pursue “lawful remedy” against the defaulters.

Check your contract’s contingencies

Even if you have signed the contract, if it includes contingencies, then there’s still some wiggle room. Contingencies cover the obligations that must be met by both buyer and seller before a real estate transaction can close. For the seller, a buyer closing a mortgage within 30 days is a typical contingency. If the buyer fails to meet that deadline, a seller may be legally able to call the sale off.

For the buyer, one common contingency is that the home passes inspection. If it doesn’t because of major flaws with, say, the foundation or roofing, then the buyer may walk away without incurring penalties, or ask the seller to pay for repairs. An inspection contingency is typically put in place to protect a buyer, but it could work in a seller’s favor, too (see our next point).

Accept the higher offer as backup

Sellers don’t have tons of options when it comes to backing out. But one thing a seller can do—though it’s not guaranteed to work—is to accept the higher offer as a backup.

“The seller can then play hardball with the first folks when it comes to any inspection items they want fixed,” says Golden.

The goal for the sellers would be to make the buyers with the initial offer back out on their own by not meeting their inspection contingency demands. Once the original buyers walk away, the seller could move on to the higher offer.

“The big danger, however, is that once you let one buyer go, the second folks could then ask for even more repairs or back out altogether,” Golden says. The bottom line when letting go of one strong offer in favor of a higher one: “It’s a big risk.”

Fill the original buyer in

If a seller decides to go with a higher offer, she must communicate that to the original buyer immediately—and return any deposit presented with the initial offer. But here’s another option: A seller could allow the original buyer to present a counteroffer. Granted, the buyer may not want to. Instead, he could just collect his deposit and take the seller to court.

Seek legal counsel

Realty laws vary from state to state, based on the contracts.

“Here in Georgia, if a seller just wants to back out of the contract, the buyer and the agents can sue,” says Golden. The suit can be used to force the seller to sell the original buyers the home or to pay a specified amount of damages—which could include the price of seeking alternate housing like a hotel and legal fees. Either way, it won’t be pretty.

“I would most definitely advise a seller to seek legal counsel before making any attempt to back out of a contract,” says Golden.

… or avoid such drama at the outset

One way to circumvent legal battles—and bad karma—is to ask yourself before you put your house on the market what you’d do in such a circumstance. If you’re the type of person who wants to take all comers, it’s advisable to list the property as “contingent, accepting backup offers.” This would “avoid any and all repercussions to the seller,” says Towle.

The reason: If a seller communicates upfront that all backup offers will be considered, the buyer cannot reasonably claim he relied on the offer acceptance as a sign he’s guaranteed the keys. The downside? Some buyers might be scared off, knowing that their dream home could disappear on a dime.