Vhda july 2010


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  • No doc loan SISA loans created a buble and Mark to Market
  • No doc loan SISA loans created a buble and Mark to Market
  • No doc loan SISA loans created a buble and Mark to Market
  • No doc loan SISA loans created a buble and Mark to Market
  • No doc loan SISA loans created a buble and Mark to Market
  • No doc loan SISA loans created a buble and Mark to Market
  • No doc loan SISA loans created a buble and Mark to Market
  • No doc loan SISA loans created a buble and Mark to Market
  • No doc loan SISA loans created a buble and Mark to Market
  • No doc loan SISA loans created a buble and Mark to Market
  • No doc loan SISA loans created a buble and Mark to Market
  • Vhda july 2010

    1. 1. VHDA Homeownership Educational Guide Role of the Lender
    2. 2. <ul><li>Agenda </li></ul><ul><li>Background on VHDA Loans </li></ul><ul><ul><li>Features </li></ul></ul><ul><ul><li>Why now? </li></ul></ul><ul><ul><li>Basic Qualifications </li></ul></ul><ul><li>Process for getting a VHDA Loan </li></ul><ul><ul><li>Preparation (Pre-Lender) Stage </li></ul></ul><ul><ul><li>Pre-Approval Stage </li></ul></ul><ul><ul><li>Approval Stage </li></ul></ul>
    3. 3. Background on the VHDA Loan
    4. 4. What are VHDA Loans? <ul><li>Virginia Development Housing Authority designed to help low to moderate income families obtain affordable financing. </li></ul><ul><li>1 st time home buyers </li></ul><ul><li>Guidelines </li></ul><ul><ul><li>Minimum down payment </li></ul></ul><ul><ul><li>Up to 101.5% financing </li></ul></ul><ul><ul><li>Credit score: 620+ </li></ul></ul><ul><ul><li>Debt to income: 31/50 </li></ul></ul><ul><ul><li>Income limit: $97.5k for family of 1-2, $112.5k for family of 3+ </li></ul></ul><ul><ul><li>Max sales price of 450K </li></ul></ul><ul><li>Many programs available to meet the borrower’s needs </li></ul><ul><ul><li>Conventional </li></ul></ul><ul><ul><li>Veterans Administration (VA) </li></ul></ul><ul><ul><li>Federal Housing Administration (FHA) </li></ul></ul><ul><ul><li>FHA PLUS </li></ul></ul>
    5. 5. Conventional Loans <ul><li>What is it?: Any mortgage that is not insured or guaranteed by the federal, state, or local gov’ts </li></ul><ul><li>Who does it typically work best for?: More established borrowers </li></ul><ul><ul><li>Borrower puts down 20% </li></ul></ul><ul><ul><li>No more than 28% gross income going towards monthly payment </li></ul></ul><ul><ul><li>High credit scores </li></ul></ul><ul><li>Features: </li></ul><ul><ul><li>No upfront Mortgage Insurance </li></ul></ul><ul><ul><li>Monthly mortgage can be removed after 2 yrs of timely payments </li></ul></ul><ul><li>Requirements: </li></ul><ul><ul><li>Loan to value: 95% maximum (90% for condo) </li></ul></ul><ul><ul><li>Debt to income: 28/36 </li></ul></ul>
    6. 6. Federal Housing Administration (FHA) Loans <ul><li>What is it?: Loan program to assist homebuyers in acquiring property with small down payments from gov’t agency (Federal Housing Administration) </li></ul><ul><li>Who does it typically work best for?: First time homebuyers </li></ul><ul><ul><li>Borrower has minimal down payment </li></ul></ul><ul><ul><li>Higher allowable DTI ratios over conventional loans </li></ul></ul><ul><ul><li>Lower minimum credit score </li></ul></ul><ul><li>Features: </li></ul><ul><ul><li>640-850 credit score, same interest rate </li></ul></ul><ul><ul><li>Minimum down payment of 3.5% </li></ul></ul><ul><ul><li>All down payment can come from gift </li></ul></ul><ul><ul><li>Assumable feature (future potential sales tool) </li></ul></ul><ul><ul><li>203k rehab loan available </li></ul></ul><ul><li>Requirements: </li></ul><ul><ul><li>Owner occupied (no investors) </li></ul></ul><ul><ul><li>Credit score: 640+ (George Mason Mortgage) </li></ul></ul><ul><ul><li>Loan to value: 96.5% maximum </li></ul></ul><ul><ul><li>Debt to income: 31/43 </li></ul></ul>
    7. 7. Veterans Administration (VA) Loans <ul><li>What is it?: Feature designed to provide housing and assistance for veterans and their families as established by the GI Bill. </li></ul><ul><li>Who does it typically work best for?: Veterans buying primary residence </li></ul><ul><li>Features: </li></ul><ul><ul><li>Do not require a down payment (maximum $768,750 Wash DC </li></ul></ul><ul><ul><li>area) OR minimum down payment up to $1 million. </li></ul></ul><ul><ul><li>No Mortgage Insurance </li></ul></ul><ul><ul><li>Only program that allows seller to pay off borrowers debt to </li></ul></ul><ul><ul><li>allow veteran to qualify </li></ul></ul><ul><ul><li>Funding fee waived for disabled vet </li></ul></ul><ul><ul><li>Entitlement is reusable </li></ul></ul><ul><li>Requirements: </li></ul><ul><ul><li>Credit score: 640+ (George Mason Mortgage) </li></ul></ul><ul><ul><li>Loan to value: 100% maximum </li></ul></ul><ul><ul><li>Debt to income: Based on residual income (typically should not exceed 41%) </li></ul></ul>
    8. 8. USDA Loans <ul><li>What is it?: A program for rural area housing </li></ul><ul><li>Who does it typically work best for?: Borrower purchasing in rural area </li></ul><ul><li>Features: </li></ul><ul><ul><li>No mortgage insurance </li></ul></ul><ul><ul><li>100% financing </li></ul></ul><ul><li>Requirements: </li></ul><ul><ul><li>Select areas only </li></ul></ul><ul><ul><li>Credit score: 640+ (George Mason Mortgage) </li></ul></ul><ul><ul><li>Loan to value: 100% </li></ul></ul>
    9. 9. Adjustable Rate Mortgage (ARM) <ul><li>Not available with a VHDA loan </li></ul><ul><li>In an ARMs Loan interest rate is fixed for a set period of time, and then can adjust with market conditions </li></ul><ul><li>When interest rate adjusts: New Rate = Margin + Index </li></ul><ul><ul><li>Margin: the minimum interest rate the lender requires (established at time of loan) </li></ul></ul><ul><ul><li>Index: changes according to market conditions and is published in Wall Street journal (two most popular indices are Treasury and LIBOR) </li></ul></ul><ul><li>… But there are caps that will limit the possible change </li></ul><ul><ul><li>Caps protect borrower from large increases to their rate </li></ul></ul><ul><ul><li>Caps: [First Adjustment] – [Yearly] – [Lifetime] </li></ul></ul><ul><ul><ul><li>Conventional: typically 5-2-5 </li></ul></ul></ul><ul><ul><ul><li>FHA: 1-1-5 </li></ul></ul></ul><ul><li>Works best for individuals who know they will be in home for relatively short period of time or who cannot qualify for 30 year fixed rates </li></ul>
    10. 10. FHA 203k program <ul><li>The 203k Program </li></ul><ul><li>Not available with VHDA </li></ul><ul><li>Intended for homes that need renovations </li></ul><ul><li>Cost of renovations can be included in loan amount (up to $35k) </li></ul><ul><li>Cost can be over sales price </li></ul>
    11. 11. Energy Efficient Mortgages <ul><li>Energy efficient appliances can save you money (lowering utility bills) </li></ul><ul><li>Home Energy Rating by Utility Company </li></ul><ul><li>Cost of improvement may allow borrower to qualify for home with higher ratios... </li></ul><ul><li>...or add 100% of the cost of improvements to loan with no additional qualifying </li></ul>
    12. 12. Active Military Benefits <ul><li>Extended $8000 tax credit for Active Military </li></ul><ul><li>Does not have to be repaid </li></ul><ul><li>No restriction on use </li></ul><ul><li>Available when filing taxes for 2010 or 2011 </li></ul><ul><li>Extension of Tax Credit Deadlines </li></ul><ul><li>For qualified service members who are ordered on a period of official extended duty, the tax credit applies to sales with a binding sales contract in place on or before April 30, 2011 and closed by June 30, 2011. </li></ul><ul><li>A person who is forced to return to the U.S. for medical reasons before completing an assignment of at least 90 days of qualified official extended duty outside of the United States may qualify for the one-year extension. </li></ul><ul><li>Definitions </li></ul><ul><li>“ Qualified service member” means a member of the uniformed services of the U.S military, a member of the Foreign Service of the U.S., or an employee of the intelligence community. </li></ul><ul><li>“ Official extended duty” means any period of extended duty outside of the United States for at least 90 days during the period beginning after December 31, 2008 and ending before May 1, 2010. </li></ul>
    13. 13. Qualification requirements for VHDA <ul><li>1 st time home buyer (have not owned house in 3 years) </li></ul><ul><li>Exclusively Virginia properties </li></ul><ul><li>Maximum income for family </li></ul><ul><ul><li>1-2 persons: $97,500 </li></ul></ul><ul><ul><li>3+ persons: $112,950 </li></ul></ul><ul><li>Maximum sales price: $450,000 </li></ul>
    14. 14. <ul><li>Process for Obtaining a VHDA Loan </li></ul><ul><ul><li>Preparation (Pre-lender) Stage </li></ul></ul><ul><ul><li>Pre-approval Stage </li></ul></ul><ul><ul><li>Approval Stage </li></ul></ul>
    15. 15. Steps in Preparation Stage <ul><li>Develop a Spending Plan </li></ul><ul><li>Target Down Payment </li></ul><ul><li>Gather income documents </li></ul>
    16. 16. Develop your spending plan <ul><li>Important considerations: </li></ul><ul><li>What is your monthly income? </li></ul><ul><li>What are your monthly expenses? </li></ul><ul><li>What are your spending habits? </li></ul><ul><li>What are you already spending on housing? </li></ul><ul><li>What tax bracket are you in? – a portion of the interest + mortgage insurance payments may be tax deductible </li></ul>Result: What would I be comfortable paying monthly for a house?
    17. 17. Sources for assistance with spending plan <ul><li>If you would like professional assistance developing a spending plan, there are several free options: </li></ul><ul><li>Consumer Financial counseling </li></ul><ul><li>Consumer Credit Counseling </li></ul><ul><li>Catholic Charities </li></ul><ul><li>Some United Way agencies </li></ul>
    18. 18. Determine a Target Down Payment <ul><li>Important considerations: </li></ul><ul><li>How much do you have in savings? </li></ul><ul><li>How much would you consider taking out of 401k, stocks, bonds, etc </li></ul><ul><li>Gifts from family </li></ul><ul><li>Employer/Organizations </li></ul>
    19. 19. Gather Critical Income Documents <ul><li>The following documents will be required to verify information you provide to your lender </li></ul><ul><li>Pay stub (most recent month’s with year to date information) </li></ul><ul><li>Asset/bank statements (most recent 2 months) </li></ul><ul><li>Federal Tax Returns (Last 3 years) </li></ul><ul><li>W-2’s (Last 3 years) </li></ul><ul><li>Complete information of where you have worked and lived for the last 2 years </li></ul>
    20. 20. □ Completed Application via online: www.gmmllc.com/spichardo or by phone. □ Driver’s License, DMV ID Card (with Photo), Military or Government Issued ID (with Photo and Signature), Permanent Resident Alien (Green Card) front and back of card, Government Passports (must bear a Photo and Signature), Visa □ Most current consecutive pay stubs, covering a 30-day period □ W-2’s for 2008, 2007, 2006 & 2009 when available □ Signed complete federal tax returns for 2008, 2007, 2006 and 2009 when available □ Most current consecutive statements for; checking, savings, mutual funds, stocks, bonds, 401K, and IRA covering a 60-day period Please provide ALL PAGES for each statement . □ Check payable to “GMMC” in the amount of $120.00 for the VHDA reservation fee □ Check payable to “GMMC” or Credit card payment in the amount of $350.00 for Appraisal □ Name, address and phone number of landlord/mortgage company for past 2 years □ Name, and phone number for HR department or supervisor for past 2 years □ Gift funds letter and documentation of funds from donor and recipient □ Divorce decree, separation agreement, and property settlement agreement, if applicable □ Statements for creditors to be paid off □ Ratified sales contract, if available □ Homeownership Educational Certificate vhda.learn.com (on-line course) □ Copy of Earnest Money Deposit Check (front and back) □ Name, phone # of subject condo property management company □ Name, phone # and fax # of home owners insurance agent □ Explanation email or letter for inquiries on credit report ITEMS REQUIRED FOR ALL BORROWERS:
    21. 21. Take these components to your Lender Target Down Payment Target Monthly Payment Income Documents
    22. 22. <ul><li>Process for Obtaining a VHDA Loan </li></ul><ul><ul><li>Preparation (Pre-Lender) Stage </li></ul></ul><ul><ul><li>Pre-approval Stage </li></ul></ul><ul><ul><li>Approval Stage </li></ul></ul>
    23. 23. Steps in Pre-approval Stage <ul><li>Check Credit Report </li></ul><ul><li>Fill out Loan Application </li></ul><ul><li>Consensus on monthly payments, down payment, and type of loan </li></ul>
    24. 24. “ A Loan is like a chair – both have 4 legs” <ul><ul><li>Documentation </li></ul></ul><ul><ul><li>Credit Score </li></ul></ul><ul><ul><li>Loan to value </li></ul></ul>Debt to income
    25. 25. Check credit report <ul><li>Lender will pull credit score for you </li></ul><ul><li>Lender will review and analyze your credit information </li></ul><ul><li>Note: You can do this yourself (ex: freecreditreport.com) but some reports may not show credit scores </li></ul>Example Credit Report
    26. 26. Credit Score Basics <ul><li>What is the maximum credit score? </li></ul><ul><li>What is required for VHDA loans? </li></ul><ul><li>What factors affect credit scores? </li></ul><ul><li>Can you improve your credit score? </li></ul>
    27. 27. Credit scores can be maximized <ul><li>Lenders and credit counselors have access to credit analyzers </li></ul><ul><li>Determine how many points your credit can improve </li></ul><ul><li>Devise strategies to improve credit – many things can be done </li></ul>
    28. 28. Other important information in credit report <ul><li>Types of Accounts </li></ul><ul><li>Credit Depth </li></ul><ul><li>Derogatory Information </li></ul><ul><li>Inquiries </li></ul><ul><li>Debt to high credit </li></ul><ul><li>Activity </li></ul>Credit reports also show a history of payments:
    29. 29. Loan Application <ul><li>What information is requested in a loan application? </li></ul><ul><li>Basic information </li></ul><ul><ul><li>Name </li></ul></ul><ul><ul><li>Address </li></ul></ul><ul><ul><li>Date of Birth </li></ul></ul><ul><ul><li>Where you’ve lived for past 2 years </li></ul></ul><ul><ul><li>Where you’ve worked for past 2 years </li></ul></ul><ul><li>Income </li></ul><ul><li>Debt </li></ul><ul><li>Reserves </li></ul><ul><li>Intended occupancy status </li></ul>
    30. 30. Consensus on monthly payment <ul><li>Lender assists in determining appropriate monthly payment by considering </li></ul><ul><li>Your target monthly payment </li></ul><ul><li>Debt to income ratio </li></ul><ul><li>Loan to value </li></ul>
    31. 31. Debt to Income (DTI) <ul><li>Ratio of your debt to your income – helps determine how much of a mortgage you can afford </li></ul><ul><li>Front Ratio: Mortgage Payment divided by your income </li></ul><ul><li>Back Ratio: Mortgage Payment + Minimum monthly debt divided by your income </li></ul><ul><li>Types </li></ul><ul><ul><li>31/43 FHA </li></ul></ul><ul><ul><li>28/36 Conventional </li></ul></ul><ul><ul><li>41/41 VA </li></ul></ul>Example #/# FHA Front Ratio (%) Back Ratio (%) Loan Type
    32. 32. Example DTI calculation <ul><li>FHA 31/43 </li></ul><ul><li>Income: $5,000/Month Gross income </li></ul><ul><li>Debt: $600/month ( $300 car, $100 student loans & $200/mo Credit cards) </li></ul><ul><li>5,000 x .31 = $1,550/ month Maximum housing payment </li></ul><ul><li>5,000 x .43 = $2,150 monthly mortgage payment + minimum monthly payment </li></ul>
    33. 33. Loan to Value <ul><li>Compares the amount you borrowing to the value of the home </li></ul><ul><li>Loan amount will be lesser of sales price or appraised value </li></ul><ul><li>How much are you putting down? </li></ul><ul><li>When do you pay mortgage insurance? </li></ul><ul><li>Minimum Down payment FHA 3.5% </li></ul><ul><li>VHDA FHA PLUS </li></ul>
    34. 34. Factor Table Example <ul><li>Allows you to easily figure out the combined principal and interest portion of your monthly payment </li></ul><ul><li>Example </li></ul><ul><li>$300,000 loan amount </li></ul><ul><li>5.000% interest rate: 5.37 factor for 30 year fixed </li></ul><ul><li>Result (principal + interest): $1,611/mo </li></ul>30 Year Mortgage Interest Rate 6.653 7.000% 6.321 6.500% 5.996 6.000% 5.678 5.500% 5.368 5.000% 5.067 4.500% 4.993 4.375% 4.919 4.250% 4.847 4.125%
    35. 35. Consensus on down payment <ul><li>Lender assists in determining appropriate down payment by considering: </li></ul><ul><li>Your target down payment </li></ul><ul><li>How much money you have </li></ul><ul><li>Net result </li></ul><ul><li>Impact of down payment </li></ul><ul><li>Mortgage insurance </li></ul><ul><li>Program </li></ul><ul><li>Interest rate </li></ul><ul><li>Seller help needed </li></ul>
    36. 36. Consensus on type of Loan <ul><li>Recall: Types of VHDA loans </li></ul><ul><li>Conventional </li></ul><ul><li>VA </li></ul><ul><li>FHA </li></ul><ul><li>FHA PLUS </li></ul><ul><li>Lender assists in determining appropriate type of loan by considering </li></ul><ul><li>Credit scores </li></ul><ul><li>Down payment </li></ul><ul><li>Mortgage insurance </li></ul><ul><li>County programs </li></ul>
    37. 37. Loan scenarios reviewed and understood <ul><li>Lenders best guess at costs associated with loan amount </li></ul><ul><li>Interest rate </li></ul><ul><li>Closing costs </li></ul><ul><li>Escrow or Prepaid items </li></ul><ul><li>Monthly payment (PITI) </li></ul>
    38. 38. Good Faith Estimate <ul><li>Document that can be used to compare lenders </li></ul><ul><li>Lender’s fee’s are boxes 1, 2, and 3, which are the ones you can use in comparing lenders </li></ul><ul><li>Everything else is dependent on service providers that you and your realtor choose </li></ul>
    39. 39. Good Faith Estimate Page 2 of GFE
    40. 40. Interest Rate <ul><li>Interest rate is the cost of borrowing money </li></ul><ul><li>Points </li></ul><ul><li>Prepaid interest </li></ul><ul><li>Each point is 1% of loan amount </li></ul><ul><li>Tax deductible </li></ul><ul><li>When should you buy points? </li></ul>
    41. 41. Closing costs <ul><li>Title company fees </li></ul><ul><ul><li>Attorney fees </li></ul></ul><ul><ul><li>Title insurance </li></ul></ul><ul><ul><li>Title search </li></ul></ul><ul><li>Governmental fees </li></ul><ul><ul><li>Recording fees (deed, note) </li></ul></ul><ul><ul><li>Tax for transfer of property </li></ul></ul><ul><li>Lender’s fees </li></ul><ul><ul><li>Points </li></ul></ul><ul><ul><li>Appraisal </li></ul></ul><ul><ul><li>Underwriting fees </li></ul></ul><ul><ul><li>Processing fees </li></ul></ul><ul><ul><li>Credit report </li></ul></ul><ul><ul><li>Flood certification </li></ul></ul><ul><ul><li>Tax service fee </li></ul></ul>
    42. 42. Escrow Accounts Pre-paid items <ul><li>Escrow accounts are for upfront expenses </li></ul><ul><li>Prepayments </li></ul><ul><ul><li>Home Owner’s Insurance (1 year) </li></ul></ul><ul><ul><li>2 months reserves </li></ul></ul><ul><li>Real Estate Tax Reserve </li></ul><ul><li>Interim Interest </li></ul>
    43. 43. <ul><li>PITI – Principal, Interest, Taxes, Insurance </li></ul><ul><li>Home owners association dues or condo fee (if applicable) </li></ul><ul><li>Mortgage insurance </li></ul>Mortgage Payment
    44. 44. Mortgage Insurance <ul><li>Conventional: over 80% loan to value </li></ul><ul><li>FHA Loans: 1.0% + monthly mortgage insurance </li></ul><ul><li>VA Loans EXEMPT from mortgage insurance BUT do have an upfront funding fee </li></ul><ul><li>Rural Development Loans 3.5% Guarantee fee </li></ul>
    45. 45. Example: Buyer paid MI
    46. 46. Survey, Flood, Home Owner’s Insurance <ul><li>Flood insurance </li></ul><ul><ul><li>determined by FEMA </li></ul></ul><ul><li>Survey </li></ul><ul><ul><li>may or may not be required </li></ul></ul><ul><ul><li>confirms boundaries of property </li></ul></ul><ul><ul><li>ordered by the lender as part of the loan application requirement </li></ul></ul><ul><li>Home Owner’s/Hazard Insurance </li></ul><ul><ul><li>Protects you against </li></ul></ul><ul><ul><ul><li>Fire </li></ul></ul></ul><ul><ul><ul><li>Theft </li></ul></ul></ul><ul><ul><ul><li>Lawsuits </li></ul></ul></ul><ul><ul><ul><li>Some Damages </li></ul></ul></ul>
    47. 47. Choosing a Closing Date <ul><li>Loan closing at the end of the month </li></ul><ul><ul><li>only pay interest for the remaining days in the month </li></ul></ul><ul><ul><li>no payment due for the next month </li></ul></ul><ul><li>Loan closing within the first five days of the month </li></ul><ul><ul><li>interest credit for up to five days </li></ul></ul><ul><ul><li>payment due the following month </li></ul></ul>
    48. 48. <ul><li>Process for Obtaining a VHDA Loan </li></ul><ul><ul><li>Preparation (Pre-Lender) Stage </li></ul></ul><ul><ul><li>Pre-approval Stage </li></ul></ul><ul><ul><li>Approval Stage </li></ul></ul>
    49. 49. Steps in the Approval Stage <ul><li>Appraisal </li></ul><ul><li>Closing costs </li></ul><ul><ul><li>Good Faith Estimate </li></ul></ul><ul><ul><li>Truth-in-Lending </li></ul></ul><ul><li>Title Work & Verifications </li></ul><ul><li>Approval! </li></ul>
    50. 50. The Appraisal <ul><li>Determines the value of the home based on homes of like kind sold in the past ~90 days </li></ul><ul><li>Protects both the buyer and the lender to be sure the value is truly there </li></ul><ul><li>What if a house is appraised for a different value than the sales price? </li></ul><ul><li>Bank will only lend on the lower of the appraised value or the sales price </li></ul><ul><li>If appraisal does not pass approval process, 203k can be used </li></ul>
    51. 51. Truth-in-lending <ul><li>Allows you to determine how much you are paying in closing costs </li></ul><ul><li>Closer APR is to interest rate, the less you are paying in closing costs </li></ul><ul><li>Can be used to compare lenders to make sure you get a fair closing cost </li></ul>
    52. 52. Recap of Steps <ul><li>Determine your target monthly payment </li></ul><ul><li>Determine your comfortable down payment </li></ul><ul><li>Gather income documents </li></ul><ul><li>Go to lender </li></ul><ul><li>Lender pulls credit </li></ul><ul><li>Fill out application </li></ul><ul><li>Lender verifies all information on credit report for accuracy (line by line) </li></ul><ul><li>Calculate monthly payment </li></ul><ul><li>Determine down payment </li></ul><ul><li>Choose best type of loan </li></ul><ul><li>Go over example good faith estimate, so borrower will know how to read it </li></ul><ul><li>Go to realtor, find homes, ready to make offer, get ratified contract </li></ul><ul><li>Appraisal </li></ul><ul><li>Inspections </li></ul><ul><li>Verification of information </li></ul><ul><li>Approval! </li></ul>
    53. 53. Questions?
    54. 54. The Loan Closing
    55. 55. Loan Closing <ul><li>Borrower has the right to use their own closing agent or the seller’s </li></ul><ul><li>Be sure to choose someone experienced in real estate law </li></ul>
    56. 56. <ul><li>Title insurance </li></ul><ul><ul><li>protects the lender if problems found during title search (i.e. liens) </li></ul></ul><ul><ul><li>buyer is required to purchase lender’s policy </li></ul></ul><ul><li>Owner’s title insurance </li></ul><ul><ul><li>optional - protects the homeowner </li></ul></ul><ul><ul><li>costs less if purchased at closing rather than after closing </li></ul></ul><ul><ul><li>benefits in regards to purchasing a foreclosed property </li></ul></ul><ul><ul><li>Survey is recommended </li></ul></ul>Loan Closing
    57. 57. <ul><li>Deed </li></ul><ul><ul><li>titles the property from the seller to the buyer </li></ul></ul><ul><ul><li>4 ways to hold the title </li></ul></ul><ul><ul><ul><li>sole owner </li></ul></ul></ul><ul><ul><ul><li>tenancy by entirety </li></ul></ul></ul><ul><ul><ul><li>joint tenancy </li></ul></ul></ul><ul><ul><ul><li>tenancy in common </li></ul></ul></ul>Loan Closing
    58. 58. <ul><li>What Are The Common Types of Tenancy </li></ul><ul><li>The term &quot;tenancy&quot; means to hold title. There are a variety of ways to hold title in the state of Virginia. Below is a list of the most frequent tenancies used in Virginia </li></ul><ul><li>Sole Owner - one who holds possession to land with no one else. </li></ul><ul><li>Tenants in Common - two or more people who hold land together, with equally divided interest between them, or a designated percentage interest between them (for example, 60% to 40%). Upon the death of an owner, shares pass to the owner's heirs. </li></ul><ul><li>Joint Tenants with the Full Common Law Right of Survivorship - two or more people holding land together with one interest between them all. In the case of the death of one owner, the surviving owner(s) will own the land. The decedent's interest in the property passes to the surviving owners as a matter of law and does not pass to their heirs. </li></ul><ul><li>Tenants by Entirety with the Full Common Law Right of Survivorship - husband and wife holding land together. In case of the death of either husband or wife, the surviving tenant will own the land. The decedent's share passes to the survivor as a matter of law and does not pass to their heirs. Additionally, a creditor of one spouse may not attach a lien to the property to secure a judgment, but a creditor of both spouses may attach a lien to the property to secure a judgment. </li></ul>Loan Closing
    59. 59. <ul><li>Deed of Trust </li></ul><ul><ul><li>secures payment of the note </li></ul></ul><ul><ul><li>indicates recourse if terms not met </li></ul></ul><ul><li>Deed of Trust Note </li></ul><ul><ul><li>borrower’s promise to pay </li></ul></ul><ul><ul><li>reflects terms of loan ( interest rate, term, prepayment, late charges, etc.) </li></ul></ul>Loan Closing
    60. 60. <ul><li>HUD 1 settlement statement </li></ul><ul><ul><li>itemizes all costs to the seller and the buyer </li></ul></ul><ul><ul><li>differences may exist between the HUD 1 and the Good Faith Estimate </li></ul></ul><ul><ul><li>buyer(s) should be able to review prior to closing </li></ul></ul><ul><li>Type of Power of Attorney needed for closing </li></ul>Loan Closing
    61. 61. <ul><li>Collected funds needed at closing </li></ul><ul><ul><li>cashier’s check </li></ul></ul><ul><ul><li>certified check - this may not be sufficient if certified by a Credit Union; they can place stop payments on these funds </li></ul></ul><ul><li>Wet Settlement Act </li></ul><ul><ul><li>funds must be disbursed within two business days </li></ul></ul>Loan Closing
    62. 62. <ul><li>What to expect the day of closing </li></ul><ul><li>When do I get my keys? </li></ul>Loan Closing
    63. 63. 21 Reasons For Title Insurance <ul><li>Buying Property Is A Numbers Business </li></ul><ul><li>A fire destroys only the house and improvements. The ground is left. A defective title may take away not the only the house but also the land on which it stands. Title insurance protects you (as specified in the policy) against such loss. </li></ul><ul><li>A deed or mortgage in the chain of title may be a forgery. </li></ul><ul><li>A deed or a mortgage may have been signed by a person under age. </li></ul><ul><li>A deed or a mortgage may have been made by an insane person or one otherwise incompetent. </li></ul><ul><li>A deed or a mortgage may have been made under a power of attorney after its termination and would, therefore, be void. </li></ul><ul><li>A deed or a mortgage may have been made by a person other than the owner, but with the same name as the owner. </li></ul><ul><li>The testator of a will might have had a child born after the execution of the will, a fact that would entitle the child to claim his or her share of the property. </li></ul><ul><li>A deed or mortgage may have been procured by fraud or duress. </li></ul>
    64. 64. <ul><li>Title transferred by an heir may be subject to a federal estate tax lien. </li></ul><ul><li>An heir or other person presumed dead may appear and recover the property or an interest therein. </li></ul><ul><li>A judgment or levy upon which the title is dependent may be void or voidable on account of some defect in the proceeding. </li></ul><ul><li>Title insurance covers attorneys’ fees and court costs. </li></ul><ul><li>Title insurance helps speed negotiations when you’re ready to sell or obtain a loan. </li></ul><ul><li>By insuring the title, you can eliminate delays and technicalities when passing your title on to someone else. </li></ul><ul><li>Title insurance reimburses you for the amount of your covered losses. </li></ul><ul><li>A deed or mortgage may be voidable because it was signed while the grantor was in bankruptcy. </li></ul><ul><li>Each title insurance policy we write is paid up, in full, by the first premium for as long as you or your heirs own the property. </li></ul>21 Reasons For Title Insurance
    65. 65. <ul><li>There may be a defect in the recording of a document upon which your title is dependent. </li></ul><ul><li>Claims constantly arise due to marital status and validity of divorces. Only title insurance protects against claims made by non-existent or divorced &quot;wives&quot; or &quot;husbands.&quot; </li></ul><ul><li>Many lawyers, in giving an opinion on a title, protect their clients as well as themselves, by procuring title insurance. </li></ul><ul><li>Over the last 24 years, claims have risen dramatically. </li></ul><ul><li>We Hope You Never Have A Title Claim </li></ul><ul><li>Americans have the future in mind when they buy a house, and they purchase homeowners insurance to help protect that future. But with homeownership comes the need to protect the property against the past, as well as the future. </li></ul><ul><li>Title insurance protects a policyholder against challenges to rightful ownership of real property, challenges that arise from circumstances of past ownerships. Each successive owner brings the possibility of title challenges to the property. </li></ul>21 Reasons For Title Insurance
    66. 66. 10 FAQ’s about Title Insurance <ul><li>1. What is title insurance? </li></ul><ul><li>It is an insurance policy that protects the insured against loss should the condition of title to the land be other than as insured. Unlike other types of insurance that offer protection against future possible occurrences, title insurance offers protection against past occurrences which could result in a claim at a future date. Coverage continues in effect for so long as you have an interest in the covered property. If you should die, the coverage automatically continues for the benefit of your heirs. If you sell your property, giving warranties of title to your buyer, your coverage continues. Likewise, if a buyer gives you a mortgage to finance a purchase of covered property from you, your coverage continues to protect your security interest in the property. Title insurance provides the insured with &quot;peace of mind&quot; in knowing that you are receiving good and marketable title to the real estate you are purchasing. </li></ul>
    67. 67. <ul><li>2. Why do I need title insurance? </li></ul><ul><li>When you buy a home--or any property for that matter--you expect to enjoy certain benefits from ownership...to be able to occupy and use the property as you wish, to be free from debts or obligations not created or agreed to by you, and to be able to freely sell or pledge your property as security for a loan. Title insurance is designed to cover these rights. Without an owner's title insurance policy, you may not be fully protected against errors in the public records, hidden defects not disclosed by the public records, or mistakes made during the examination of the title of your new property. As a result, you may be held fully accountable for any liens, judgments or claims brought against your new property. However, your owner's title policy insures that if such an occasion arises, you will be defended, free of charge against all covered claims and paid up to the amount of the policy to settle valid claims. </li></ul>10 FAQ’s about Title Insurance
    68. 68. <ul><li>3. What does title insurance cost? </li></ul><ul><li>The cost varies, depending mainly on the value of your property. The important thing to remember is that you only pay once, then the coverage continues in effect for so long as you have an interest in covered property. If you should die, the coverage automatically continues for the benefit of your heirs. If you sell your property, giving warranties of title to your buyer, your coverage continues. Likewise, if a buyer gives you a mortgage to finance a purchase of covered property from you, your coverage continues to protect your security interest in the property. </li></ul>10 FAQ’s about Title Insurance
    69. 69. <ul><li>4. If my lender obtains title insurance, why do I need it? </li></ul><ul><li>The lender's policy covers only the amount of its loan, which is usually not the full property value. In the event of an adverse claim, the lender would ordinarily not be concerned unless its loan became non-performing and the claim threatened the lender's ability to foreclose and recover its principal and interest. And in the event of a claim, there is no provision for payment of legal expenses for an uninsured party. When a loan policy is being issued, the small additional expense of an owner's policy is a bargain. </li></ul>10 FAQ’s about Title Insurance
    70. 70. <ul><li>5. If I am required to purchase lender's insurance, why do I need owner's coverage as well? </li></ul><ul><li>In almost every instance, a lender will require you to purchase lender's title insurance protecting it up to the value of its loan on the property. This coverage only protects the lender, not you, and the coverage diminishes as the loan is paid off. As you build more equity in the property, you expose yourself to a higher risk of loss occasioned by a title defect. In this situation the protected lender will suffer no loss while you as the owner of record bear the substantial risk of the damage. Owners' title insurance will protect you against any covered loss from failure of title up to the full amount of the policy </li></ul>10 FAQ’s about Title Insurance
    71. 71. <ul><li>What title insurance protects against </li></ul><ul><li>Here are just a few of the most common hidden risks that can cause a loss of title or create an encumbrance on title: </li></ul><ul><li>False impersonation of the true owner of the property </li></ul><ul><li>Forged deed, releases or wills, Instruments executed under invalid or expired power of attorney; </li></ul><ul><li>Undisclosed or missing heirs; Mistakes in recording legal documents </li></ul><ul><li>Misinterpretations of wills Deeds by persons of unsound mind </li></ul><ul><li>Deeds by minors </li></ul><ul><li>Deeds by persons supposedly single, but in fact married </li></ul><ul><li>Fraud </li></ul><ul><li>Liens for unpaid estate, inheritance, income or gift taxes </li></ul>10 FAQ’s about Title Insurance
    72. 72. <ul><li>7. What protection does title insurance provide against defects and hidden risks? </li></ul><ul><li>Title insurance will pay for defending against any lawsuit attacking your title as insured, and will either clear up title problems or pay the insured's losses. For a one-time premium, an owner's title insurance policy remains in effect as long as you, or your heirs, retain an interest in the property. </li></ul><ul><li>8. If my title has been examined for defects, why do I need Insurance? </li></ul><ul><li>There are many defects which even the most meticulous search of the land records will not uncover: For instance, it is impossible for an examiner to know whether the marital rights of all previous owners have been relinquished; whether all deeds, mortgages and judgments affecting the property have been properly indexed in the land records; whether all signatures are valid; or whether an unknown heir of a previous owner had a valid claim against the property. Without owner's title insurance you may have no avenue of recovery for these types of problems </li></ul>10 FAQ’s about Title Insurance
    73. 73. <ul><li>9. Are there different types of title insurance? </li></ul><ul><li>Yes. There are three different types of Title Insurance. A Lender's Policy, Standard Owner's Policy and the Owner's Enhanced Policy. Lender's Coverage is required by all corporate lenders as a condition of the purchaser's loan. This covers only the lender for the amount of the loan they are making to a borrower. The Lender's Policy that the lender is provided with is the standard ALTA 1992 Loan Policy. It provides coverage to the Lender against such title encumbrances as fraud in connection with the execution of document, incorrect representation of the marital status of grantors, wills not properly probated, and many other circumstances that might jeopardize the Lender's security in the property. </li></ul><ul><li>The Standard ALTA 1992 Owner’s Policy protects you as the owner of real property against fraudulently executed documents, incorrect representations and improperly probated wills as well as any unsatisfied claims that may not appear in the County land records. </li></ul><ul><li>The Owner’s Enhanced Policy covers you, the owner against all that is included in a standard ALTA 1992 policy but with additional and enhanced coverage. For an estimate of costs for title insurance please see our cost calculator. Subject to limitations, some of the benefits of an Enhanced Policy include: </li></ul><ul><li>Mechanic’s lien coverage is provided for work done prior to the date of your policy. </li></ul><ul><li>Zoning coverage is now provided, insuring that your land is properly zoned for a single-family residence. </li></ul><ul><li>Subdivision coverage is now provided in the event your land is a portion of an improperly created subdivision. </li></ul><ul><li>Coverage is provided if you as the owner are forced to remove an existing structure, other than a boundary wall or fence, due to a previous owner’s failure to obtain the necessary building permit. </li></ul><ul><li>Coverage is provided if an adjacent builder builds onto the homeowner’s property without permission. </li></ul><ul><li>Coverage is provided for forgeries affecting your ownership after the date that your title insurance policy is issued. </li></ul>10 FAQ’s about Title Insurance
    74. 74. <ul><li>10. When do I purchase title insurance? </li></ul><ul><li>For a one-time premium paid at the time of your settlement, you can receive a title insurance policy to protect against title defects or claims made against title. Your policy will protect you even after you sell the property or pay off any loan. The cost of title insurance will be reflected at settlement as part of your total closing costs. </li></ul><ul><li>In addition to your Owner's title insurance policy, your lender will almost always require you to purchase a title insurance policy to insure their interest in the property up to the face amount of their loan. The Lender's policy is only applicable to the specific transaction, and it provides coverage for the mortgage lien and it protects against errors made in the title search connected with that transaction, as well as any pre-existing clouds on title. Therefore, each new lender will want a lender's policy that is specific to their transaction, whether for a purchase or a refinance. </li></ul>10 FAQ’s about Title Insurance
    75. 75. Questions?