We'll start with
the first five steps.
Step 1-- Decide Who's Going to
Run the Show
Depending on where you live, settlement
can be conducted by lenders, title insurance companies, escrow agents, real estate
brokers, or attorneys. Your agent or loan officer will probably recommend a settlement
agent but you may want to shop around on your own and compare fees. The settlement
agent conducts the settlement on behalf of all parties-buyer, seller and mortgage
lender. As such, their job is to make sure the transaction is properly handled
for all concerned. You may want to hire an attorney to represent you and independently
review your sales contract and loan closing.
Step 2 --
Get a Title Search
The lender will require a title search
to make sure that nothing interferes with the home seller's ownership of the property.
First of all, the lender wants to make sure the seller is indeed the owner to
prevent any fraudulent sales. But the title search also informs you and the lender
about any prior liens against the seller's home, legal claims that must be paid
before you can close.
Step 3 -- Buy Title Insurance
do you need it? A lender's policy protects the lender in case a flaw in the title
or a claim comes up after closing. An owner's policy protects you. Title insurance
provides security so that once you buy the property, you really own it, no matter
what happens or who comes forward with a legal claim against your title. Just
because you have the deed and things look official, does not mean mistakes or
fraud didn't occur somewhere in the past. A signature by an incompetent person,
a forgery, clerical errors, an undisclosed heir coming forward after you bought
the property� all these problems are your problems unless you have title insurance.
An owner's policy also covers you against losses or damages you might incur from
not getting complete ownership or access to your land.
example, if your neighbor disputes ownership of the driveway on your property
line, the title company will be responsible for investigating the problem and
negotiating with your neighbor. As with any kind of insurance, you hope you never
have to make a claim, but in the event you do, title insurance pays for itself
in a big way.
Save Money With a Re-Issue Rate
you only have to pay for title insurance once-the coverage continues as long as
you own the property. The best way to save money is to ask the current owner's
insurance company for a re-issue rate. If the current owner's policy was issued
in the last 10 years, you can qualify for up to 40% in discounts on the premiums.
The actual discounts will depend on the age and amount of the prior policy compared
to the cost of obtaining a new policy.
Some states control title insurance rates. Find out whether rates are fixed in
your state. If not, get quotes from several title insurance companies. Don't just
compare rates. Remember to ask each provider what services and limitations on
coverage they offer, so you can accurately compare policies and their costs. If
you're buying a new-construction home, make sure your title insurance includes
coverage against claims by contractors, sometimes known as "mechanics' liens."
Step 4 -- Get a Property Survey "Update"
lenders and title insurance companies require a property survey to mark the boundaries
of your house and property. Find out from your lender and title insurance company
if an updated survey is acceptable. You can avoid paying for a full survey by
getting an "update" from the surveyor who previously surveyed the property.
5 -- Compare Homeowners Insurance
Yet another item to
purchase prior to closing is hazard insurance. Your lender will want it, but you
must have it to protect yourself from damage or destruction of your home. Coverage
must at least equal the cost of fully replacing your home in the event of fire
or other causes. It's not a good idea to purchase a home in a flood plain but
if you live near a body of water, be sure to investigate flood insurance. Homeowners
insurance also includes personal liability in case someone is injured on your
property, as well as personal property coverage in case of theft.
to Cut Costs
Most lenders want homebuyers to pay for
a full year's insurance premium at closing. If you don't want to pay the full
premium upfront, ask your lender to pay it from escrow so you can contribute to
the cost as part of your monthly mortgage payments. Remember that homeowners insurance
is highly competitive-quotes can vary by hundreds of dollars. Take time to shop
around. Ways to save include:
Ready for Steps 6 through 10?
Just keep going!
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