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Closing Costs Explained Visually ‘Good Introduction’ to Settlement Process

August 27, 2009 Leave a comment

If you’re shopping for a home and haven’t had a chance to watch this quick introduction to title insurance, you may want to check it out. While “Closing Costs Explained Visually” is targeted toward consumers, real estate experts are also finding it useful.

“Rather than a detailed step-by-step dissertation on title and escrow — which many consumers really need before the home buying begins — the two-minute Federal Title & Escrow Co. video is useful as a primer to get you into the basics of the process,” writes Broderick Perkins, editor of Deadline News and the Real Estate News Examiner blog.

After a proper intro to the settlement process from Federal Title, home shoppers may then want to read Perkins’ thorough three-part title insurance series for a better understanding of today’s title insurance industry.

My favorite installment: Part 3 – Shop Around for Title, Escrow Services.

Title insurance companies sometimes get a bad rep, but we’re not all bad. Some companies are committed to giving their customers the lowest rate possible on insurance premiums. Federal Title for one is saving home buyers as much as $2,000 through our REAL Credit Program.

As a home buyer, the more you know about the settlement process, the more you’ll be able to save on closing costs.

Washington Post Shows No Love for Title Insurance

August 26, 2009 Leave a comment

By Nikki Smith
Marketing Director
Federal Title & Escrow Co.

The Washington Post ran an article in last Sunday’s paper called Easing the Pain of Closing Costs. Considering closing costs pertain largely to the title insurance and escrow services, I was a little surprised to see just three sentences about choosing the right title company. See below:

Find cheaper title insurance. Title insurance protects against challenges to your ownership, with separate coverage for your lender and for you. But as much as 80 percent of the premium goes to paying commission to a title agent. Shop around for title insurance.

I wanted to throw in my two cents in the comments section at the WaPo website but the comments section has been closed! So since I already went the trouble of cobbling some thoughts together, I’ll leave them here:

Where’s the love for title insurance? Three sentences is all?!?

If somewhere down the road a title defect comes to light, title insurance is all a home buyer has to protect his/her real estate investment. In DC, the most common title defect is a result of fraud.

Lenders require home buyers to purchase a lender’s title insurance policy, while an owner’s policy is optional. So there is an opportunity to save some money there.

You can choose between standard coverage or enhanced coverage, too. Some title companies may downplay the standard option, but in many cases a standard policy is sufficient. And it’s cheaper.

The main thing for home buyers to know if they have the right to choose: Home buyers choose the policy, and they can choose what title company handles the settlement. So don’t let a mortgage lender or real estate agent steer you toward a title company without doing a little cost comparison of title companies on your own. Lots of companies offer online quotes. Some title companies (like Federal Title) offer extra savings just for ordering services directly from them online.

This video is a good introduction to the overall process.

… Anyway, the article represents title insurance unfairly. Yes, it can cost thousands of dollars on top of the sale price of your home (around 3-6 percent extra depending on where you live), but the peace of mind is worth it in the long run.

Here’s a final thought: If closing costs are outside your budget, consider offering the seller more money for the home in exchange for him/her covering settlement and escrow fees.

New RESPA Rule FAQs – HUD-1 Forms

August 20, 2009 Leave a comment

1) Q: How are courier and overnight delivery fees shown on the HUD-1 Settlement Statement?

A: Courier and overnight delivery fees are considered to be fees for administrative or processing services. They are part of a primary service, such as the origination service or title service, and may not be separately itemized.

2) Q: Does voluntarily using the HUD-1 in a transaction that otherwise is not subject to RESPA result in RESPA applying to the transaction?

A: No, using the HUD-1 form does not subject a transaction to coverage under RESPA.

3) Q: Does “conducting a settlement” (from the definition of “title service”) have the same meaning as “conducting the closing”?

A: Yes. The terms “conducting a settlement” and “conducting the closing” have the same meaning under HUD’s RESPA regulations and are subject to identical requirements under the regulations.

4) Q: What if at closing the seller is paying for a settlement service that was listed on the GFE, such as the Owner‘s title insurance policy? How is this shown on the HUD-1?

A: If the seller is paying for a service that was on the GFE, such as Owner‘s title insurance, the charge remains in the borrower‘s column on the HUD-1. A credit from the seller to the borrower to offset the charge should be listed on the first page of the HUD-1 in Lines 204-209 and Lines 506-509 respectively.

5) Q: If there are additional government recording fees, such as to record a power of attorney or road maintenance agreement, are they included in Line 1201 of the HUD-1 or can they be charged separately?

A: Line 1201 is used to record the total government recording charges. Additional items the lender requires to be recorded, other than those already enumerated in Line 1202, must be itemized on Line 1206. The charges for these additional items must be stated outside the column.

6) Q: How do settlement agents get the information to prepare page 3 of the HUD-1? Do they have to search through all of the loan documents to get this information?

A: The lender is required to transmit the information necessary to complete the HUD-1. The instructions for completing the HUD-1 state that the lender must provide information to the settlement agent in a format that permits the settlement agent to simply enter the necessary information to complete the loan terms section on page 3 of the HUD-1 without having to refer to the loan documents.

7) Q: Is it a violation of the tolerance if some of the items in the 10% category in the Comparison Chart exceed 10%, but other items in the category do not exceed 10%?

A: The tolerance applies to the total of all charges shown in the category ―Charges That in Total Cannot Increase More Than 10%.‖ A tolerance violation of this category means that the total of all actual charges in this category exceed the total of all estimated charges in this category by more than 10%.

*The preceding Q&A was originally published on the HUD website.

Federal Title President Joins Expert Click Community

August 17, 2009 Leave a comment

Todd Ewing, president of Federal Title & Escrow Company is among the newest members of the Expert Click community. Expert Click connects journalists and experts in a variety of fields. For information about the title insurance business, how to calculate closing costs and laws and regulations like the Real Estate Settlement Procedure Act, or RESPA, visit Todd’s profile.

MD 1st Time Homebuyers: True/False

August 13, 2009 Leave a comment

STATEMENT: As long as you have not owned a principal residence in Maryland in three years, you qualify as a Maryland First Time Homebuyer.
FALSE: The code does not provide a reset clause – if you have ever previously owned a principal residence in Maryland, no matter when, you are not eligible for the exemption.

STATEMENT: If you have previously owned a property in Maryland, but have never lived in that property, you qualify for the exemption.
TRUE: The requirement is that you must not have previously owned a principal residence in Maryland. Previously owning a non-principal residence does not disqualify you, as long as the property that you are purchasing will be your principal residence.

STATEMENT: It does not matter how you title the property, you will receive the exemption as long as you are a Maryland First Time Homebuyer.
FALSE: If the purchaser is a Trust, a Partnership, an LLC, or a Corporation, it can not qualify as a Maryland First Time Homebuyer.

STATEMENT: If two people are buying a principal residence, as long as one of the buyers has never previously owned a principal residence in Maryland, they can receive the exemption.
FALSE: Every purchaser who intends to live at the property as a principal residence must have never previously owned a principal residence in Maryland.

STATEMENT: While I qualify for the exemption, my parents who will be on title only to help me get the loan disqualify me since they already own a principal residence in Maryland.
FALSE: The Maryland Code will still allow the exemption as long as the parents sign an affidavit stating that they are a co-maker or guarantor of a purchase money deed of trust and that they will not occupy the residence as their principal residence.

Location Survey – WHY?

July 15, 2009 1 comment

The GCAAR Regional Sales Contract makes only one reference to the survey and is found in para.#19 as follows: “The title report and survey, if required, will be ordered promptly . . . .” Note the key phrase “IF REQUIRED.” What does that mean?

“IF REQUIRED” means if required by the purchaser’s lender. Nearly all mortgage lender underwriting will require the title insurer to issue a lender’s title insurance commitment without exception to survey matters. In other words, a lender will not accept a title insurance policy without coverage for survey matters.

Closing Costs Explained Visually

Finally – our new video!!
We have been working on producing a video that explains closing and settlement costs, visually. Buying a house is a huge financial committment and one that should not be taken lightly. The number one question we get from buyers and borrowers is “How much is this going to cost?” While there is no easy way to answer this question, we have created a suite of tools to get buyers and borrowers started.

But this new video is the one we are most excited about, take a look and let us know what you think.