“They’re not makin’ any more of it, so get it while you can!” These are the words of so many of our ancestors that it would be ludicrous for me to claim that my great-great-great grandfather said it first. And in the first land run (April 22, 1889) the land we now know as Canadian, Cleveland, Kingfisher, Logan, Oklahoma and Payne counties were settled.
The following four land runs (September 22, 1891; April 19, 1892; September 16, 1893; and May 23, 1895) most if not all the remaining lands now known as Oklahoma. In each case settlers would stake their claim and then register their claimed lands with the assessor. The assessor filed the claims as a matter of public record and this public record was the start of what is now known as a land abstract.
The land abstract (hereafter referred to as simply, the abstract) contains a documented record of every transaction (including liens and property divisions) on a specified parcel of property. Many of these documents are inches thick and contain many interesting stories, some of which precede statehood.
Pete Katzdorn General Counsel with Elite Title and Escrow in Edmond chuckles as he relates the contents of one such abstract.
A husband and wife were not only marriage partners but business partners in a farm raising pigs for slaughter. For some unknown reason the wife separated herself from her husband and wanted a divorce which he was in no mood to grant. There must have been several attempts to serve her husband with the divorce papers when she came up with a cunning plan.
She was able to convince her husband that she needed his help for something very important on the farm. He finally agreed to come and help with what he thought was a call to butcher a hog. Instead when he arrived he was served divorce papers. “It just goes to show that some married couples should not be business partners and that our state’s abstracts hold a great deal of history” Stated Mr. Katzdorn.
Katzdorn says recent changes to Oklahoma law allow title preparation in some instances to take place without a complete search of the abstract. Prior to this change, title companies were required in all cases to locate and retrieve abstracts before preparing and insuring title work on a home, or land. But since July 1st of this year Katzdorn says, “Borrowers how have a choice. They can either update an abstract or use a prior owner’s title insurance policy in place of a base abstract as part of their updated title.”
These recent changes in Oklahoma title law have made it possible to streamline title preparation in some instances; however the costs associated with title work have not decreased. “Even though title costs have not decreased” Katzdorn says, “costs for Oklahoma title work are low when compared to the fees allowed in many other states.”
Because private citizens are allowed to maintain possession of their property’s abstract, this search often ends in the admission that the compiled document is not to be found. In this event, it becomes necessary that a new abstract be built requiring many days and fees sometimes amounting to $1,500 or more.
In addition when Katzdorn compares other statistics, he says the land records kept by Oklahoma are more comprehensive than many other states which results in a lower number of law suits.
Abstracts can provide some interesting reading but for the most part they are filled with endless ramblings of legal jargon. For most home and land owners the abstract is best protected when it is kept with one of the many title companies that serve our great state.
Thursday, August 14, 2008
Friday, July 18, 2008
5 Ways to Save Big on Your Next Mortgage
Buying a mortgage is something most people do only a few times in their lives. In fact most endure the car buying process quite a few times more often than they do the mortgage closing. In both of these cases the buyers make one critical mistake; they misunderstand their roll as a buyer (a.k.a. soon to be owner of a home or car) instead of a borrower.
Yes you do get to move into the house after closing and yes you have technically “bought” the home. But you have used other people’s money to purchase the house and we all know they expect to be well paid for the money they allow you to use.
I’ve written several articles on how to get the lowest interest rate, if you would like copies of these, please contact me and I’ll be glad to provide them to you. But I want to focus this article on how to save money when you are actually purchasing the mortgage. You must be aware that you are purchasing a mortgage first and it is this instrument that allows you to over time, purchase the home.
First, read and understand the paperwork. All fees and costs I will address in this article show up under various names on the Good Faith Estimate of Closing Costs (GFE). Before agreeing to buy any mortgage, you should carefully examine this document. The GFE details the estimated costs of closing the mortgage; lender and broker fees, third party fees, title company costs and any other associated charges.
The other critical document is the Federal Truth in Lending (TIL). This paper shows more than the amount being financed, the total finance fees paid and the total payments made over the life of the loan, it also reports the Annual Percentage Rate (A.P.R.) for the mortgage. The A.P.R. is not the interest rate charged on the loan but the factored result of a formula developed by H.U.D. to help borrowers compare costs of different lenders. The lower the A.P.R., the lower costs associated with the mortgage purchase.
Second, beware of excessive Lender and/or Broker fees. It’s not that we mind the Lender/Broker making a living; we just don’t want them making their entire month’s income on our deal. It is not excessive to see a Broker Fee of 1% of the loan amount. At the same time this fee is almost always negotiable. So negotiate.
Third, do the math on discount points. It is nearly always possible to “buy” a lower interest rate by paying discount points. The secret to making discount points work in your favor is to compare the cost of buying the lower interest rate with the amount the lower rate will save on your monthly payment. For example, a $200,000 mortgage at 6% fixed for 3o years would have a monthly payment of $1,247.74 (principal and interest). Paying a full discount point (1% of the loan amount, or $2,000) might net you a 6% interest rate which would drop your monthly payment to $1,199.10; a monthly savings of $48.64. By dividing the cost of the lower rate, $2,000 by the monthly savings $48.64 you discover that the “break even” point for the lower rate is 41 months or nearly 3.5 years. You will have to make the decision whether or not this works in your favor.
Fourth, avoid markup on third party expenses. Some Lenders/Brokers up-charge appraisal and inspection fees if they are not paid at the time services are provided. You can avoid any up-charge by paying the appraiser directly for his/her services. The same can be done with the home inspector and the pest inspector.
Fifth, carefully watch title costs. This is one area where closing costs rapidly mount up. There are attorney fees, document fees, courier fees, title insurance, abstracting fees, GAP fees, document stamps, filing fees, etc. Most of these fees are competitive between different title companies. But if you are in a city with multiple title companies, take the time to shop. Think of these fees as the title company’s commission for earning your business. Ask them where they can shave some of your closing costs. Even a few hundred dollars makes a difference.
Yes you do get to move into the house after closing and yes you have technically “bought” the home. But you have used other people’s money to purchase the house and we all know they expect to be well paid for the money they allow you to use.
I’ve written several articles on how to get the lowest interest rate, if you would like copies of these, please contact me and I’ll be glad to provide them to you. But I want to focus this article on how to save money when you are actually purchasing the mortgage. You must be aware that you are purchasing a mortgage first and it is this instrument that allows you to over time, purchase the home.
First, read and understand the paperwork. All fees and costs I will address in this article show up under various names on the Good Faith Estimate of Closing Costs (GFE). Before agreeing to buy any mortgage, you should carefully examine this document. The GFE details the estimated costs of closing the mortgage; lender and broker fees, third party fees, title company costs and any other associated charges.
The other critical document is the Federal Truth in Lending (TIL). This paper shows more than the amount being financed, the total finance fees paid and the total payments made over the life of the loan, it also reports the Annual Percentage Rate (A.P.R.) for the mortgage. The A.P.R. is not the interest rate charged on the loan but the factored result of a formula developed by H.U.D. to help borrowers compare costs of different lenders. The lower the A.P.R., the lower costs associated with the mortgage purchase.
Second, beware of excessive Lender and/or Broker fees. It’s not that we mind the Lender/Broker making a living; we just don’t want them making their entire month’s income on our deal. It is not excessive to see a Broker Fee of 1% of the loan amount. At the same time this fee is almost always negotiable. So negotiate.
Third, do the math on discount points. It is nearly always possible to “buy” a lower interest rate by paying discount points. The secret to making discount points work in your favor is to compare the cost of buying the lower interest rate with the amount the lower rate will save on your monthly payment. For example, a $200,000 mortgage at 6% fixed for 3o years would have a monthly payment of $1,247.74 (principal and interest). Paying a full discount point (1% of the loan amount, or $2,000) might net you a 6% interest rate which would drop your monthly payment to $1,199.10; a monthly savings of $48.64. By dividing the cost of the lower rate, $2,000 by the monthly savings $48.64 you discover that the “break even” point for the lower rate is 41 months or nearly 3.5 years. You will have to make the decision whether or not this works in your favor.
Fourth, avoid markup on third party expenses. Some Lenders/Brokers up-charge appraisal and inspection fees if they are not paid at the time services are provided. You can avoid any up-charge by paying the appraiser directly for his/her services. The same can be done with the home inspector and the pest inspector.
Fifth, carefully watch title costs. This is one area where closing costs rapidly mount up. There are attorney fees, document fees, courier fees, title insurance, abstracting fees, GAP fees, document stamps, filing fees, etc. Most of these fees are competitive between different title companies. But if you are in a city with multiple title companies, take the time to shop. Think of these fees as the title company’s commission for earning your business. Ask them where they can shave some of your closing costs. Even a few hundred dollars makes a difference.
Friday, June 27, 2008
Fixing Credit for Home Purchase
I still answer phone calls almost daily from people wanting to get pre-approved for a home loan who have no down payment and a credit profile with more problems than the agent responsible for resurrecting Brittany Spears acting career. These are well meaning people who could buy a home for what they are paying in rent, if only their credit allowed them to do so.
A well dressed couple sitting across from the desk from me tells me they want to purchase a $175,000 home in a nice subdivision here in Edmond. “My credit isn’t so good. My score is about a 560. I’ve been working on improving my scores, but I don’t know how to speed up the process.”
Genuine empathy is the best way I can describe my feelings for this couple. He continues. “We pay our mortgage and credit card payments on time but the three credit cards we have are maxed out at the $500 limit. The limits are so low because when we got them our credit was really bad. We’re not sure if we should pay these balances off. And we don’t know how to get the recorded slow pays and collections off our credit report.”
This is just one example of the many that regularly come my way. Make no mistake, their credit score of 560 is much worse than “not so good”, it’s awful. Consider that credit scores range between 300 and 850 and that half the adults in America have at least a 700 credit score. Anything below 620 is considered sub-prime. Even FHA cuts off loan approval for scores below 580.
According to credit score creator Fair Isaac, people with credit scores between 550 and 599 have a 51% chance of defaulting on a home loan or any credit account. Contrast this figure with the 2% likelihood of default from people with scores over 750 and it becomes obvious why lending guidelines have tightened significantly for lower scored borrowers.
There is no “quick fix” for credit scores. Think about it; you probably didn’t get into your situation over night and you’re not going to get out of it in a week or two. Most likely it will take several months or even years to correct negative credit reporting.
Still you can speed up the credit repair process by paying all credit card balances in full and never use more than 10% to 20% of the available funds on any one card and pay those balances in full each month. This is the fastest way to improve credit scores.
If you find yourself using 30% or more of the available balance each month, you should consider asking the card carrier for an increased limit. By keeping the amount of utilized credit at or below 20% your scores should realize the maximum benefit.
While rebuilding credit scores it would also be a good idea to be saving up money for a down payment and closing costs. Unless you are a veteran with V.A. benefits, the smallest down payment any lender allows is 3% of the purchase price. Both Fannie Mae and FHA have these programs. V.A. home loans still allow qualifying veterans to finance up to 100% of the purchase price.
In addition to the down payment you should plan on saving enough to cover your share of the closing costs. For a $200,000 home you should expect between 2% and 3% in closing costs. For a $100,000 home the percentages are higher. Check with your preferred lender to get an accurate cost estimate. This way you’ll be able to set an accurate savings plan.
There are professionals who specialize in credit repair and enhancement. Should you decide to use these services, carefully check out their track record by asking for and calling several of their previous clients. The guidelines for home purchases have tightened and will probably tighten again before they relax. If your credit is challenged, let me assure you that it is worth the time and effort to repair it.
A well dressed couple sitting across from the desk from me tells me they want to purchase a $175,000 home in a nice subdivision here in Edmond. “My credit isn’t so good. My score is about a 560. I’ve been working on improving my scores, but I don’t know how to speed up the process.”
Genuine empathy is the best way I can describe my feelings for this couple. He continues. “We pay our mortgage and credit card payments on time but the three credit cards we have are maxed out at the $500 limit. The limits are so low because when we got them our credit was really bad. We’re not sure if we should pay these balances off. And we don’t know how to get the recorded slow pays and collections off our credit report.”
This is just one example of the many that regularly come my way. Make no mistake, their credit score of 560 is much worse than “not so good”, it’s awful. Consider that credit scores range between 300 and 850 and that half the adults in America have at least a 700 credit score. Anything below 620 is considered sub-prime. Even FHA cuts off loan approval for scores below 580.
According to credit score creator Fair Isaac, people with credit scores between 550 and 599 have a 51% chance of defaulting on a home loan or any credit account. Contrast this figure with the 2% likelihood of default from people with scores over 750 and it becomes obvious why lending guidelines have tightened significantly for lower scored borrowers.
There is no “quick fix” for credit scores. Think about it; you probably didn’t get into your situation over night and you’re not going to get out of it in a week or two. Most likely it will take several months or even years to correct negative credit reporting.
Still you can speed up the credit repair process by paying all credit card balances in full and never use more than 10% to 20% of the available funds on any one card and pay those balances in full each month. This is the fastest way to improve credit scores.
If you find yourself using 30% or more of the available balance each month, you should consider asking the card carrier for an increased limit. By keeping the amount of utilized credit at or below 20% your scores should realize the maximum benefit.
While rebuilding credit scores it would also be a good idea to be saving up money for a down payment and closing costs. Unless you are a veteran with V.A. benefits, the smallest down payment any lender allows is 3% of the purchase price. Both Fannie Mae and FHA have these programs. V.A. home loans still allow qualifying veterans to finance up to 100% of the purchase price.
In addition to the down payment you should plan on saving enough to cover your share of the closing costs. For a $200,000 home you should expect between 2% and 3% in closing costs. For a $100,000 home the percentages are higher. Check with your preferred lender to get an accurate cost estimate. This way you’ll be able to set an accurate savings plan.
There are professionals who specialize in credit repair and enhancement. Should you decide to use these services, carefully check out their track record by asking for and calling several of their previous clients. The guidelines for home purchases have tightened and will probably tighten again before they relax. If your credit is challenged, let me assure you that it is worth the time and effort to repair it.
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