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Real Estate Made Simple Category
Real Estate Made Simple : Tax And Insurance Escrow
As a homeowner in Blue Ridge and Blairsville Georgia, your fiscal responsibility extends beyond just making mortgage payments. You must also pay your home’s real estate taxes as they come due, as well as your homeowners insurance policy premiums.
Failure to pay real estate taxes can result in Foreclosure. Failure to insure your home is a breach of your mortgage loan terms.
There are two methods by which you can pay your real estate tax and homeowners insurance bills.
The first method is to pay your taxes and insurance as the bills come due, usually semi-annually. Depending on your home’s tax bill size and the cost to insure your home, these payments can feel quite large — especially if you’ve failed to budget for them properly.
The second method of paying your taxes and insurance is to give your lender the right to pay them on your behalf, a process known as “escrowing for taxes and insurance”.
When you escrow your real estate taxes and homeowners insurance, you pay a portion of your annual obligation to your lender each month, which your lender then holds in a special account for you, and disperses to your taxing entities and insurance company as needed. Lenders prefer that homeowners escrow taxes and insurance because, in doing so, the lender is assured that tax bills remain current and that homes stay insured.
Want a discount on your next mortgage rate? Tell your lender that you’re willing to escrow.
To help calculate your monthly escrow payment to your lender, do the following :
- Find your home’s annual real estate tax bill
- Find your home’s annual homeowners insurance premium
- Add the two figures and divide by 12 months in a year
The quotient is your monthly “escrow”; the extra payment you’ll make to your lender each month along with your regularly scheduled principal + interest payment. Then, when your tax bills and insurance premiums come due, your lender will make sure the payments are made on your behalf.
If you’re unsure whether escrowing is right for you, talk to your loan officer and/or financial planner. If you do not have a loan officer, please Contact Me and I will be happy to introduce you to one on our Team. There are valid reasons to choose either path.
What Is Annual Percentage Rate (APR)?
More commonly called APR, Annual Percentage Rate is a government-mandated mortgage comparison tool. It measures the total cost of borrowing over the life of a loan into dollars-and-cents.
A loan’s APR is printed in the top-left corner of the Federal Truth-In-Lending Disclosure, as shown above. When quoting an interest rate, loan officers are required by law to disclose a loan’s APR, too.
APR is meant to simplify the process of choosing between two or more loans. The theory is that the loan with the lowest APR is the “best deal” for the applicant because the loan’s long-term costs are lowest. However, the loan with the lowest APR isn’t always best.
APR makes assumptions in its formula that can render it moot.
First, APR assumes you’ll pay your mortgage off at term, at never sooner. So, if your loan is a 15-year fixed rate, its APR is based on a full 15 year term. If you sell or refinance prior to Year 15, the math used to make your loan’s APR becomes instantly flawed and “wrong”.
Example: Let’s compare two identical loans in Georgia — one with discount points and a lower interest rate; and one without discount points and a higher mortgage rate. The loan with discount points will have a lower APR in most cases. However, if the homeowner sells or refinances within the first few years, the loan with the higher APR would have been the better option, in hindsight.
Second, APR can be “doctored” early in the loan process.
Because the APR formula accounts for third-party costs in a mortgage transaction, and third-party costs aren’t always known at the start of a loan, a bank can inadvertently understate them. This would make the APR appear lower than what it really is, and may mislead a consumer.
And, lastly, APR is particularly unhelpful for adjustable-rate loans. Because the APR calculation makes assumptions about how a loan will adjust during its 30-year term, if two lenders use a different set of assumptions, their APR’s will differ — even if the loans are identical in every other way. The lender whose adjustments are most aggressively-low will present the lowest APR.
Summarized, APR is not the metric for comparing mortgages — it’s a metric. For relevant comparison points, talk to your loan officer.
Simple Real Estate Definitions : Short Sale
A “Short Sale” is when a home seller sells his home for a lesser amount than what is owed on his mortgage, and the mortgage lender agrees to accept the lesser amount in lieu of a full payoff.
By way of example, a Short Sale may be appropriate for someone Selling a Home in Blairsville whose mortgage balance is $250,000 but whose home wouldn’t sell for more than $220,000. Rather than pay the $30,000 difference to the lender at the time of sale, the seller enters into an agreement with the lender by which all sale proceeds are paid to the bank and the deficient balance is forgiven.
Short Sales are a preferable alternative to foreclosure but the process still harms both parties. For one, the seller is penalized with a derogatory tradeline on credit for not fulfilling a mortgage obligation. And, two, the lender is forced to take a loss on a mortgage loan. Versus an executed foreclosure, however, Short Sale damages are relatively limited on both sides.
For this reason, Short Sales are sometimes considered “the economical alternative” to default.
The process of getting a Short Sale approved varies from lender-to-lender and can be time-intensive. Home sellers should not go at it alone — speaking with a real estate agent about the proper protocol is usually the best place to start. And sellers should be aware of how a Short Sale on their credit can impact future borrowing.
Current Fannie Mae guidelines prevent short-selling homeowners from obtaining new mortgage financing for a period of 2 years.
Click Here to see a Home For Sale in Blairsville that I currently have listed as a Short Sale. If you are facing a hardship such as your home’s value being less than what you owe on your mortgage, or if you are possibly facing Foreclosure, I may be able to help, but you need to call me at 706.994.8686 before it is too late.
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The Simple Explanation Of APR
Posted by Chad Lariscy on November 18, 2009 | Comments (0) | Tags: Conforming Loan Limits
APR is an acronym for Annual Percentage Rate. It’s a government-mandated calculation meant to simplify the comparison of mortgage options.
A loan’s APR can always be found in the top-left corner of the Federal Truth-In-Lending Disclosure.
Because APR is expressed as a percentage, many people confuse it for the loan’s interest rate. It’s not. APR represents the total cost of borrowing over the life of a loan. “Interest rate” is the basis for monthly mortgage repayments.
The main advantage of APR is that it allows an “apples-to-apples” comparison between loan products.
As an example, a 5.000 percent mortgage with origination points and fees will almost certainly have a higher APR than a 5.500 percent mortgage with zero fees. In this sense, APR can help a borrower determine which loan is least costly long-term.
However, APR is not without its shortcomings.
First, different banks includes different fees into their APR calculations. By definition, this spoils APR as a choose-between-lenders, apples-to-apples comparison method.
And, second, when calculating APR, “life of the loan” is assumed to be full-term. When a 30-year mortgage pays off in 7 years or fewer — as most of them do — APR comparisons are rendered moot.
In other words, APR is just one metric to compare mortgages — it’s not the only metric. The best way to compare your mortgage options is to review all the loan terms together and determine which is most suitable.
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Escrow Account…..What's That?
An escrow account is a designated savings account into which funds get deposited for a specific purpose.
With respect to real estate and home loans, escrow accounts are used to pay real estate tax bills and homeowners insurance payments.
Escrow accounts are managed and disbursed by lenders.
When a homeowner “escrows” his mortgage, along with his scheduled monthly mortgage payment, he must also send an additional payment to the lender equal to 1/12 of the home’s annual real estate tax bill plus 1/12 of the annual homeowners insurance bill.
By sending a pro rata portion of the tax and insurance bill each month, the homeowner’s escrow account will always, in theory, have enough funds to make payments in full as tax bills and insurance premiums come due.
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What Exactly Is A Quitclaim Deed?
By its most common definition, a quitclaim deed is a document by which one person passes legal and financial ownership of a home to another person.
It’s also a way for an owner of a home to remove himself from the title to the property.
Often misspelled as “quick claim deed” or “quit claim deed”, quitclaim deeds have a multitude of applications, including:
- Assigning a home to a trust or entity
- Adding a partner to title after marriage
- Removing a partner from title after divorce
In order to quitclaim a property, the grantor must have the legal right to assign the property to a grantee, or else the quitclaim deed is worthless. For example, you can quitclaim your interest in City Hall to your neighbor, but it would have no practical or legal consequence because you don’t actually own City Hall.
This is where quitclaim deeds vary from warranty deeds (or grant deeds) — the types of transfers that occur when real estate is sold. In instances of the former, the title to a home is guaranteed to be clear.
Before using a quitclaim deed on your own home, consult an estate planning attorney. Transferring real property can trigger ruin a will, or trigger taxes — it’s important to consult a professional for help.
If I can be of any assistance to you or point you in the right direction, please feel free to call me at 706-994-8686, or Contact Me today.
You might also enjoy learning more about Estates and Title To Property.
Make it a GREAT day!
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Explaining What The Federal Reserve Did In Plain English
The Federal Open Market Committee voted to leave the Fed Funds Rate unchanged today, within the target range of 0.000-0.250 percent. This doesn’t mean the Fed stood pat, however.
On plan to resurrect the economy using “all available tools”, today, the Fed announced a new, $1.5 trillion round of fiscal support for the treasury and mortgage markets.
The stimulus will likely be Thursday morning’s headline story.
In its press release, the FOMC touched upon a few of the prevailing economic issues, using these points as a legitimizing backdrop for its newest debt load:
- Job losses and wealth loss are dragging down consumer spending
- Some U.S. trading partners are falling into recession
- Businesses are cutting back on investment and inventory
Of interest is that the FOMC said today’s inflation levels may be too low to support economic growth at all. This condition is more commonly called deflation. The Fed’s latest actions, therefore, may be a deliberate attempt to induce inflation through unprecedented borrowing.
For home buyers and potential refinancers, this is terrific news — at least in the short-term. By introducing new demand for mortgage bonds, the Fed will help pressure mortgage rates lower. Already this afternoon, mortgage rates fell and they will continue to fall until the market reaches a new equlibrium.
After the Fed’s last intervention, markets reached their balance point in about a day-and-a-half.
Source
Parsing the Fed Statement
The Wall Street Journal Online
March 18, 2009
http://online.wsj.com/public/resources/documents/info-fedparse0903.html
Did You Say Chattel?
Have you ever heard someone mention the word “Chattel” and wonder what in the world they were talking about? Me neither. Of course I knew they were talking about Personal Property.
So What is Chattel?
Chattel is just another word for Personal Property. It comes from the word Cattle which has the meaning of possession or ownership. I can just hear it now, thinking of the wild west, “those are my cows, that’s my chattel.” Chattel is something that is NOT “Usually” hard to move, or simply not attached. For example, a grill or possibly a picnc table out on the deck. How about those Rockers out on the Front Porch up here in these Beautiful Georgia Mountains sitting back and soaking up the views. Rocking Chairs are Chattel in case you got lost in all of that!
One very important thing to remember when buying or selling a home or cabin in the North Georgia Mountains, is that your Chattel cannot be factored into the appraisal when it is being included in the sales price of the home or cabin. Chattel is typically sold using a Bill of Sale. This instrument is used to transfer personal property from one person to another.
So when you hear the word Chattel, you will undoubtedly know that they are talking about personal property.
I would absolutely love to be your North Georgia Mountain Realtor. So if you ever have a need, please feel free to contact me. I can speak for my entire family when I say that I know we will be very grateful just for the opportunity to meet and exceed your needs.
Make it a GREAT day!
Estates And Title To Property
Guest Author J. Byron Wyndham has written a post to help us understand a little more about Estates and how to go about ensuring that proper Title is obtained before listing a North Georgia Mountain Property and ultimately closing the sale at the Attorney’s office.
All Real Estate Agents need to be very careful when listing property that is part of, or coming from or through an estate or probate action.
In dealing with Joint Tenants with Right of Survivorship, we do not have to worry about probate action. When one party dies, the Title is automatically transferred to the surviving Spouse, Partner, or Tenant. But sometimes the surviving Spouse, Partner, or Tenant thinks there is right of survivorship when actually there is not.
If the Title is coming from an Estate, or from a Surviving Spouse, Partner or Tenant, it is very prudent and advisable that the Listing Agent asks a lot of questions. The main problem we see when handling sales from an Estate is that often the Seller does not really know the status of Title within the Estate.
I once had an Executor tell me that he would be in my office to sign the Deed since he had full power as the Executor. We kept asking questions because we were unable to locate the Will and the Estate. We were concerned that the Estate was probated in a county other than where the property was located. After a lot of questions, and back and forth, I realized that the Will had never been probated. The “Executor” was named as the Executor in the Will but we had to explain to him that he was not the Executor until the Probate Court probated the will, named him the Executor, and granted him the appropriate powers.
It is so important to know the status of the Estate ahead of time. Sometimes we have to track down missing heirs, locate the original Will and even probate the Will prior to closing. So often the heirs know there is a problem but don’t know what to do about it. Estate issues need to be addressed prior to closing and not while everyone is sitting at the closing table.
Thanks Byron for your insight and thoughts on Estates and Title to Property. I guess from now on when I hear the word Estate, you better believe I will be asking a lot of questions. If you have any questions or concerns about Real Estate, I would be more than happy to assist you in anyway that I can. I may not know the answers, but I know who, where, and how to get the answers. So give me a call at 706.633.8186, or you can Contact Me now.
Thank you for coming up on “The Porch” today, and please come back each and every opportunity that you have.
Make it a GREAT day!
Real Estate Made Simple…Even I Can Understand!
I was recently asked the definition of Appurtenance by one of my readers, and now good friend and client. After answering his question, it made me stop and think that if he didn’t fully understand what an Appurtenance was, then how many other folks who have been on The Porch may not either? So I came up with a brilliant idea to begin a category of Real Estate Made Simple, and hopefully I will be able to write some interesting posts that will explain Real Estate a little more at my speed, how we know it in the North Georgia Mountains.
Before I further explain Appurtenance, I first need to explain Land. You see, Land is just simply a spot on Earth, and Land has 3 parts. It has the Surface, which has it’s “Surface Rights.” Then it has what is above the Surface, known as “Air Rights.” And third, it has the Sub Surface below, better known as “Mineral Rights.” Now these “Rights” are able to be separated and divided. Land has both Physical and Economic characteristics. Some Physical Characteristics of land are for one it is immovable, making it good for use in securing debt. It is also indestructible, it does not ware out. Lastly, it is Non-Homogeneous which means it is unique. We have all heard the most famous term in all of Real Estate, “Location, Location, Location.” Lands Economic Characteristics are Situs, again meaning Location making it have a preference. Second economic characteristic is it’s Scarcity, better explained as Supply relative to Demand. Another is Permanence of Investment; Fixity, meaning it is not typically a short term investment.
Now you may ask what this has to do with Appurtenance, well you see the term Real Estate is defined by it’s Land + Appurtenances.
Therefore, Land + Appurtenances = Real Estate.
