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Deed vs. Title: What's the Difference? Terms Home Buyers Need to Know

Deed vs. title: 

What's the difference? Most people use the terms interchangeably, but there's a significant difference between the two— a distinction that's important to understand when you're ready to purchase a home. So let's look at what distinguishes deed from title.

Deed vs. title: The difference between these 2 real estate terms
"A deed is a legal document used to confirm or convey the ownership rights to a property," explains Anne Rizzo of Title Source Title Clearance. "It must be a physical document signed by both the buyer and the seller."

Title, however, is the legal way of saying you have ownership of the property. The title is not a document, but a concept that says you have the rights to use that property.

So when you buy a property, you will receive the deed, a document that proves you own it. That deed is an official document that says you have title to the real estate.

How to get the deed and take title of a property
To get the deed and "take title," or legally own the property, your lender will perform a title search. This ensures that the seller has the legal right to transfer ownership of the property to you, and that there are no liens against it. If everything is clear, then at closing the seller will transfer the title to you, and you become the legal possessor of the property.

The title or escrow company will then ensure the deed is recorded with the county assessor's office or courthouse, depending on where you live. You'll generally get a notification a few weeks after closing that your deed has been recorded. If you don't, check with the professional who did your closing and ensure that the paperwork has been filed. At that point, you have the deed and title to the real estate and the property is all yours.

What is title insurance?
Even with all of the due diligence a title company does before closing, there are rare instances when title problems can pop up later (e.g., missed liens and other legal issues that can be very costly to resolve). To protect against any financial loss, two types of title insurance exist: owner's title insurance and lender's title insurance.

"Unlike other types of insurance that protect the policyholder from events that may happen in the future, an owner’s title policy protects the buyer from events that have happened in the past," says Rizzo. "That may jeopardize their financial interest, such as title defects from fraud or paperwork errors, unpaid liens against the property, or claims that someone else is the real, legal property owner."

On the other hand, when you secure a mortgage, your lender or bank will require that you purchase lender's title insurance to protect the lender's investment in case any title problems arise. Lender's title insurance essentially protects the lender's interest in your property, which is typically until your mortgage is paid off.

Failure to Disclose: Should Buyers Sue Sellers for Not Revealing Problems

Can a buyer sue a seller for failure to disclose information about the house? 

As a buyer, you deserve to know about every problem with the house, from the leaky roof to the small colony of black mold hiding in the cabinet in the laundry room. 

If the seller fails to disclose a problem to you during the property transfer process, should you start calling lawyers, or can you settle this issue yourself outside of a courtroom? It all depends on the real estate disclosure laws in your state and how far along in the purchase process you are.

Real estate disclosure laws
Real estate disclosure laws differ from state to state, but in most places in the U.S., sellers are required to disclose info to a prospective buyer that could affect the property value. That could be anything from a termite infestation to a property line dispute with a neighbor. If your house was built before 1978 and has lead paint, federal law requires this to be disclosed as well.

Sellers must volunteer information about their property to the buyer; it's not enough to just wait for a buyer to ask a question and answer honestly, according to California real estate attorney Bryan Zuetel of Irvine, CA. In many states, that information is shared through a disclosure form, where a homeowner outlines details about the house. That form will include negative information as well as basic facts such as the square footage.

Sellers do not have to disclose something that they don't know about. But if it can be proven that something was known and omitted, a seller can get in big trouble.

"A seller may be liable to the buyer for the nondisclosure of material facts, negligent misrepresentation of facts, intentional misrepresentation of facts, or suppression or concealment of facts," Zuetel explains.

Should you sue a seller for failure to disclose before the sale?
If the seller fails to disclose information about the house but you haven't yet signed on the dotted line, you may be able to cancel the purchase. Canceling the purchase could be a lot less costly and time-consuming than suing the seller.

Laws in most states guarantee a buyer the right to cancel a transaction due to discovery of certain facts during the transaction. In California, for example, Zuetel says a buyer may terminate a transaction within a certain number of days after receiving a disclosure regarding natural hazard zones around the property.

Most real estate attorneys recommend including contingencies in the residential purchase agreement that will give buyers an out, and require any money held in escrow be returned to them (pending a review of the disclosures and the property). If your contract has this contingency in place, you should be able to cancel the transaction and walk away without losing anything but your time.

Should you sue a seller for failure to disclose after the sale?
Things get more complicated if you buy the property. That's when you may land in a courtroom, but a lawsuit could still be avoided, says Zuetel.

"The dissatisfied buyer can contact the seller to determine whether the parties can work out an agreement or settlement of the issues," he notes.

In fact, some purchase contracts will contain a provision that the buyer and seller must try mediation before the filing of a lawsuit, while other purchase contracts will require that disputes between the buyer and seller must be arbitrated, rather than litigated in court.

If you do end up suing the seller, you could seek monetary damages for the seller's failure to disclose information or misrepresentation of the property. The amount you sue for can include damages for the difference between the amount that the buyer paid and the fair market value of the property at the time of the sale, Zuetel says.

7 Steps to a Stress-Free Home Closing

This cheat sheet helps you do your homework, so you know what you’re signing when you close the sale of your home.

You’ve already cleared several hurdles by finding the right home, negotiating the best price, and getting approved for a mortgage. 

The last obstacle on your homebuying track is the closing, which can be both tedious and tense. By knowing what to expect and doing some legwork, you can smoothly put your closing behind you. These seven steps will guide you.

1. Set a Closing Date
Ask your title company to set a closing date and time that meshes with the end of your lease or the sale of your existing home. Don’t want to skip work? Ask for an evening or weekend closing. Tight on cash? Schedule your closing for the end of the month. That’s when you’ll pay the least amount of interest at the closing table.

2. Gather Your Funds
Buyers usually have to bring money to the closing. Ask the title company what forms of payment it accepts. Chances are you can’t use a personal check.

If you have to move money into your bank account to pay your closing costs, do so a week ahead to avoid last-minute problems. If the title company requires the funds in the form of a cashier’s check, stop by the bank a few days before closing to pick it up.

3. Purchase Title Insurance
If you’re getting a mortgage, you have to buy a title insurance policy. Think it protects you against problems with the title of your home? Nope, it protects the lender in case the sellers really didn’t own the home or someone else had a claim on it.

To cover yourself, you can buy an owner’s title policy from the same insurance company that sells you the lender’s title policy. Or, shop online at Closing.com, EasyTitleQuote.com, or FreeTitleQuote.com. An owner’s title policy insures you against losses from fraudulent claims against your ownership and errors in earlier sales. In some areas, sellers traditionally pay for the buyer’s title policy.

Whether or not you get the owner’s policy, if you buy a title policy from the same company that issued the prior owner’s title insurance, you can ask for a reissue discount or “bring-down” rate. There’s a discount because the title company only has to check the records filed since that prior owner bought the home, not since the dawn of time.

4. Line Up Homeowners Insurance
Get quotes and compare policies to be sure coverage will start by your closing date. An annual policy should run $500 to $1,000, depending on your home’s size, age, and amenities. To get a lower premium, opt for a high deductible or buy your homeowners insurance from the same company that insures your car.

If you live in an area where natural disasters occur, like earthquakes, floods, or hurricanes, you’ll need separate insurance to protect your home from those hazards.

5. Review Your Good Faith Estimate and HUD-1 Settlement Sheet
Your lender already gave you a Good Faith Estimate (GFE) that showed your estimated closing fees. Some of the fees on your GFE can’t change and others can rise by 10%. Before you go to the closing, compare the numbers on your GFE with the numbers on your HUD-1 settlement statement. Question your loan officer about any fees that increased.

6. Do a Walk-Through
Schedule an appointment to walk through the home one last time just before your closing.

• Make sure repairs you requested have been made.
• Look for major changes since you last viewed the property.
• See if the sellers left everything they promised to leave.
• Check to see that the sellers took all their personal belongings.
• Test electronics and appliances to ensure they’re still working.
• Turn on the HVAC and hot water. Are they functioning right?
• Walk the yard to be sure no plants or shrubs have been removed.

7. Resolve Issues Identified in Your Walk-Through
If your walk-through uncovers problems:

1. Delay the closing until the seller corrects them (if your state allows it). But that’s often not feasible because your lease is probably over and you’ve already scheduled movers. 2. Negotiate a discount to your sales price to cover the cost of the work needed. If the air conditioning is on the fritz and a contractor says the repair will cost $500, ask that the sales price be reduced by that amount. If you make that request at closing, however, be ready for a delay while the title company redoes the paperwork. 3. Have the title company hold a portion of the seller’s proceeds in escrow until the dispute is resolved. Once that happens, the funds will be released to you or the seller, depending on the outcome.

Specialist Wanted

8 COSTLY MISSTEPS NEW HOMEOWNERS MAKE IN THEIR FIRST YEAR

The negotiations are over. Your mortgage is settled. The keys to your first home are in hand.

Finally, you can install your dream patio.

You can paint the walls without losing your security deposit.

Heck, you could knock out a wall. You’re soooo ready to be a homeowner.

So ready in fact, you’re about to make some costly mistakes. 

Wait, whaaat?

“You have to rein it in and be smart,” says Daniel Kanter, a homeowner with five years under his belt. Especially in your first year, when your happiness, eagerness (and sometimes ignorance) might convince you to make one of these eight mistakes:

#1 Going With the Lowest Bid
The sounds your HVAC system is making clearly require the knowledge of a professional (or perhaps an exorcist?).

But you’ve been smart and gotten three contractor bids, so why not go with the lowest price?

You might want to check out this story from a Michigan couple. Rather than going with a remodeler who’d delivered good work in the past, they hired a contractor offering to complete the work for less than half the cost, in less time.

A year later, their house was still a construction zone. You don’t want to be in the same spot.

What to do: Double-check that all bids include the same project scope — sometimes one is cheaper because it doesn’t include all the actual costs and details of the project. The contractor may lack the experience to know of additional steps and costs. 

#2 Submitting Small Insurance Claims
Insurance is there to cover damage to your property, so why not use it?

Because the maddening reality is that filing a claim or two, especially in a relatively short period, can trigger an increase in your premium. “As a consumer advocate, I hate telling people not to use something they paid for,” says Amy Bach, executive director of nonprofit United Policyholders, which works to empower consumers. But, it’s better to pay out of pocket than submit claims that are less than your deductible.

Save your insurance for the catastrophic stuff. “You want the cleanest record possible,” Bach says. “You want to be seen as the lowest risk. It’s like a driving record — the more tickets you have, the more your insurance.”

Some insurance groups, like the Insurance Information Institute and National Association of Insurance Commissioners, say it’s hard to generalize about premium increases because states’ and providers’ rules differ. But this stat from a report by UP and the Rutgers Center for Risk and Responsibility at Rutgers Law School is pretty sobering: Only two states — Rhode Island and Texas — got top marks for protecting consumers “from improper rate increases and non-renewals” just for making:

• An inquiry about a claim
• A claim that isn’t paid because it was less than the deductible
• A single claim 

Your best protection? Maintaining your home so small claims don’t even materialize.

#3 Making Improvements Without Checking the ROI
Brandon Hedges, a REALTOR® in Minneapolis-St. Paul, recalls a couple who, though only planning to stay in their home for a few years, quickly replaced all their windows. When the time came to sell, he had to deliver the crushing news that they wouldn’t get back their full investment — more than $30,000.

New windows can be a great investment if you’re sticking around for awhile, especially if windows are beyond repair, and you want to save on energy bills.

Just because you might personally value an upgrade doesn’t mean the market will. “It’s easy to build yourself out of your neighborhood” and invest more than you can recoup at resale, says Linda Sowell, a REALTOR® in Memphis, Tenn.

What to do: Before you pick up a sledgehammer, check with an agent or appraiser, who usually are happy to share their knowledge about how much moola an improvement will eventually deliver.

#4 Going on a Furnishing Spree
When you enter homeownership with an apartment’s worth of furnishings, entire rooms in your new home are depressingly sparse. You want to feel settled. You want guests at your housewarming party to be able to sit on real furniture.

But try to exercise some retailing willpower. Investing in high-quality furniture over time is just smarter than blowing your budget on a whole house worth of particleboard discount items all at once. 

What to do: Live in your home for a while, and you’ll get to know your space. Your living room may really need two full couches, not the love seat and a recliner you pictured there.

#5 Throwing Away Receipts and Paperwork
Shortly after moving in, your sump pump dies. You begrudgingly pay for a new one and try to forget about the cash you just dropped. But don’t! When it comes time to sell, improvements as small as this are like a resume-builder for your home that can boost its price. And, if problems arise down the road, warranty information for something like a new furnace could save you hundreds.

What to do: Stow paperwork like receipts, contracts, and manuals in a three-ring binder with clear plastic sleeves, or photograph your documents and upload them to cloud storage.

#6 Ignoring Small Items on Your Inspection Report
Use your inspection report as your very first home to-do list — even before you start perusing paint colors. Minor issues that helped take a chunk of change off the sale price can cause cumulative (and sometimes hazardous) damage. Over time, loose gutters could yield thousands in foundation damage. Uninsulated pipes? You could pay hundreds to a plumber when they crack in freezing temperatures. And a single faulty electric outlet could indicate dangerous ungrounded electricity.

What to do: Get the opinion and estimate of a contractor (usually at no charge), and then you can make an informed decision. But remember #1 above.

#7 Remodeling Without Doing the Research
No one wants to be a Negative Nancy, but there’s a benefit to knowing the worst-case scenario.

Homeowner Kanter tells the time he hired roofers to remove box gutters from his 1880s home. Little did he know, more often than not aged box gutters come with more extensive rot damage, which his roofers weren’t qualified to handle.

“We had to have four different contractors come in and close stuff up for the winter,” he says. Had he researched the problem, he could have saved money and anxiety by hiring a specialist from the start, he says.

What to do: Before beginning a project, thoroughly research it. Ask neighbors. Ask detailed questions of contractors so you can get your timing, budget, and expectations in line.

#8 Buying Cheap Tools
You need some basic tools for your first home — a hammer, screwdriver set, a ladder, maybe a mower.

But if you pick up a “novelty” kit (like those cute pink ones) or inexpensive off-brand items, don’t be surprised if they break right away, or if components like batteries have to be replaced frequently.

What to do: For a budget-friendly start, buy used tools from known quality brands (check online auctions or local estate sales) that the pros themselves use.

8 Signs You’re Ready to Buy Your First Home

Is now the time to buy your own place? Here are the ways to know when it makes sense financially to purchase your first home.

A cooling real-estate market is good news for buyers because it's easier for them to negotiate a deal. But it shouldn't be the main reason that pushes you into your first home. In fact, buying your first home is a personal decision that you should make independent of what the market may or may not be doing.

"Time means nothing," says Michael Eisenberg, a CPA and financial-planning specialist in West Los Angeles. You can't predict what will happen to home prices in your neighborhood in the next few months, let alone the next few years. But if you're looking to make the long-term commitment of homeownership, it helps to approach the decision like you would any business decision. You don't want to buy on emotion, or because everyone else is doing it.

"This is the biggest financial move a young person may ever make," Eisenberg says. "You should make the investment because it makes sense for your finances. You buy when you're ready."

So how, exactly, do you know when your finances are ready? We provide a checklist of eight things first-time homebuyers should have squared away before they consider a purchase — no matter where analysts say home prices are heading.

You are ready to buy when …

No. 1: You have a budget — and you know how to use it

Owning your own place comes with a slew of new expenses, so good money-management skills are a must-have. If you don't have a household budget right now, start one. (See "Build your budget" and "A simpler way to save: The 60% solution" to learn how.) You need to know where you are financially — where your money is coming from and where it goes every month — to know exactly how much you can afford to spend on a new home.

Once you have your current finances sorted out, draw up a mock budget for homeownership. Find out how much homes cost in your area and how much your mortgage payment will run. Then, factor in higher utility bills, homeowners insurance, property taxes, homeowners association fees, and maintenance and upkeep costs, as well as higher commuting costs if you're considering a neighborhood farther from work. If you simply cannot afford the increased expenses that come with a house, it's never a good time to buy — no matter what's happening in the real-estate market.

No. 2: You have a sizable down payment

Traditionally, to get your foot in the door, you'll need a down payment worth 20% of the home price. That means for a $250,000 home, you'll need $50,000 upfront. Sure, there are ways to get around that steep requirement with zero- or low-down loans, but those options will cost you. You may have to pay extra for private mortgage insurance or take out a piggyback loan with a much higher interest rate. With the slowing housing market, having that 20% down payment becomes even more important because you'll start off with some equity in case you have to move earlier than expected. "In the early years, you aren't building any equity with the mortgage payment," Eisenberg says. "If the market changes or your personal circumstances change and you're forced to sell, you could lose money" if you made little or no down payment. The equity in your home can also give you an extra source of cash in an emergency.

And the money down is only the beginning. Don't forget to factor in closing costs (3% to 6% of the purchase price) property taxes, initial repairs, moving expenses and decorating costs.

No. 3: You have a reliable source of income

Buying a home is a long-term financial commitment, so you'll need consistent cash flow to cover those monthly payments — not to mention the little extra expenses that come with homeownership. If you're in school, plan to go back to school, have a less-than-reliable job or plan to start a family, you need to take a good look at your future cash-flow abilities. Will you be able to make your mortgage payment six months from now? How about six years from now? "Some couples can afford the house when they're both working, but if a kid comes along and one wants to stop working, then they have a problem," Eisenberg says.

No. 4: You have an emergency savings fund

If you have enough cash on hand to cover three to six months of your living expenses, you're one step closer to being prepared for homeownership. Just in case something happens to disrupt your steady income — say a serious illness, unexpected layoff or even a natural disaster that prevents you from working — you want to make sure you can still afford to make your mortgage payments until you can get out of your rough patch, says Bob Baldwin, a CPA in Charleston, S.C. Learn more about how and where to build your emergency stash.

No. 5: You have your debts under control

Call 'em crazy, but lenders like to make sure you'll have enough money each month to pay your obligations. So before they'll give you a mortgage, they take a look at your so-called debt-to-income ratio. Generally speaking, they want to make sure your monthly housing costs — including principal, interest, taxes and insurance — will consume no more than 33% of your monthly gross income; and that your total debt payments, including your mortgage, credit cards, student loans and auto loans, will remain below 38% of your total pay. So if you have large outstanding debts, it's a good idea to try to pay them down before applying for a mortgage to make sure you can qualify for as much money as you'll need. This also means you should avoid taking on any substantial new debt six months to one year prior to your purchase, or you may throw your ratio off. So, it may be best to drive that clunker for a little while longer, or put off charging that European vacation.

No. 6: Your credit report is in good shape

You don't have to have perfect credit to become a homeowner, but a decent history can help you get a lower interest rate on your mortgage and a lower monthly payment. The government allows you to check your credit history free once a year from each of the three main credit bureaus at AnnualCreditReport.com. So take a peek to find out what lenders see about you. If you see any errors, correct them now. If you see room for improvement, find out how you can boost your score.

"Don't be sloppy the year or two before you buy the house," Baldwin says. You don't want any missed payments or other black marks that could lower your estimation in the eyes of lenders.

Having bad credit, however, may not be your biggest concern. If you're just starting out, you need to make sure you have a credit history. If you hold a credit card or took out student loans, you're probably covered. If not, find out how you can build a stellar credit history from scratch, preferably one year or more before you plan to buy.

No. 7: You can make a long-term commitment

Are you ready to stay put for at least three to five years? Typically, that's how long you'll have to keep the house in order to recoup your buying and selling costs. If you sell before then, you may lose money on the deal. And if you do turn a profit, you'll have to pay capital gains taxes if you lived in the house less than two years. The length of your stay becomes even more important now that home appreciation has slowed from its previous pace. If you don't think you'd stay put for that long, you may be better off renting.

Don't fret: Renting can actually make better financial sense for some people at different times in their lives, Eisenberg says. If you think you may get a job transfer, go back to school or otherwise need to move within the next five years, renting gives you the flexibility you need and could possibly save you money.

No. 8: You are prepared to become your own landlord

Even if you can afford homeownership, don't buy simply because you can. You need to make sure you're ready to live the lifestyle. Owning a place comes with a fair share of new responsibilities, headaches and costs — not the least of which is becoming your own landlord. When you rent an apartment, you simply call the landlord if something breaks. With your own home, if it's broke, you fix it — or you'll have to pay someone else to fix it. You're also responsible for upkeep, including yard work and shoveling snow (unless, of course, you buy a condo without a yard). Will you have the time, energy or desire to maintain the property? How about the money for all those little extras, such as buying your own lawn mower and hiring the occasional plumber? Make sure you know what you're getting into.

Checklist for First-Time Buyers

Here’s your step-by-step guide to getting all your ducks in a row so that you’re ready to make a winning offer on the home of your dreams.


Step 1: Make sure you’re (really) ready


Homeownership is a big commitment. Before you leap, make sure you can answer “yes” to the following questions:

Is your job stable?

Do you see yourself living in this town for the next five to 10 years?

Are you prepared for all the extra work that comes with homeownership, such as repairs and maintenance, yardwork, pest control, and attending HOA meetings?


Step 2: Create a list of “musts”


Homebuying is like dating: If you’re expecting absolute perfection, you’ll be disappointed. Few people find a home that’s 100 percent ideal. It’s important to know which issues you’re willing to compromise on and which are deal breakers.


Maybe you’re willing to buy a fixer-upper if it’s in a great location. Maybe square footage matters most to you, and location is secondary. Maybe you’re willing to get a home that requires a major makeover as long as the “bones” underneath are solid.


Check out different neighborhoods, home styles, and listings online to get a feel for what’s most important to you.


Step 3: Figure out what you can afford


Your mortgage payments aren’t the only cost you’ll need to consider.


First, you’ll need a down payment. Ideally, you’ll want to put down at least 20 percent of a home’s purchase price to avoid paying private mortgage insurance (PMI), an additional charge tacked onto your mortgage payment.


You’ll also want to make sure you’re financially secure enough to handle any maintenance or repair costs that can (and will) crop up. If the plumbing bursts or the roof needs replacing in a few years, do you have enough of an emergency fund on hand to cover it?


As a rule of thumb, you should set aside 1 percent of the purchase price of the home, each year, in your “house emergency fund.” That’s $83 per month for every $100,000 of home value.


Step 4: Gather documents


The loan approval process is a test of how much paperwork you’re willing to endure. It’s time to spend a weekend organizing your files.


Collect your proof of employment, such as pay stubs and copies of the past two years of W2 forms (or 1040 tax returns if you’re self-employed). Print out bank and investment account statements from the past 30 days, canceled checks from the past 12 months showing that you’ve paid rent on time, and contact information for your landlords for the past two years.


Step 5: Get prequalified or preapproved


You don’t want to lose out on your dream home because you haven’t gotten pre-approved for a mortgage. (It’s happened.)


Before you visit a single house, gather that documentation from Step 3 and get prequalified for a loan. The prequalification process is relatively quick and easy — you’ll simply provide information about your income and debts. Many sellers won’t even consider a bid unless you’re prequalified for a loan.


For extra credit, take the next step and obtain a preapproval letter. This step is more time-intensive and requires a through credit and background check, but it can make you a stronger candidate in a seller’s eyes.


Step 6: Assemble your support team


You’re new to the homebuying game, so you’ll need the right people on your side to help you navigate it. Find a real estate agent you trust and communicate well with, and don’t hesitate to enlist a friend or family member for a second opinion. 

7 Helpful Tips for First-time Home Buyers

Looking for a new home can be a pretty exciting task. With that much money on the line, it's worthwhile to read up on the process before you set out. Unnecessary mistakes can and should be avoided while trying to get the best deal for your money. As a first-time home buyer, proper guidance from seasoned professionals can make all the difference.

Here are a few tips first-time buyers can take when trying to find their first home:

Get clear on what you want – This is the most important part of your preparation. You are about to enter a shopping experience that is unlike any other. At times, it can be stressful and difficult. 

There is a lot of money on the line and a big commitment to be made, so prepare accordingly. Get clear on what you really want and what you are willing to compromise on. This will make your home shopping experience much more efficient and will give you a map to go off of should tensions run high. 

Take a look at this guide to buying your first home, which might help you narrow down your wants vs. needs. The better prepared you are, the better chance of having a smooth transaction.

Do your research – Home shoppers today are more empowered than ever before. You have so much information at your fingertips. Go online and find the areas you want to live in. Narrow down the neighborhoods you want to consider to three or four, and focus on those. Learn about the cost of the things you really want and the cost of the things you can do without. The more knowledgeable you are the better you will be at negotiating a good deal.

Talk to the bank – Preparing to get a mortgage in advance of your actual purchase will be super important.

Before you start looking at houses you should have a discussion with your lender. The lender will be able to give you an honest assessment of what your finances look like, how much house you can afford and what your rates will be. You want to know all of this – what it will really cost you – before you start looking at homes you can't actually afford. Find out what your monthly payment will be at different amounts and determine what your personal limits are as well. Depending on your credit, the lender may be willing to give you far more than you need. Once you know the time is right to buy a home make sure you get pre-approved by a lender. Make sure you understand the difference between getting pre-approved and pre-qualified for a mortgage. Without a doubt you will want to get pre-approved as a pre-qualification letter is not worth much. A savvy REALTOR® representing a homeowner will pick up on this right away. If you are competing with other buyers and are not financially prepared, you could lose out on your dream home!

Think about the future – Is this going to be a starter house that you will move out of in five years? Is it going to be a property that you fix up and flip? Is it going to be the home for your new family that you will be in for 10 or 20 years? Your long term plans will help dictate your purchasing choices. It is important to understand what you really want this home for before you go and sign any papers and spend any money. One of the biggest mistakes first-time home buyers make is not thinking about their long term plans.

Find a good REALTOR®– A real estate agent can prove invaluable when shopping for a home. If you find one that is good – an agent that is finding people the homes they want at a price they are happy with – then much of the work will be done for you. The agent will talk about what you want, will run you through much of the above mentioned areas and will help you find the houses that are really what you are looking for. The agent will also be an effective negotiator, meaning that you will probably get more house for your money than if you went at it alone.

Set a timeline – The situation you are in is uniquely your own. You want to set a timeline for when you will find and buy a home – a timeline that reflects your realities. If you have bad credit that needs to be cleaned up first, for instance, you will need to spend some time working on that before you actually start house hunting. If you need to move right now, that is another factor in your timeline. Give yourself some restrictions so you will be encouraged to move at a steady pace and get the job done. Hunting for a house can be quite stressful and it is not something that should be drawn out any more than necessary. Determine what you want, work with a REALTOR®, and get it as efficiently as possible.

Understand your fiscal responsibility - Another problem that first-time home buyers don't always properly think through is the financial responsibility of owning a home. A large amount of buyers will think about making their mortgage payments and nothing else. If you have been renting for a while, or even living with mom and dad, it is easy to see why this can happen.

Unfortunately, owning a home comes with quite a few more additional first-time home expenses that you may not have considered such as appliances, furniture, and even taxes and insurance. These are all important things to consider when putting together your homebuying budget.

Use all of the above tips for finding your first home and you will be well on your way to enjoying your new life as a homeowner!

4 Mental Traps to Avoid When Buying Your Next Home

You’ve decided that you’re ready to buy a home — but you find yourself overcome with fears and anxieties. Or, on the other hand, perhaps you’re bubbling with a bit too much excitement.

Before you sign on the dotted line, pause for a moment and ask yourself if you’re falling into one of these common homeowner mental traps:

Trap #1: Assuming That Buying is Always Better Than Renting

The idea that renting a home equals “throwing money away” is one of the most pervasive myths floating around.

In reality, the decision to buy vs. rent should be based on factors such as the average housing and rent prices in your location, the amount of time you’ll live in that dwelling, your tax bracket, the mortgage rate for which you qualify, property tax, HOA and insurance rates in your area, projected appreciation in your area, inflation assumptions, and more.

Here’s a simple example: Assuming you’ll live somewhere for three years, if you can buy a home for $100,000 that would otherwise cost $1,000 per month in rent, buying may be the better option. If, however, you need to pay $650,000 to buy a home you could rent for $1,000, renting might truly be the better choice.

Trap #2: Believing Your Current Needs Reflect Your Future Needs

Let’s imagine that you’re part of a child-free couple that likes to travel, lives with minimal possessions, and doesn’t want to spend too much time maintaining your home. You might choose a small home that fits your lifestyle, while disregarding the school district during your decision-making process.

But will you still have the same priorities in five years?

Remember that you’re buying a home to suit your future needs, not just your current ones. Purchase a home that you’ll be able to “grow into” or “shrink into” as the size of your family either expands or contracts. Anticipate other factors such as maintenance, HOA fees, proximity to jobs (and potential future job sites), school district, yard size, neighborhood safety and walkability.

Perhaps today, you want a swimming pool — but in three years, when your youngest child moves off to college, you want the freedom to travel without needing to worry about pool and yard maintenance. Or maybe you don’t need a yard today, but in a few years, you’d like to adopt a dog.

Trap #3: Fear of Getting “Priced Out of the Market”

Home prices have skyrocketed in the past five years. It can be tempting to believe that prices will continue to rise indefinitely, and that if you don’t purchase a home today, you’ll get “priced out” of the housing market.

Conversely, it’s also tempting to believe that if you buy now, you’ll definitely flip your home for a profit when it’s time to sell.

Neither of those are foregone conclusions. The housing market, like all industries, is cyclical: Prices rise and fall. In addition, housing is local: price and appreciation activity in Kansas City, Missouri doesn’t necessarily reflect activity in Jacksonville, Florida.

Leave speculation aside. Purchase a home based on your family’s budget and needs, not your guesses about what the future may or may not hold.

Trap #4: Believing All Renovations Are Profitable

Are you selling your current home in order to move into a different one? If so, you might be in the midst of renovating. Many homeowners update their kitchen, bathrooms, landscaping, and other features in order to make their home more attractive to buyers.

But that doesn’t mean you’ll recoup the cost of your renovations. While some updates might fetch you a higher price, other updates simply lack a return-on-investment. Replacing peeling laminate countertops with builder-grade granite might help you house sell faster, but upgrading to a rare style of granite with an ornate beveled edge probably won’t translate to a thicker bottom line.

Bottom Line

There are plenty of myths and assumptions about the housing market. If you believe too deeply into these ideas, you run the risk of overspending.

Don’t fall into the trap of thinking “housing prices will always rise,” “renovations will always pay off,” or — worst of all —”this time, it’s different.” Focus on purchasing a home that you cherish that fulfills your needs and wants, both now and in the future. And enjoy your new space!

5 Steps You Can't Skip During Escrow

The escrow process, which is also known as closing or settlement, is the endgame of the home-buying process. It is when the buyer, seller and other necessary parties get together to seal the deal.While your real estate agent and lender may assist you during the process, you should prepare yourself by knowing what to expect once you are in the thick of it.

To do so, brush up on these five prominent hurdles you’ll face during the escrow process.

Escrow Steps for Success

1. Have a Solid Contract

The sales contract or purchase agreement is the blueprint for the escrow process. The real estate agent or attorney typically writes the contract. It should clearly state the terms of the deal and what must occur before escrow closes and the property changes hands. It should not contain blank spaces.

The contract will include details about these specifics:

*What happens if the agreement fails

*What personal property is included in the deal

*The closing date

*What happens if escrow is delayed

*Who pays what cost

*Financing arrangements

*Occupancy date

2. Clear Contingencies

Contingencies are contractual conditions that must be met before the contract becomes official. Inspection, appraisal, and financing are common examples, although contingencies can be written for any event or issue. Contingencies come with a time limit to complete the task.

Once each contingency is completed, the buyer and seller should sign a document removing the contingency from the contract.

3. Review Title Reports

Typically, there are two title reports: a preliminary report and a final report with title insurance. Review the preliminary report to verify the legal description of the property and to learn about any liens, encumbrances or other items affecting the property’s title.Later, with the final title report, make sure the title is clear and the title or escrow agent knows how you want to take title to the property.

Common titles are as follows:

*Joint tenancy

*Tenancy in common

*Tenants by entirety

*Community property

*Sole property

4. Track Transaction Costs

In the end, title and escrow costs are combined with mortgage and other transaction costs on federally mandated closing documents. Obtain a Good Faith Estimate to gauge what these costs may be. Then compare them to the HUD-1 Settlement Statement, which is the final line-by-line list of all mortgage and closing costs.

If there are significant discrepancies between the GFE and the HUD-1 Settlement Statement, ask about them, as they may be open for dispute.

5. Be Prepared on Closing Day

On closing day, come to the table only after reading and fully understanding your HUD-1. Bring a pen and paper for taking notes, an attitude of good faith, plenty of time and the willingness to back out if the deal doesn’t follow contractual guidelines. Parties present at closing include these particulars:

*Lender

*Seller

*Seller’s real estate agent

*Closing agent

*Attorneys for you, the lender or both

The buyer will deposit any escrow payments and sign necessary documents. The seller signs over the deed and closing statements and receives any money due.

After signing, the deed and mortgage documents are delivered to the county courthouse or other government repository for recording as public records.