KW EL Cajon

What You Must Know About Insurance When Buying a Home

homeinsurance

Purchasing a home involves getting to know a lot of financial terms and processes that most first-time homebuyers have never been exposed to. One of the most confusing is insurance. If you’ve never owned a home before, your familiarity with insurance most likely centers around auto insurance, health insurance, life insurance and, perhaps, renter’s insurance.

Even then, your level of familiarity may be minimal, if you are like most Americans. In fact, a mere 14 percent of those who have health insurance understand even the most basic insurance jargon, such as deductibles, co-payments and co-insurance, according to a study published in the Journal of Health Economics.

The various types of insurance required in the average real estate transaction are even less understood, so let’s take a look at them and get you up to speed.

Title Insurance

Title insurance comes in two varieties: a lender’s policy and an owner’s policy. If you take out a mortgage to purchase the home, your lender will require that you purchase a lender’s policy. This protects the lender from anyone else who thinks he is the rightful owner or otherwise has a claim against the property.

Depending on where you live, you may also be required to purchase an owner’s title insurance policy. In other areas, the purchase is voluntary.

The issuance of either policy is based on research of the property’s title, or the “chain of title” as it is known. The examiner will look at public records, such as deeds, wills and trusts to ensure that the wording is proper and that the names on the documents are correct. She will look for outstanding mortgages, judgments and any liens against the property. She will check easements, look for pending legal action against the property and more.

Should the examiner find problems on the title, they will need to be remedied before the purchase can be completed.

Once the policy is in place, the lender (and you, if you purchase an owner’s policy) is insured against unknown heirs coming forward claiming ownership, forged signatures on the deed, mistakes in the public records, and other hidden hazards.

Homeowners Insurance

You may hear homeowners insurance referred to as hazard insurance, but they are one and the same. Again, if you take out a mortgage to purchase the home, the lender will require that you purchase homeowners insurance.

While coverage varies, most policies cover fire damage or loss, theft, wind damage, hail damage, vandalism and more. Some perils aren’t typically covered, such as flood and earthquake damage, but there may be supplemental insurance that you can purchase to cover these hazards.

Your insurance agent can help you determine how much coverage you require, based on the loan amount and what it might cost to rebuild the home.

Payments to the insurance company are either kept in an escrow account sent in with your mortgage payment or the homeowner pays the premium on her own – it varies by insurer.

If you suffer a loss, the insurance company will typically make out the check to both you and the lender.

Private Mortgage Insurance

Private mortgage insurance is something most homebuyers and homeowners would love to get rid of, but it’s a necessary evil. Without it, many buyers would not be given a mortgage and thus not be able to purchase a home.

PMI is required of borrowers whose down payment is less than 20 percent. Because these borrowers are considered higher risk, the lender needs assurance that it will get its money should the borrower default on the loan.

Because the borrower pays the premium (typically added to the monthly mortgage payment), it seems that the lender is the only party that benefits. Keep in mind, however, that without PMI, lenders would demand a 20 percent down payment. Therefore, the cash-poor borrower reaps an enormous benefit.

The good news about PMI – at least for those with conventional loans – is that you can request a cancellation of the insurance once your loan balance reaches 80 percent of the original value of the home. Unfortunately, borrowers with an FHA-backed loan are locked into paying mortgage insurance premiums for the life of the loan, if they put less than 10 percent down. Borrowers who pay more than 10 percent, but less than 20 percent, can cancel the mortgage insurance in 11 years.

The best people to speak with if you have questions about any type of insurance required during the home-purchase process are your lawyer, your real estate agent and your insurance agent.

Your Local San Diego Real Estate Expert,

Stephen Nissou, Realtor ®
CalBRE # 01443193

NIssou Realty Group   |   Keller Williams Realty – El Cajon
680 Fletcher Pkwy. El Cajon, CA 92019
619.250.4541   |   619-873-2772 Office
Stephen@StephenNissou.com
http://www.StephenNissou.com

Stephen

Do I Have To Sell Before I Buy

originalThe ultimate question in real estate for buyers: Do I have to sell my existing home before I buy a new home? It’s not uncommon for home buyers to qualify for a mortgage on a new home while still living in their existing home.

If you buy something and the clock starts ticking on selling the home you currently occupy because you need that money to close on the house you are ready to purchase. During the time that the market is scary-slow and sales are plummeting, this could be a scary proposition. So you sell first….

But what if you can’t find anything you like in the neighborhood you want. Are you prepared to rent?

It’s a tough decision to make. Realtors alike will say that you should sell your home and then start shopping for a new one. But in the current housing market, with multiple offers being the norm and the average time a home on the market is about 30-40 days, the process is now reversed. Realtors are their clients to start buying first, knowing that their home will sell quickly and easily.

Ultimately it comes down to your view of the market. You want to buy first, you have to be confident that your home will sell.

Your Local San Diego Real Estate Expert,

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The Foreclosure Process

Foreclosure

A Foreclosure is defined as “the process of taking possession of a mortgaged property as a result of the mortgagor’s failure to keep up mortgage payments.” To simplify, it’s the act of a home being taken away from you due to your failure of paying the mortgage payments.

When someone buys a home, they sign a mortgage or deed of trust. This document puts a lien on the property, making the loan a secured loan. When the lender loans you money without any type of collateral (credit card debt, etc.) they can take you to court for failure of payment.

What types of foreclosures are there?

There are two different types of foreclosures in the US – Judicial or Non-judicial. In a Judicial Foreclosure, the lender will seek to foreclosure by filing a civil lawsuit against the borrower. It is handled through the local court system, where the court appoints a referee to conduct the foreclosure auction on the courthouse steps. The lender will record a lis pendens with the country clerk, which becomes a lien on the property and gives notice to the pending foreclosure auction. The court will grant judgment permitting the lender to conduct the foreclosure auction. This process takes up to 4-8 months to complete.

The second type of foreclosure is a non-judicial foreclosure. It is followed by the deed of trust states. A deed of trust is an interest in real property to a third- party to hold as security for repayment of a debt. The trustee has the authority to initiate foreclosure proceedings by virtue of power of sales. The trustee will record a notice of default with the county clerk and gives notice of the impending foreclosure. It also grants the borrower a period of time in which to object the lenders claim o pay what he owes. The borrower may not stop the foreclosure after the expiration of this time period.  After the expiration of this time period, the trustee will record a Notice of Trustee’s Sale with the county clerk, which will establish the date, time, and place of the foreclosure auction. It can take up to 12 months to complete the foreclosure, depending on the state.

What is the Foreclosure process?

There are five stages of the foreclosure process.

Stage 1: Missed Payments – Foreclosure starts when a borrower fails to make timey mortgage payments. This can be due to financial hardships, such as unemployment, divorce, death, or medical related issues. Other times, borrowers decide to stop paying because the property mortgage exceeds the value of the home, or they are tired of managing the property.

Stage 2: Public Notice – After about 3-6 months of missed payments, the lender makes a public notice with the County Recorder’s Office, which indicates that the borrower has defaulted on their mortgage. This is also known as a Notice of Default. This official notice allows the borrower to be aware that they are in danger of losing all legal rights to their property and they may be evicted from the premises.

Stage 3: Pre-Foreclosure – After you receive Notice of Default the borrower will enter the “pre-foreclosure” phase, which takes anywhere from 30-120 days. The borrower can try to work out an arrangement with the lender via a short sale or pay the outstanding amount owed on the property. If the borrower decides to pay off the default during this phase, foreclosure ends and the borrower avoids home eviction and sail. If it is not paid, the foreclosure continues.

Stage 4: Auction – If the default is not remedied, the lender sets a date for the home to be sold at a foreclosure auction. It is recorded with the County Recorder’s Office that is posted on the property. Auctions are sometimes held at the courthouse, or the property itself. In some states, the borrower has the right of redemption, where he can come up with the outstanding cash and stop the foreclosure process up the moment the home will be auctioned off. At the auction, the home is sold to the highest cash bidder. Many lenders make agreements with the borrower (called the “deed in lieu of foreclosure) to take the property back because of the limited amount of buyers who can pay cash only for the property. Sometimes, the bank will buy the property back at the auction.

Stage 5: Post-Foreclosure – If a third party does not purchase the property at the foreclosure auction, the lender will take ownership of the property and it becomes known as a bank-owned property or REO, Real Estate Owned. Bank-owned properties are then listed with a local real estate agent for sale on the market, or some lenders prefer to sell their properties at a liquidation auction.

What are your rights as a tenant during a foreclosure?

If there are tenants in the house that was foreclosed on, the new owner has to honor the existing lease. When the tenants have a month-to-month lease the new owner can evict the tenants or former owner/landlord. You can offer the existing tenants a new lease or rental agreement, or begin the eviction process.

 

Your Local San Diego Real Estate Expert,

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KW’s RED Day!

Nissou Realty Group is out today to celebrate Keller Williams El Cajon’s RED Day!

RED Day, introduced in 2009, is Keller Williams day of giving back to the community. RED stands for Renew, Energize, and Donate. Each year on the second Thursday of May, associates from all over the world spend the day away from their businesses serving worthy organizations and causes in their communities. RED Day is just another example of our commitment to each other and to the cities and towns where we live and work.

Today, we are out cleaning and beautifying Santee Lakes! Be part of all the fun from 9am-3pm!

Red Day Flyer Final