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Take It From The Experts: Title Insurance and Mortgages

Real Estate Advice From Industry Pros! TAKE IT FROM THE EXPERTS feature explores different transactional related topics of interest to our readers by going straight to the Real Estate Experts source: our local professionals. From advice for buyers and sellers entering today’s market given by Gloria Nilson’s own Realtors to firsthand information about mortgages, title services, home staging, smart home products and legal issues, we consulted some of the area’s best and brightest to share their thoughts with you.

Why do I need a great credit score?
Credit scores range from 300 to 850. This score is important because it not only determines whether or not you are an acceptable candidate for financing, it can impact the interest rate you will pay. Generally speaking, a credit score above 720 will result in the best terms for a mortgage.

How can I improve my credit score? 
There are different ways in which you can positively impact your credit score in preparation for purchasing a home. Your mortgage professional should be able to produce a predictive analysis for you through their credit reporting agency that will provide you with your current score, things you can do to achieve improvement in that score, and over what period of time. Many of these things are simple steps.

Does my spouse’s credit score matter?
Typically the score that is used for a mortgage application is the middle of the three credit scores for the lower borrower. So if your spouse’s credit score is lower than yours, it will be the one that is used for the mortgage application.

Do I need a large down payment?
A down payment can be as low as 3% for a conventional loan, as low as 3.5% for FHA and as low as 0% for a VA loan. A 20% down payment is not required but will eliminate the need for mortgage insurance on most products.

What is pre-qualifying versus pre-approval?
There is a significant benefit to obtaining a pre-approval prior to starting the search for a home. It will provide you with a clear picture of the purchase price and loan amount to target. It will also help strengthen any offer that you make by supplying the letter to the seller. A prequalification typically does not involve pulling a credit report and only provides you with a general idea of where you stand versus a pre-approval that uses your full financial picture.

What is title insurance and how does it work?
Title insurance protects you from financial loss and related legal expenses in the event there is a defect in title. Unlike other insurance, title
insurance focuses on risk prevention instead of risk assumption. The searches are done prior to issuing the policies so title issues are eliminated before the purchase occurs.

What is a title search?
There are many searches done in order to complete the title policy. We order full county searches which pull all the land records for at least the
past 60 years. We also order a tax search, tidelands search, Upper Courts search, and a flood search. Once all searches are in, they are examined by a title examiner before a title binder is issued.

What kind of issues can a title search reveal?
A title search will determine the legal owner of the property. In addition, it will also reveal any mortgages, liens, judgments or unpaid taxes that
will have to be cleared before the property can be sold. Also included will be details for any existing easements, restrictions or leases affecting the property.

The owner of the home I want to purchase had a title search six months ago; do I need a new title search?
Liens can be placed on the property at any time. Searches need to be updated to make sure that no additional liens or encumbrances were
placed on the property during that time period.

How much does title insurance cost? How long does my coverage last?
The title insurance premium is based on the purchase price of the property, and the loan premium is based on the loan amount. Both amounts are regulated by the New Jersey Department of Banking & Insurance. Unlike other insurances, there is only a one-time premium paid at closing. The loan policy insures the loan only and is in effect until the loan is paid off. The owner’s policy is in effect until the property is sold to a new owner.

Published August 5, 2019 in Home Improvement, Home Care