Author: Shannon

Consider this: a mortgage program offers certain Americans a home loan with a zero down payment and no private mortgage insurance requirement. In addition, closing costs are limited and if the home is newly constructed, the builder must supply the buyer with a one-year home warranty.

Despite the obvious perks of the program, only 10.5 percent of the nation’s nearly 22 million veterans take advantage of this aspect of their Veterans Administration benefit offerings. When asked why, 33 percent of those who responded said they were completely unaware of the benefit, another group said that they went with the FHA loan because they assumed it was “easier” to obtain.

Obviously, the VA could be doing a better job informing (especially young) members of the military, veterans and surviving unmarried spouses about the VA loan and the mortgage industry could be doing a whole lot more to get the word out.  So, today we’ll take a look at the program and learn why it may just be the best loan product on the market.

Remember, we aren’t VA, mortgage or financial experts, so consult with the appropriate professional should you have any questions regarding the VA home loan program and its benefits.

The basics of the VA home loan program

Like the Federal Housing Administration (FHA) program, the U.S. Department of Veterans Affairs doesn’t actually make loans, but offers lenders a guaranty, if the veteran defaults on the loan. Should this happen, the VA will pay from 40 to 50 percent of the balance of the loan (the percentage depends on the size of the loan).

As you can imagine, this promise enables lenders to relax when faced with a borrower who may have little or less-than-perfect credit and a lower-than-average income.

So, what can you do with the VA home loan program?

• Buy a home (a condo, too, if it’s in a VA-approved community)
• Build a home
• Simultaneously buy and rehab a home
• Buy a lot and/or manufactured home

Is the VA loan harder to qualify for than the FHA loan?

No-one quite understands why so many current members of the military and veterans assume that the FHA loan is easier to obtain. Although there are additional steps you’ll need to take when pursuing a VA loan, they are quick and somewhat easy (if you have the right lender).

To qualify, you’ll need to say “yes” to at least one of the following questions:

• Were you on active duty for at least 90 consecutive days during wartime?
• Have you served at least 181 days of active duty during peacetime?
• Have you served in the National Guard or Reserves for more than 6 years?
• Are you a widower or widow of a military service member who died either in the line of duty or as the result of an active-duty service-related injury or disability?

The biggest advantages of the VA loan

As previously mentioned, the biggest advantage of the VA loan is that you won’t have to put any money down. Now any conventional or FHA-backed loan for which a borrower submits a less-than 20 percent down payment will require the purchase of mortgage insurance (the Mortgage Insurance Premium in the FHA loan and private mortgage insurance, or PMI, with a conventional loan).

These policies cover the lender in the event the borrower defaults on the loan.  This insurance, which benefits the lender should the borrower default on the loan, can add quite a chunk to your monthly mortgage payment. For instance, FHA’s annual mortgage insurance premium for a 30-year fixed-rate mortgage with 3.5 percent down payment is 0.85 percent annually.

The VA loan has no monthly mortgage insurance premiums, closing costs are limited and there is no prepayment penalty. With no monthly mortgage insurance premium, the veteran’s house payment each month will be less than if he or she had obtained an FHA loan.

The VA home loan process

Yes, there are a few more hoops to jump through when dealing with the VA. Eligibility requirements, however, are much like those for FHA and conventional loans:

•  “Suitable credit.” The VA doesn’t really explain what they mean by “suitable.”
• You should be able to prove that you have the income to cover all your bills and the house payment.
• You must live in the home (you can’t rent it out).
• You must present a VA Certificate of Eligibility (COE). Most VA-approved lenders can access your COE online or you can access your COE on the eBenefits page of the VA website.

The biggest hurdle for vets is that these loans are provided by lenders and they all have their own guidelines. Shop around until you find one that you feel you can work with.

 

 

Imagine you need complicated surgery and you have an amazing insurance plan that allows you to choose your doctor from among every surgeon in your city. Not only that, but you’ll pay the same amount for whomever you choose.

Will you decide on the fresh-from-residency or part-time doc or the surgeon who has been slicing people open for decades, with a proven track record in the very type of operation you need?

While the sale of your home isn’t a life-or-death proposition, it is quite a significant financial transaction and deserves taking your time to do the exacting research required to find the real estate agent that will best help you reach your financial goals. If you’re looking for an agent to help you sell your home, look for the following three qualities.

1.Ten years of silence

After studying thousands of symphonies produced between 1685 and 1900, Carnegie Mellon University psychologist John Hayes narrowed down 500 that are, today, considered “masterworks.”

These 500 pieces were produced by only 76 composers, and all of them but three were written after the composer had been in “business” for at least ten years. Yes, this even includes Mozart. Hayes referred to this decade of hard work and education as the “10 years of silence,” and found that it applied equally to famous poets, artists and others.

Another study claims that to become an expert in any field requires a minimum of 10,000 hours working in it (K. Anders Ericsson and Malcolm Gladwell).

But there is more to it than merely showing up for ten years or 10,000 hours (sounds like a warranty, doesn’t it?). As in most things in life, becoming an expert requires deliberate practice.

Kobe Bryant can walk onto the basketball court and make the game look easy. But, he didn’t become a multiple world record-holder by working part-time. In the off-season, Bryant spent a minimum of six hours a day, six days a week, for six months in deliberate practice. From running to weightlifting to shooting hoops, he worked tirelessly to not only maintain but also to improve his skills.

Real estate agents don’t become expert marketers and negotiators by working only on the weekends. Those with the skills required to sell your home quickly and for top dollar take the time to study the current housing market and the local economy, learning how they affect their clientele and their real estate. They’ve used various negotiating techniques over the years and honed this aspect of their businesses to perfection. They tour the current crop of available homes instead of relying on MLS photos in their comparisons.

Now, the best agents aren’t always veterans and they don’t all work full-time. In fact, rookie agents typically have their brokers working with them on their first few transactions so you’re actually receiving the benefit of the broker’s experience. But if your transaction is complicated, such as selling a luxury home, performing a short sale or listing ranch or farm land, you should rely on an agent with lots of experience.

2. He or she is happy to answer questions

How well does the agent handle your questions? Even homeowners who have sold a home before have questions about the listing and selling process. A professional agent will take his or her time to answer these questions in plain English and ensure you understand the entire process.

3.The agent has a plan, and it’s proven to work

A listing agent has many tasks to perform, from before the ink dries on the listing agreement until the final walk-through just before closing. The most important of these, especially in a slow market, is marketing. Ensure that the agent you hire has a proven marketing plan and the funds to implement it.

Ask for MLS printouts of the agent’s last three listings and check the photos – they should be clear, compelling and there should be lots of them. Check the agent’s remarks about each listing. Do they entice you?

Agents that you interview may try different tactics to get you to list your home with them, from inflating the home’s value (known in the business as “buying the listing”) to claiming to be a “neighborhood expert.” When it comes to the sale of your home, however, go beyond the rhetoric and find the agent you feel the most comfortable with and the one that you feel can best market your home.

 

 

Like shopping for anything expensive, shopping for a home requires research and a game plan. When you have a list of steps to take, the process will be far less perplexing and far more enjoyable. You’ll also be more successful if you have a strategy, so let’s take a look at some of the initial steps to take to get you into that new home. Check them off as you complete them.

Get ready to buy a home – check your finances

No, working on your finances won’t be the most exciting part of the process, but it just may end up being the most rewarding. Just as you wouldn’t go car shopping without knowing exactly how much you can afford to spend, neither should you step foot in even one home for sale without understanding where you stand financially.

A good place to start is with your credit score. If you haven’t checked it in a while, order your credit reports. By law, you are entitled to one free credit report (from each of the three reporting agencies) every 12 months. The only company that is authorized by the Federal Trade Commission to supply consumers with these free reports is annualcreditreport.com.

Go through the reports and dispute any errors you find. Fixing even one error may significantly impact your credit rating.

Then, go over your budget (if you don’t have one, create one using the template here). Tally up all of your debts and figure out how much money you have coming in every month.

Finally, determine where you can make cuts or how you can bring in more money to set aside for your down payment and closing costs. Your down payment requirement will depend on which loan program you use and closing costs, although variable, typically run between 2 and 7 percent of the loan amount, according to the National Association of Realtors.

Shop for a mortgage

Meeting with a lender is the next important step in the game plan. Based on the outcome of your first meeting with a loan officer, you can request a preapproval letter, which puts you in a strong negotiating position with home sellers.

Lenders want stacks of paperwork, all proving that you can afford a home. Plan on supplying your lender with at least the following:

• Tax returns, including Schedule C if you are self-employed
• Pay stubs,
• W2s,
• Bank statements (all pages, including the blank ones)
• Identification, including your Social Security card and driver’s license

The self-employed and those pursuing jumbo loans may be asked for additional documentation.

Make a list of must-haves in your new home

Now that you know how much you can spend on a home, it’s time to make a shopping list, which can include items such as:

• Location – proximity to public transportation, schools, shopping or whatever is important to you.
• Neighborhood must-haves – community pool, security gate, guard, trails, clubhouse, etc. Do you want friendly neighbors or those that keep to themselves? A neighborhood with or without kids?
• Architectural style – if you have a particular style in mind, such as colonial or Victorian, list that, as well as the number of bedrooms and bathrooms you need.
• Interior features – If there is anything you absolutely must have, such as a formal dining room or a chef’s kitchen, make note of it.
• Exterior – Do you need a large lot or just a small yard? Is a carport sufficient or do you require a garage? Don’t forget to list pool, spa, fencing and any other exterior features you want in your new home.

Finally, organize the list, placing the three most important items at the top. These are your priorities, and you should share them with your real estate agent.

Tip: To determine your priorities, think about what you find intolerable about your current living situation. For instance, if barking dogs drive you crazy, vow to find a quiet neighborhood. If you’re sick and tired of mowing the lawn when you’d rather be relaxing, seek a home with low-maintenance landscaping.

Find a real estate agent

Since you’re now ready to look at homes, you’ll need a real estate agent’s help from here on. Remember, the services of a buyer’s agent won’t cost you anything – the seller pays all real estate commissions, so there really is no reason not to have your own representation and many, many reasons you should.

While all of the steps in the above checklist are important, and should be taken in the order listed, securing the services of a professional real estate agent to help in the purchase of a home is critical. Having a pro represent your interests, negotiate on your behalf and walk you through all the piles of paperwork — at no cost to you – will give you peace of mind during the process.

Although experts in the real estate industry continually suggest the importance of seeing a lender before doing anything else with regards to purchasing a home, many buyers don’t. Instead, they merrily attend open houses, mine Internet real estate databases and hound real estate agents to show them homes that they may not even qualify to purchase.

We want to help you be a smart homebuyer, so we’ve developed a checklist to help you keep your home buying wish list realistic.

To avoid creating a fantasy wish list you absolutely must know how much money you can spend on a house. Only a lender can help you determine this figure. Once you know what you can spend, we can help you determine where you can afford to live. From there, you can build a realistic wish list.

The Home

The first items on your wish list should be based on what you absolutely can’t stand about your current home. Is it too far from work? Then your list should include that you want a shorter commute. Does it drive you nuts to have to find a parking place every night when you get home? Put a garage on the list.

Next, determine what you need. If you have a large family, maybe you need additional square footage or more bedrooms and bathrooms. If you work from home, perhaps an office is a must. Bad knees and staircases don’t mix so a one-story home may be a necessity.

Finally, it’s time to think about the extras – those items that you can live without, but it would be wonderful if they were included in your new home.

The Neighborhood

Now that you’ve figured out what your ideal home should include, it’s time to think about the type of neighborhood in which you’d like the home to be situated. Some items to consider:

• Crime: A neighborhood’s crime rate is something that you will need to investigate on your own as laws prevent real estate professionals from discussing this with you. Call the local police department for neighborhood crime statistics. You’ll also find information online, with the FBI’s Sex Offender Registry.

• Property values: Look for a neighborhood where property values are rising. You’ll usually find these types of neighborhoods on the fringes of more expensive communities, according to the    National Association of Realtors.
• Easy Ingress and Egress: The ease of entering and leaving a neighborhood is especially important to commuters.
• Future Plans: Many homebuyers underestimate the impact of an area’s future plans on their property values. The best way to find out what the city has in mind for the area surrounding your neighborhood is by visiting the city planner’s office.
• Noise Level: While many people don’t mind the sound of kids playing and loud music, others aren’t comfortable in anything less than complete silence. If you are of the latter group, cruise the neighborhood in question at different times of the day and night and on weekends as well as weekdays.
• Lifestyle: If you’re a young, single professional you probably won’t feel at home in a family neighborhood so consider a place downtown, or close to it. If you can put up with the typically higher crime rate and lack of convenient parking, a home in the urban core may be ideal. Folks with kids, on the other hand, may want to look at neighborhoods with cul-de-sacs so the little ones are safe from traffic.
• Neighbors: Because the condition of your neighbor’s homes will affect the value of yours, take a good look at the other houses on the block. Foreclosures will drag down the value of neighboring homes. Unsightly landscaping and poorly maintained homes do likewise.
When the list is finished, we’ll find you some affordable neighborhoods and get down to the serious business of the Great American Househunt.

Here’s a checklist to bring along with you:
 Determine exactly how much you can afford to spend on a home.
 Ask us to point you to some neighborhoods with homes priced within your budget.
 Determine what drives you crazy about your current home
 Get clear on your needs in a home
 Decide on your “wants-but-can-live-without” items

Investigate potential neighborhoods:
 Crime
 City planning
 Traffic
 Noise level
 Does it fit your lifestyle?
 Do the neighbors take care of their homes?
 Proximity to schools
 Proximity to city amenities

The phrase “Homeowners Association” may sound innocuous enough to some but it sends shivers down the spines of many. In books and movies this group of homeowners is typically portrayed as power hungry, meddling and suspicious. Think Big Brother meets Mussolini and you’ll have an idea of this group’s image.

Is this reputation deserved? It’s hard not to believe the rumors while being bombarded with news stories about Homeowners Associations (HOAs) that force residents to take down American flags, or those that seize homes when residents are late paying their dues.

HOAs are like “little governments,” according to Jackie Faye of NBC News. Like all governments, they exercise the power granted to them in one of two ways: with benevolence or dictatorially. Perhaps Abraham Lincoln foresaw the rise of the HOA when he claimed that “. . . if you want to test a man’s character, give him power.”

So, who are these people?

A HOA is actually a legal entity whose purpose is to manage a group of housing units, or a common interest development, as they are known in some regions of the country. These developments may be single-family dwellings or condominiums. The decision-making body of this entity is typically known as “the Board,” and there may be committees as well. The HOA board is composed of homeowners who act as volunteers, and are generally chosen in annual elections open to all homeowners within the community.
The reasons for volunteering to sit on a HOA board are varied. Some homeowners want more of a say in how the HOA money is spent, others are concerned with maintaining home values.

HOA duties and responsibilities

Although it seems as if HOA boards have unlimited power to do as the members wish, most states have laws that govern what they can and cannot do. Yes, they sometimes overstep these laws. While duties and responsibilities vary across the country, here are some that are common to most HOAs:
• Paying taxes on the common areas
• The enforcement of the association’s rules, such as the bylaws and the Covenants, Conditions and Restrictions (CC&Rs)
• Creating the association’s budget
• Creating rules for the use of the common areas
• Disciplining homeowners for violations of HOA rules

Buying a home in a HOA-governed community

The HOA must supply the homeowner with certain documents when there is an offer to purchase the property. The seller then gives these documents to the buyer. There is usually a charge for the copies and the seller typically pays this fee.
HOA doc packages are usually quite thick and may be extremely complex and boring. It is essential, though, that you read and understand everything in them. If you need help, contact an attorney. Once you own the home, you are obliged to follow the HOA’s rules.
Some items to pay close attention to in the CC&Rs include:
• Pet policies, if you have pets
• Parking rules, for yourself and guests
• The rules and restrictions for the use of onsite amenities
• Landscaping rules
• House color, exterior decorations allowed
• Restrictions on the construction of outbuildings, such as sheds and gazebos
• The rules regarding leasing your home
Look at the HOA’s budget:
• Does the income cover the costs? If not, why?
• How is the money spent?
• Does the reserve account hold enough money for emergencies?

Check out the board’s meeting minutes:
• What type of issues does the board typically face?
• What type of actions have they taken against homeowners?
• Have they talked about increasing fees or any upcoming special assessments?

Read over the governing documents, or bylaws, to determine how and when elections are held, how to sit on the board and the length of board member’s terms.

One of the most important aspects of purchasing a home governed by an HOA involves determining if there is pending litigation. Sometimes the HOA is suing the developer or a homeowner or the HOA is being sued. If there is litigation pending, you may not be able to get a loan, so make sure you get all the information you need about this.

Buying a home regulated by a homeowners association has advantages, such as security and the regulation of the area’s appearance and noise levels. The drawbacks, on the other hand, are numerous and include the additional monthly outlay for HOA fees and the sometimes-meddlesome members of the HOA. Do your homework when considering purchasing into a common interest development governed by a HOA. Investigate it thoroughly to make sure you don’t end up in a HOA horror story on the nightly news.

The seller of that home you are about to purchase no doubt thought long and hard about how much to ask for it. She consulted with her real estate agent who spent some time poring over statistics and the prices of recently sold homes in the area to come to a rough estimate of the home’s value.

You made your offer based on what you felt the home was worth (hopefully based on your agent’s research). When all is said and done, however, neither your opinion nor that of the seller matter. The home is worth what the appraiser says it’s worth, at least as far as your lender is concerned.

Who is the appraiser?

A professional appraiser is an unbiased third party that is trained to determine the value of a piece of property. While not all appraisers are state-licensed, federally regulated lenders are required by law to use only those who are. Like many real estate agents that belong to a national association that adheres to strict ethics, so do many appraisers.

Are appraisers always accurate in their evaluation of homes? Usually they are, but not always. It depends on the information available to them at the time.

What affects a home appraisal?

Numerous factors can influence a home’s appraised value. Some of these include:

• The national and local economies
• The location of the home
• Nearby foreclosures
• The condition of the home
• The value of other, similar homes that were recently sold in the area
• The appearance of the home compared to those that have recently sold
• Upgrades made to the home.

A day in the life of an appraisal

Let’s assume you’ve made a full-price offer on a house that is listed at $300,000. The lender will order an appraisal of the house before giving you the final decision on your loan application.

The appraiser visits the home and looks at every aspect of its exterior, from the roof to the soil. Then, she inspects the interior, from the ceiling to the floors. Finally, most appraisers measure the square footage of both the house and the lot.

Back at her office, the appraiser uses the information she compiled to compare it against comparable sales nearby. She takes other facts into account as well, such as any problems with the house and any upgrades. She may also check local planning departments to ascertain if anything is planned in the nearby community that may impact the home’s future value. Finally, the appraisal is compiled and handed off to the lender.

The best news a buyer can receive is that the house appraised for more than he offered. The next best news, for both buyer and seller, is that it appraised at the offered price.

Then, there’s the worst news

A buyer typically has four choices when an appraisal comes in under the agreed-upon sale price: ask the seller to lower the price, increase the cash down payment, negotiate with the seller to pay half of the shortfall and you pay the other half, dispute the appraisal or walk away from the deal.

Sellers, on the other hand, have several choices as well. These include lowering the price of the house to meet the appraised value.

If you feel the appraisal was too low, work with your agent to find discrepancies in the report. Check that it accurately reflects the square footage, the age of the home (as well as those of comparable homes) and the number of bathrooms and bedrooms. Check the comps the appraiser used for errors regarding the home’s condition.

If you find errors, have your real estate agent contact the lender for a new appraisal. Most experienced real estate listing agents come close to the figure that the appraiser gives. Typically, it’s the homeowner that sets an unreasonably high home price and a buyer that either wants the home so much she is willing to overpay or a buyer that doesn’t do her homework and fails to research the sales prices of nearby homes.

It’s funny how a house doesn’t feel like an investment until it comes time to sell it. All of a sudden, after years of living there, the thought of its value hits you upside the head. Hopefully, you’ve practiced good home maintenance over the years and can now focus on cosmetic changes to increase value. And these won’t cost a fortune because many are typical do-it-yourself projects.

Lipstick on a pig

All the cosmetics in the world won’t make a pig look any prettier. Sure, if you choose those fixes carefully you can realize a tidy sum at the close of escrow. But, if the house has major problems, such as with the roof or heating system, you may end up giving that money back to the buyer for repairs.

If you suspect there may be problems with the house, hire a home inspector to come in a do a thorough check. It’s worth the fee because it may allow you to head off a slowdown in the future transaction with a buyer. Home repairs that buyers expect to be made and that increase value the most include:

• Plumbing repairs
• Updating electrical system
• Repairing damaged floors
• Don’t forget the little things: the dripping faucet, torn window screens and damaged countertops. You may have been able to live with these details but a buyer will notice them.

Larger projects, such as roof problems, are sometimes better dealt with by disclosing them to potential buyers and letting it be known that the price of the home reflects the need for the repair.

Clean

It’s a fact: clean houses sell faster and for more money than dirty ones. Buyers like houses that have been well cared for and a clean house looks like a maintained house.

They also place a higher value on houses that appear to be ready to move right into. Nobody wants to have to clean a house before settling in. Some sellers think they’ll get around this chore by offering to have the house professionally cleaned before moving out. There’s no value added in that plan. The time to clean is before it hits the market.

Paint

Painting the walls creates an instant transformation in a number of ways. Paint adds color to a room and makes it look and smell cleaner. Keep to the neutral colors on the color wheel, as they appeal to a broader segment of buyers.

Update the kitchen

In general, kitchens are usually most important in terms of enhancing the return on your home investment. Bathrooms are a close second. Attention to some of these little kitchen details can add to the home’s value.

• Replace the lighting fixtures.
• Put in new cabinets or, at the very least, replace the existing hardware.
• Replace old appliances. New appliances make a good impression on prospective buyers.
• Upgrade the faucet
• Buy new curtains and throw rugs
• Remove everything from the countertops with the exception of a few decorative items. Check decorating magazines for ideas.

Fix up the bathrooms

Nothing kills a real estate deal quicker than a nasty bathroom. Thoroughly cleaning it and painting the walls provides an instant transformation, but there’s more you can do that will add value to the entire home:

• Install new lighting. New fixtures can create a statement with minimal effort.
• Replace old sink, shower and bath faucets and handles with new decorative faucets.
• Install new towel racks.
• Replace shower doors.
• Re-caulk the tub and sink to freshen their appearance.
• Replace mirrors and medicine cabinets.
• Hang new towels and add throw rugs that compliment the wall color.

That oh-so-important curb appeal

It doesn’t do you any good to invest in home improvements and updating if the exterior of the home doesn’t invite potential buyers inside. Plus, updated landscaping adds around 10 percent more to the home’s value. Here are some general considerations:

• Clean up the yard. Remove toys, trash, leaves and dead plants.
• Clean the front porch by removing cobwebs from the light fixture, sweeping and applying a fresh coat of paint to the front door.
• Mow the lawn. If it’s discolored, de-thatch and fertilize.
• Trim trees and prune perennials to make them look tidier.
• Add container plants to the porch or next to the front door.
• Add surprising pops of color with seasonal flowers.
• Apply fresh mulch to the beds.
• Plant trees. According to the U.S. Forestry Service, trees increase property values by as much as 10 percent.

Keeping a perspective on all the work that you do in, on or around your home is important. Specifically, focus on the kinds of improvements that will enhance your return on investment. And bear in mind that improvements should be appropriate for the immediate neighborhood. While your aim should be to have the most attractive home on the block, don’t over-improve for the neighborhood.

Ok, so, you didn’t set out to become an insurance expert – all you wanted to do was buy a house, after all. Yet, in the process, you ran up against at least four different types of insurance – and these are just the mandatory policies.

We are willing to bet that you never dreamed you would learn so much about insurance as you have during the home-buying process. From PMI to hazard insurance EVERYONE has their hand out, wanting to make sure their interests are covered.

Think title insurance is frivolous?

A Utah couple put their home on the market and quickly found a buyer. Escrow was opened and the title search was ordered. During the process, the title company discovered a lien against the property, which happens frequently. What happened in this case is when the homeowners originally bought the home, the sellers lent them some money for the purchase. This loan created a lien against the property.

The escrow company contacted the original homeowners (the originators of the loan) and informed them that the folks they lent the money to were selling the home and, thus, paying off the loan. The lien could be removed, right?

When dealing with reasonable people the answer would be yes. Unfortunately, the original homeowners turned out to be quite disagreeable and refused to take the payment in full for the money they lent. They offered no explanation.

The sellers worked overtime, trying to get the uncooperative former owner to accept the loan repayment. When the closing date came and went, the buyers for their home ― a family of five ― were forced to move into a weekly apartment because they’d already given notice to their landlord.

Finally, the original homeowner came forward and demanded more money than what was owed. To get their buyers out of the weekly rental and to move on with their own lives, the sellers paid the former owner more than what they owed.

There is a moral to this story, which I’ll get to in a minute. First, let me explain what title insurance is and how it works. When a home goes under contract, the lender demands a search of the home’s title to determine that the homeowner is truly the owner of the property and that nobody else has a full or partial claim to it. The title search will also reveal outstanding judgments or liens against the property, information about unpaid taxes and many other issues.

After the title search, the title company will release a summary of its findings, typically called an abstract of title or a preliminary title report, and an opinion about the validity of the property’s title.

If the lender sees anything negative it will refuse to issue the funds and the home will not close until the problem is cured. If, on the other hand, the researcher validates the title, the lender will proceed, with the requirement that the buyer purchase an insurance policy to protect it against any claims that weren’t found during the research. This is commonly known as the lender’s title policy, although there is also an optional owner’s policy that protects the new homeowner as well. The lender’s policy only protects the lender, even though it doesn’t pay the premium, the buyer or the seller does.

So, the moral of the original story about the Utah homeowners is that home sellers should order a title report before actually going under contract with a buyer. You never know what might turn up and most clouds on title take time to remedy – time you won’t have once there is a closing date.

Nobody likes PMI

Private mortgage insurance (PMI) has been in the news a lot over the past few years. FHA raised and then lowered the costs of its premiums (which they call the Mortgage Insurance Premium or MIP) and that hit the headlines. Then the advice columns on how to get rid of PMI started making the media rounds. American homeowners try desperately to rid their house payment of the PMI premium.

PMI covers only the lender and will kick in if you default on the loan. It is required for most loans when the buyer pays less than 20 percent of the purchase price for a down payment. This is, in a nutshell, the price borrowers pay for low down-payment loans. Without it, you’d have to come up with 20 percent of the purchase price of the home. So, it’s not entirely “useless” after all. Annoying, yes.

Let’s talk about homeowner’s insurance

Homeowner’s insurance is another lender-requirement but the homeowner also benefits in the case of a claim. Hazard insurance is a part of a homeowner policy.

Homeowner’s insurance coverage varies from the basic theft, weather damage and fire to more- costly coverage including that for earthquake or flood damage. The lender will let you know which basic coverage you will need to purchase.

The whole topic of insurance is confusing to most folks and when you are trying to cover such an expensive investment the only counsel you should obtain is that of an experienced and knowledgeable insurance agent.

 

Whether it was a foreclosure, short sale, deed-in-lieu of foreclosure, a job loss or just plain irresponsibility, there are some steps you can take to get your credit score back into the range where it is attractive to mortgage lenders and you can finally buy that house.

Where does my credit score come from?

Credit scores range from 300 (the worst) to 850. Although a score of 700 will get you lower rates and more credit opportunities than lower scores, 760 and above is considered prime.

If you’ve ever ordered your credit report you did so from one or all of what are commonly known as “the big three” credit reporting agencies: Experian, TransUnion and Equifax.

These agencies compile massive amounts of financial information obtained from companies from which Americans have obtained credit in the past. From this, they determine each person’s payment history, the length of the person’s credit history, the various types of credit he or she has and the amount of credit debt held.

When the big three agencies turn their information over to Fair Isaac Corporation (FICO) or, in some cases, Vantage, it’s fed into a complicated formula and out pops a three-digit number that pretty much rules your financial life. Thankfully, your credit score adjusts, according to how risky you appear.

Pay on time

The best way to repair your credit score is by paying your bills on time, every month. Yes, it sounds simple and it is the responsible thing to do, but it’s also one of the quickest ways to pump your score into a more acceptable range. Don’t believe us? According to a study conducted by Experian,100 percent of super prime consumers and 97 percent of those with prime credit have no late payments on their credit reports.

Furthermore, The Raleigh Area Development Authority says that a person with a 707 credit score can raise it 20 points, just by paying bills on time for one month.

Manage the plastic

Your use of credit cards may be the culprit when your score is at rock bottom.

First, credit scoring agencies look at the age of your credit. New credit, such as opening new credit card or department store accounts, makes them leery. Just what will you do with all this new-found credit? Since they don’t know, you become a higher credit risk and take a 10 point ding on your score.

High balances make you appear risky as well. If your cards are maxed out you may lose up to 70 points on your credit score.

Don’t close your credit card accounts, just pay them on time. Consumers with no credit cards or installment loans look risky (it’s that fear of the unknown again) and tend to be penalized with lower scores. Besides, closed accounts still show up on your credit reports and may still affect your score.

If you have the money in your budget, another quick way to raise your score is to pay down high credit card balances. Try doubling your payments for a few months or at least pay a payment and a half.

If you build it, you can buy it

Many Americans didn’t do anything to deserve a low score other than to have never used credit. To credit scoring agencies, these people are, again, unknown entities. How they will use credit when they receive it is a mystery and therefore makes them a credit risk in the eyes of the agencies.

Unlike the folks that need to slow down on their credit card usage, you need to obtain a card, use it and pay the balance on time. Ensure that you obtain a card from an institution that will report your responsible use of credit.

To make it easy on you, we’ve compiled this handy, fix-your-credit checklist:

• Order your credit reports from each of the big three agencies to determine where you stand

• Dispute any errors you find on your credit report. Some shady credit counseling companies may suggest you dispute everything on the reports, which may do way more harm than good. The Federal Trade Commission offers advice on how to file disputes on its website.

• Pay all your bills on time, every month

• Pay down your credit card balances. If you can only afford to pay one at a time, pay department store cards first, if you have them, otherwise, pay off the one with the highest balance first. Aim to get the balances within 30 percent of your credit limit.

• Use old credit cards that you haven’t used lately to keep their histories active. Remember, old credit is worth more than new credit when it comes to your score.

• Obtain a secured credit card if you have no credit history. Use the card for small purchases and pay the balance on or before the due date.

• Consider obtaining a small loan if your credit report lacks an installment loan history. Ensure that the lender reports to all three agencies.

• Ask creditors to re-age your accounts. This might be challenging but if even one creditor agrees to do so your score may improve dramatically.

• Ask the credit card companies to increase your credit limit