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Are You Ready to Buy?
Once you decide to become a homeowner there are many things to consider before taking the leap.
What's your financial situation?
Credit cards, utilities, car payments, childcare and groceries are factors to consider. Will you be able to handle unforeseen emergencies, monthly bills and a mortgage payment? As a rule of thumb, no more than 28 percent of your gross monthly income should be used for housing payments.
Delinquent credit card and bank payments, past bankruptcies or a student loan that's unpaid can severely affect your ability to get a mortgage loan. For a small fee you can obtain a credit report and clear any misunderstandings before applying for a loan.
What's your employment history?
If you have been working continuously for the past two years, a lender should consider this to be steady employment. However, if your work history has not been continuous for the last two years, as long as you have a reasonable explanation for any breaks in employment, you still may qualify for a loan.
Have you saved money for a down payment and closing costs?
In addition to borrowing money for your home, the lender will require you to invest, in cash, 5 to 20 percent of the purchase price toward the loan. If you are looking at a $100,000 home, a ten percent down payment would be $10,000.
Closing costs are additional expenses incurred throughout the buying process that must be paid for in cash, such as attorney and inspection fees, escrow charges and document fees. Closing costs are typically 5 percent of the purchase price of your home.
How Much Home Can You Afford?
How much you can borrow will depend on your income, down payment, job stability, existing debts, credit references and payment history. Lenders usually use the following two qualifying guidelines to decide how much of a loan you can manage:
Your monthly housing expenses – mortgage payment, property taxes, insurance, etc. These expenses should be no more than 28 percent of your monthly gross income.
Your monthly living expenses and any long-term debts – utilities, car and school loan, child support, health and car insurance, etc. These expenses should be no more than 36 percent of your monthly gross income.
How Can a Real Estate Professional Help?
Selecting an agent will be one of the most important decisions when looking to buy a home. Seek advice from someone who "buys" houses for a living.
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Working with professional real estate agents is beneficial for several reasons:
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They will examine your financial situation and determine exactly how much you can afford.
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They can easily obtain information on all properties listed for sale.
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They can set appointments for you to see homes that interest you.
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They can help you complete the necessary paperwork when making an offer.
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They will help you arrange financing.
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They are experienced negotiators.
Where can I get title insurance?
From any licensed title insurance company or its representatives operating in your state. Pinellas Title Insurance, Inc. brings to you expertise and experience, as well as the financial strength to protect you should a claim arise.
What is a title?
A title is the foundation of property ownership. It is the owner's right to possess and use the property.
Why is transferring the title to real estate different from transferring the title to other items, such as a car?
Because land is permanent and can have many owners over the years, various rights in land (such as mineral, air or utility rights) may have been acquired by others by the time you come into possession of it, even if the land has never before been built upon. So in order to transfer a clear title to a piece of land, it is first necessary to determine whether any rights are outstanding.
What is a title search?
A title search is a detailed examination of the historical records concerning a property. These records include deeds, court records, property and name indexes, and many other documents. The purpose of the search is to verify the seller's right to transfer ownership, and to discover any claims, defects and other rights or burdens on the property.
What kinds of problems can a title search reveal?
A title search can show a number of title defects and liens, as well as other encumbrances and restrictions. Among these are unpaid taxes, unsatisfied mortgages, judgments against the seller and restrictions limiting the use of the land.
Are there any problems that a title search cannot reveal?
Yes. There are some "hidden hazards" that even the most diligent title search may never reveal. For instance, the previous owner could have incorrectly stated his or her marital status, resulting in a possible claim by a legal spouse. Other "hidden hazards" include fraud and forgery, defective deeds, mental incompetence, confusion due to similar or identical names and clerical errors in the records. These defects can arise after you've purchased your home and can jeopardize your right to ownership.
What is title insurance?
Title insurance is your policy of protection against loss if any of these problems - even a "hidden hazard" - results in a claim against your ownership.
How much could I lose if a claim is filed against my property?
That depends on the claim. In an extreme case, you could lose your entire home and property - and still be liable to pay off the balance of your mortgage. Most claims aren't that dramatic, but even the smallest claim can cost you time, money and aggravation, and you may have to pay costs for a legal defense.
How does title insurance protect my investment if a claim should arise?
If a claim is made against your property, title insurance will, in accordance with the terms of your policy, assure you of a legal defense - and pay all court costs and related fees. Also, if the claim proves valid, you will be reimbursed for your actual loss up to the face amount of the policy.
The owner of the property has a deed. Isn't that proof of ownership?
Not necessarily. A deed is just a document by which the right of ownership in land is transferred, whatever that right may be. It's not proof of ownership, and it doesn't do away with rights others may have in the property. In addition, a deed won't show you liens or claims that may be outstanding against the title.
Wouldn't an abstract show property limitations and restrictions?
Maybe - and maybe not. An abstract is a history of the property title as revealed by the public records. Abstracts may contain errors and do not disclose "hidden hazards" that can threaten your property title if you do not have a title insurance policy.
What about an attorney's opinion?
An attorney's opinion is based on a search of the public records. So, once again, even the most exhaustive search of these records may not reveal everything. Unlike a title insurance company, an attorney is not liable if you should suffer loss because of "hidden hazards" in the title.
The owner of the property I want to purchase has lived in the home for only six months. He had a title search done six months ago. Why do I need another one?
Because the owner could, in a very short time, do many things to encumber the title. For example, he could grant easements or construct improvements that encroach on adjacent property. It is necessary to conduct an up-to-date title search to uncover any such problems.
If the builder of my home already has title insurance on the property, why do I need it again when I purchase the land from him?
A title policy insuring the builder does not protect you. Also, a great many things could have happened to the land since the builder's policy was issued. Liens, judgments and unpaid taxes for which prior owners were responsible may be disclosed after you purchase the property - causing you aggravation and costing you money.
Are there different types of title insurance policies?
Yes. Basically there are two different types of policies - a loan policy and an owner's policy. The loan policy protects the lender's interest in the property as security for the outstanding balance under the buyer's investment or equity in the property up to the face amount of the policy. (Title insurers in many states offer increased policy coverage through inflation endorsements to cover increases in value due to inflation.)
How much does title insurance cost?
Probably a lot less than you think. Charges vary in different sections of the country, but generally the cost of title insurance to about one percent or less of the cost of the property. And unlike other insurance premiums, which must be paid annually, a title insurance premium is paid one time only, usually at settlement.
How long does my coverage last?
For as long as you or your heirs retain an interest in the property and, in some cases, even beyond.
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