James Grady

Title Insurance

Simply explained, "title" is the right to own, possess, use, control, and dispose of property. When

you buy a home, you are actually buying the seller's title to the home. A deed is the written legal

evidence that the seller has conveyed his or her ownership rights to you.

Before the closing meeting when the actual transfer of ownership occurs, an attorney or title

specialist generally conducts a title examination. The purpose of the title examination is to discover

any problems that might prevent you from getting clear title to the home. Generally, title problems

can be cleared up before settlement. But in some cases, severe title problems can delay settlement,

or even cause you to consider voiding your contract with the seller.

What are some common title problems?

Title problems come in all shapes and sizes. Following are just a few examples of situations that

can create a title problem:

· The home to be purchased was owned by the seller's parents, who intended to use it for

their retirement. The seller's father died several years ago, and the mother just recently

passed away. A title search reveals that the property is titled in the mother's name, but

there is no will on file to indicate how she disposed of it.

· You are buying a house to which an addition was made several years ago. The sellers of

the home took out a home improvement loan and did the work themselves. They have

repaid the loan, but the lien was never removed from the title.

· The seller of the house added central air conditioning several years ago. The seller and the

contractor had a dispute over the workmanship, and the seller withheld the final payment

on the contract. The contractor filed a mechanic's lien on the property, which has never

been removed.

· You are buying a house with a newly paved driveway. The seller of the house bought his

neighbor's share of their shared driveway and converted it into a private driveway when

the neighbor built a new driveway on the other side of his house. Unfortunately, ownership

of the expanded driveway doesn't appear in the public records.

Some "clouds on title" can be corrected relatively easily, like most of the examples listed above,

while others can become quite complicated to remove. You should insist on being kept informed of

every step in the title examination process. If title problems are uncovered, it is important for you

to understand your legal rights.

What is title insurance?

Title insurance is the best way to protect yourself against title defects that have occurred in the

past, which may not appear until after you've taken ownership of the property. Before a title

insurance policy is issued, a title report is prepared based on a search of the public records. This

report gives a description of the property, along with any title defects, liens, or encumbrances

discovered in the course of the title search. Title insurance protects you against title defects that

were not discovered in the course of the title search (for example, forged signatures). If such a

defect were discovered later, your title insurance would cover you. Title insurance is different than

casualty insurance (auto, life, health) in that you pay a one-time fee (which can vary from state to

state as well as between insurance companies) and that it protects against past (as opposed to

future) events.

How does title insurance protect you?

If title problems are severe enough and not covered by insurance, you could actually lose your

house. A title insurance policy protects you and your heirs against title defects for as long as you

own the property. The policy represents the title insurance company's responsibility to compensate

you for any covered loss caused by a defect in the title, or any lien or encumbrance that was not

discovered in the title search. Most title insurance policies do have exceptions, however, so it is

important to read and understand the policy. Be sure to call the title company if you have any

questions about what is covered in your particular policy.

Lending Options

In addition to savings accounts and the proceeds from a home you already own, there are other less

obvious sources of funding as well. These include:

Home Equity Loan -

amount of equity built up in their own home that they were planning to borrow against in order

to gift money to you for your upcoming home purchase.

Life Insurance -

amount of "available" funds from which you can borrow. More often than not, the interest

rates on this type of loan are very favorable.

Stocks and Bonds

market in which to do so, then perhaps you can use it as a form of collateral.

Company Profit Sharing or Savings Plan

possibility of withdrawing or borrowing from what you have in your account(s).

Retirement Savings Plan (401k)

about the possibility of withdrawing or borrowing from this account as well.

If the above suggestions do not apply to you, there are still other possibilities:

Mortgage Insurance

reduce the down payment required. Private Mortgage Insurance (PMI) protects the lender in

case of default and allows for an approval of a larger loan amount.

First-time Buyer Financing

you could qualify as a first-time buyer, which could mean special financing from your state or

local housing agency. This usually means a smaller down payment or a lower interest rate, and

in some cases both.

VA Loans

down."

There are also many types of government-backed loans for various situations, and literally

thousands of loan programs offered by different lending institutions. Your lender can tell you about

the ones for which you may qualify.

Determining your target price for a house is dependant upon the financing terms available to you as

well as the amount you have available for a down payment. The monthly payment usually consists

of principal with interest, plus taxes and insurance, also known as P.I.T.I. Some lenders, however,

also may require mortgage insurance when the down payment is less than 20%. When you consider

these added expenses, you'll soon realize the term "affordability" means more than just the price of

the house itself.

Until June of next year the Goverment is offering up to a $7500 Tax Credit for new homeowners. Restrictions do apply. The credit is an interest free loan for up to 15 years. It allows buyers to have additonal funds to make improvements or pay down the mortgage depending on their situation. Contact me for all the details.