1. What is the importance of Qualifying a Title as part of the loan closing process?
The loan closing process involves signing many documents. It is a legal way of binding yourself to the agreement on a loan payment and the process of losing your property if you fail to pay the monthly instalments, monthly taxes and allowing the expiry of your home insurance. Therefore, it is important for you to know if you qualify for the mortgage before closing the deal. One of the most important documents sent to the title company or the attorney’s office before the loan closing process in the closing disclosure (Griswold, 2017). During the loan application process, you were given an estimate of the amount of loan you qualify to. The closing disclosure gives a definite value. much difference is not expected between the two values. However, giving wrong information may qualify you to have a bigger loan that might be hard to pay back thus leading to losing the property in future due to difficulty in loan payment; here are some of the advantages of qualifying for a loan before coming to it:
Knowing your income will help you know the amount of mortgage you qualify for. If you are spending more than 40% of your income on home expenses then you do not qualify for a mortgage (Griswold, 2017). If you do so you are going to stretch your finances to service the loan.
Understanding your assents and debts is another important aspect to look at. Most people do not want to disclose other debts they have before applying for alone. Loan lenders need to verify your loan credits and status for other loans (Griswold, 2017). From the statement your loan request may be approved or rejected. Therefore, understanding your loan status helps you to gauge your commitment towards your debtors. Your asset value is also important to enable you to know which asset you will forfeit in case you have financial challenges during loan payment.
Tax return history is also important. The statement of your yearly and monthly tax returns is also important when assessing yourself for a mortgage (Griswold, 2017). The statement helps in determining your income from both formal and informal employment and the value of your assets. The history analyses your self-worth thus giving you and the bankers the amount of mortgage that suits your pocket.
Being preapproved for gives one an edge when competing for a property with other buyers. When the property is good more people develop an interest on it. The prices you offer to the seller are a consideration for the seller, but more importantly the seller will give much consideration to a prequalified buyer. Buyer who have no interest in proving their credit worth are considered unserious in their venture thus the seller in most cases will ignore their offer.
Lastly, we have an insurance policy that you are servicing; in the current world a lot of money is channelled towards insurance policy buying. If you are a policy you are still buying it is good for you to finish and bind the insurance policy first before engaging in the mortgage (Griswold, 2017). Have two areas where you need to give huge monthly instalments can strain your financial capacity.
2. What are Title Insurance and its role in real estate finance?
Title insurance is a modern form of insurance where the insured is protected against claims for events that have already taken place. Title insurance has gained popularity among homeowners in the recent past. Title insurance exists in two different forms; first the owner of a real estate may decide to purchase a policy as a way of protecting various investments in the property (Griswold, 2017). Secondly lenders on the other side my purchase title insurance as a security for the interest earned by the property.
The cost of title insurance varies from several hundred to a few dollars. The price of the property dictates this price. The premium to this insurance is paid at the close of escrow, but other premiums can be paid in situations where you decide to refinance your mortgage. In most states the buyer pays for title insurance. However, in others such as North California the sellers also pay for the policy. The local custom is responsible for this transaction.
Title insurance coverage is mainly important to homeowners when transferring the ownership of the property from one person to another (Hill, 2017). In cases where there was a wrong input at the public record entry; in such a case a title evaluation exercise is carried out and through the insurance the ownership can be passed to the correct owner through will, sale, or even awarded to him or her as a gift.
Additionally, title insurance ensures there are no past disputes on the property that may hinder title transfer to the current homeowner. Many small business groups and individuals have benefited from title insurance due to their inability to detect issues before they reach advanced stages. It is worth spending a little more on title insurance than losing the entire property in a case as an issue arises (Hill, 2017).
3. What is the Torrens System?
Torrens system is title legislation that gives guidelines on land and property ownership and interests recording. The records are mainly owned by the state, any manipulation of the record the current owner needs to be there or the next of kin a legal officer and the next owner. The Torrens system is particularly important when a rightful owner suffers a loss. In such a case the government has the obligation to compensate him or her (Hill, 2017). The information contained in the system is always final and there is no need to look into other documents such as title deeds that are prone to manipulation.
4. Find an internet example of a real-world title problem that impacted real estate finance. Discuss
Through technology most land property material has been digitized. The same technology gives a provision for hacking and data manipulations. The real estate industry has made advancements towards employing blockchain technology in their systems. Through a blockchain-based property management system it is possible to; reduce the probability for siloed databased, enhance trust and transparency, make transaction procedures more credible, and minimize the number of intermediaries employed in the title transfer process (Uzair, 2018). Many cases were witnessed after the digital era but through blockchain technology the cases have been minimized.
Real estate transactions involve huge amounts of money, require physical engagement between the parties and the attorney. Most activities were carried out offline until the introduction of blockchain technology. The technology utilizes smart contact to ensure the transaction take place in terms of cryptocurrency such as bitcoin and ether. Blockchain has changes the following areas in the real estate sector; platforms and market places now all activities can take place online, elimination of intermediaries such as brokers, banks, and lawyers, ensured liquidity, enhanced fractional ownership, promoted decentralization, and reduced cost due to high levels of transparency.
References:
Griswold, R. S., Tyson, E., & Tyson, E. (2017). Mortgage management for dummies. Retrieved from http://ebookcentral.proquest.com
Hill, J. J., Steindorff, A. K., & Widener, V. H. (2017). Recent developments in title insurance law. Tort Trial & Insurance Practice Law Journal, 52(2), 651.
Tyson, E., & Griswold, R. S. (2019). Real estate investing for dummies. John Wiley & Sons.
Uzair, M. M., Karim, E., Sultan, P., & Ahmed, S. S. (2018). The Impact of Blockchain Technology on the Real Estate Sector Using Smart Contracts.
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