Your Questions Answered About Refinancing

If you consider refinancing your home, you undoubtedly have some questions, such as How does refinancing work? What are the average costs to refinance? What are the title company's responsibilities?

The refinancing process may be a confusing experience if you've never been through it before. Here are answers to some of your questions:

HOW DOES REFINANCING WORK?

When you purchase a home, even though you have the full intention of making the mortgage payments, sometimes issues arise that keep you from making your financial obligations. Refinancing your home is a way to reduce your monthly mortgage payment. 

In the case of a divorce, you may need to refinance your home to remove your ex's name from the mortgage

Or on a positive note, you may choose to refinance because improvements in your credit score will now help you obtain a lower interest rate.

WHAT DOES "REFINANCING" MEAN?

A refinance loan is a second loan used to pay off the first one. When you refinance your home, it's typically necessary to pay off the original loan first. 

WHAT ARE THE AVERAGE CLOSING COSTS TO REFINANCE?

The closing costs of a refinance are between 2 and 5 percent of the loan. That means a 15-year-fixed mortgage at 2.35 percent will cost approximately $660 for each $100K borrowed. That said, many different factors can impact the price, from the type of loan you are seeking to your credit score. It's important to remember that each case is unique. 

DOES REFINANCING MEAN I GET A NEW TITLE? 

When you decide to refinance your home, the first thing your title company must do is search the public records to confirm ownership. In most cases, you will not be issued a new title at the end of the process. 

An owner's title policy is purchased at the original closing. For each separate loan transaction, you can purchase a loan policy. Once you are confirmed as the current property owner, you will be able to submit your owner's title policy to your title company to acquire a reissue credit.

A new title is only provided at closing if the "current vesting" (the property owners' name) changes. For example, if your new mortgage doesn't include your ex-spouse's name, you will need a new title.

WHY DO I NEED TITLE INSURANCE ON A REFINANCE?

First, it is essential to understand that title insurance is significantly less costly than many other types of insurance policies you might buy. That's because instead of paying a monthly premium, you pay a one-time fee at the time of the closing. In return, you get proof that you are the legal owner of your property. This ensures that past events (even ones you are unaware of) can not result in the loss of your ownership. Additionally, it is customary for both lenders and owners to purchase title insurance at the closing, so each party to the loan is protected. 

Mortgages are backed by securities. That's why investors must be confident that the title is "free and clear" of all encumbrances. Title insurance provides your lending institution with this confidence. Without title insurance, it would be too challenging to back mortgages with the necessary assets, and investors would be too wary of the risk. 

WHAT DOES THE TITLE COMPANY DO? 

The first responsibility of a title company is to conduct a title search to establish the legal property owner. This process may also reveal information that the lender might find relevant. For example, the title search may indicate that the property owner has had a judgment filed against them. If this is the case, the lender could require the owner to pay the judgment before starting the refinancing process.

Title companies are typically involved in the closing. When a lender has reached an agreement with a property owner and is ready to provide them with a loan, a title company will prepare a settlement statement. This document explains how the loan funds will be disbursed to the borrower. It also will show how the funds will be used. For instance, if a loan is being issued for the payment of several bills, the settlement statement will list them accordingly.

Sometimes the title company is involved in the disbursement of funds as well. There are instances when a lender will provide the agreed-upon loan to the title company instead of directly to the borrower, which often happens when the settlement statement includes other parties besides the borrower, who are also entitled to payment.

In general, the title company may also serve as a liaison between the various parties involved in refinancing. These can include not only borrowers and lenders but attorneys, surveyors, government employees, and more. Because refinancing can involve many steps, with many issues to resolve before closing can occur, it helps to have an intermediary who works with everyone to move the process along smoothly.

That's one of the primary reasons for working with a title company during refinancing is beneficial to all parties involved. By assisting in key steps and coordinating with various organizations and individuals, title companies ensure refinancing is more efficient.

At Homestead Title, we understand that refinancing a home can seem like a lengthy and overwhelming process. Every step of the way, we work with all relevant parties to help make it easier. To discover more about what we can do for you, contact us today.

13 Steps to a Successful Real Estate Closing

The term “real estate closing” includes a process of specific steps in the home buying process. From the time that the buyer and seller reach a purchase agreement until the time of the closing,  there are several steps that should be followed to ensure that the property's ownership is transferred lawfully and smoothly. 

Here are thirteen steps to a successful real estate closing: 

1. Set up an escrow account: Escrow is when a neutral third party retains the funding and documents involved in the closing process to ensure everything is accurate in the transaction before it is complete. Escrow protects the buyer and seller during the home purchasing process.

2. Determine Property Ownership: In order to determine and confirm a property’s legal ownership, there must be an examination of public records to determine if there are any claims on the property. A title search entails a search for deeds, contracts, and other documents to make sure the title is "free and clear" of any defects.

3. Purchase Title Insurance: Title insurance protects the insured from financial loss related to the title of the property. There are two policies at a home loan closing: the lender’s policy, and an optional owner’s policy. Lenders require title insurance to protect their interest in the loan. Owners have the option to purchase title insurance to protect themselves from title defects that arise after the closing that could at the least incur legal fees and, in the worst-case scenario, may result in a loss of the property. Both are a one-time upfront fee.

4. Hire a closing attorney: There are numerous legal documents that must be signed during a real estate closing and some can be complicated. Buyers and Sellers often hire a real estate closing attorney to help protect their interests, to address any issues at the closing immediately, and to ensure all the appropriate closing documents are filed with the proper state and county authorities.

5. Get pre-approval for your mortgage: A mortgage pre-approval prior to your real estate closing shows the sellers that you have your finances in check and that you won't be denied a mortgage if they decide to sell you their home. Pre-approved loans help the closing process move faster, and often lenders will offer to lock in a lower rate to facilitate a smooth closing.

6. Determine closing costs: Closing costs may include fees related to the origination and underwriting of a mortgage loan, real estate commissions, taxes, insurance premiums, title, and record filing. Escrow companies will often charge a service fees for managing your closing process. Prior to your real estate closing, you should carefully review the itemized list of charges.

7. Schedule a home inspection: Many home buyers include a home inspection contingency in their purchase contract to ensure there are no surprises. Standard inspections include a review of the heating and cooling system, interior plumbing, electrical systems, roofing, doors, windows, walls, and foundation.

8. Renegotiate the offer: You can often renegotiate your purchase offer with the seller if the home inspections revealed any issues. If the seller does not agree to drop the purchase price or to pay for any necessary repairs, the buyers can choose to withdraw their offer and still be protected under the home inspection contingency.

9. Secure the mortgage interest rate: If the rate of mortgage interest was not locked in through the pre-approval process, the buyer should do so during the closing process. Interest rates fluctuate daily, so you should monitor rates to lock in the lowest rate possible.

10. Lift real estate contingencies: Any real estate contingencies that were put into place must be removed in writing before your scheduled closing.

11. Placing funds in escrow: To finalize your real estate purchase, you will need to deposit your down payment and pre-determined closing costs into an escrow account. Usually, a wire transfer of funds or a cashier check is required.

12. Do a final walkthrough: Before the date of closing and any final paperwork is signed, homebuyers should do one last walkthrough of the property.

13. Sign Closing Documents: On the date of closing, the buyer and seller's parties will meet in-person to make final payments, sign the legal documents, and officially transfer ownership of the property. 

Homestead Title is a full-service title and escrow company. Since 1934, we have provided our customers with competent, thorough, and professional service. Prior to each closing, we search public records to clarify legal and financial risks for lenders, realtors, and other stakeholders in the real estate transaction process.  Our energetic and capable team of real estate title professionals provide accurate investigations, rapid turnaround time, streamlined paperless delivery, and exceptional customer service. For more information, call us at (504) 581-6427 and let us provide you with a smooth and efficient real estate closing. 

What You Need to Know About Unrecorded Liens

When a property owner has a mortgage on their home, the mortgage company places a lien on the property. This type of recorded, voluntary lien will not affect any future sale of the property because the lien is be paid off during the closing process. Once the mortgage debt is paid, the clear title will transfer to the new owner.  

Unfortunately, unrecorded, involuntary liens may not show up during a normal title search. An unrecorded lien may end up costing the new owner hundreds or even thousands of dollars. If an unrecorded lien still exists on the property, the responsibility to pay the lien will transfer to the new owners. This can cause a significant and unwanted financial liability.  

The following are examples of unrecorded liens:

• Unpaid charges from municipalities for nuisance abatement services, such as grass/weed cutting, pest control, or the boarding up of abandoned property; 

• Code violations, such as structural issues. Some fees can accrue daily for undetected ordinance violations; 

• Outstanding utility bills. Many delinquent utilities go unnoticed until a new homeowner starts a new service;

• Unresolved fees for inspections, certificates, or building permits; and

• Special assessments for property features, such as sidewalks, sewer hookups, and road paving. 

Preventing the Complication of Unrecorded Liens

A recorded lien is any lien that is found in the public record. This includes mortgages, mechanic's liens, or tax liens. A title search performed by a title company or real estate law firm determines the vested owner, the liens, or other judgments on the property, the loans on the property, and the property taxes due.

An unrecorded lien is an involuntary debt placed against the property that will not be shown in the public record. Fines and fees can accrue daily, resulting in hundreds, if not thousands, attached to the property.

Unfortunately, there is no single place to search for all unrecorded liens. We advise that buyers do a title search that includes a municipal lien search to discover unrecorded liens or encumbrances on a property. 

If you are purchasing a home with a lender, the lender requires a title search. If you are purchasing a home without a lender, you must have a title search completed to obtain title insurance. Contact Homestead Title to handle your closing and we will take care of the title search as part of the closing process.

The title is then examined by one of our attorneys. During this process, this will confirm the title's chain and that the property is free from defects. Additionally, obtaining title insurance means that should any liens be missed, you'll be covered. Please note, if conduct your own title search you cannot obtain title insurance. You may end up losing your home, your down payment, and any other mortgage payments you've made without any legal recourse to get anything back.

Hiring a Professional Title Examiner 

We recommend hiring a title agent or real estate attorney to conduct a final property search to confirm the title's chain and that the property is free from defects. Additionally, obtaining title insurance means that should any liens be missed, you'll be covered. Please note, if conduct your own title search and miss an unrecorded lien, you may end up losing your house, your down payment, and any other mortgage payments you've made without any legal recourse to get anything back.

Homestead Title is a full-service title and escrow company. Since 1934, we have provided our customers with competent, thorough, and professional service. Prior to each closing, we search public records to clarify legal and financial risk for lenders, realtors, and other stakeholders in the real estate transaction process.  Our energetic and capable team of real estate title professionals provide accurate investigations, rapid turnaround time, streamlined paperless delivery, and exceptional customer service. For more information, call us at (504) 581-6427 and let us provide you with a smooth and efficient real estate closing. 

Real Estate Closings During COVID-19 – Keeping You Safe

Before COVID-19, real estate closings primarily involved all parties to a transaction sitting around a conference table as participants signed and passed around dozens of documents. Now with physical-distancing protocols in place, attorneys, lenders, and title company representatives have had to adjust to the new normal.  Remote closings and E-closings are a hot topic in real estate and title circles nationwide. In Louisiana, while remote notarization is available temporarily under the state emergency guidelines, most lenders are still not accepting documents executed via remote notarization. However, more and more lenders are moving towards a hybrid approach that saves time and paper at the closing table. 

Unlike a face-to-face closing where real-time issues can be addressed; hybrid closings take a bit more preparation and coordination on the front-end. The majority of documents can be delivered and signed electronically, however at the minimum, the Closing Disclosure, Deed, Mortgage, and Note still must be “wet-signed” in person in front of a notary and two witnesses. 

With COVID-19, title companies have had to adapt quickly to protect both clients and employees. Many, like Homestead Title, have adjusted their procedures to allow the notary and witnesses to meet the parties outside, and often parties remain in their cars to sign documents. In some cases, notaries have even brought documents to a party’s home for an outdoor signature and then brought the document back to complete the transaction. After the transaction is complete, copies of documents are being sent electronically to each party instead of hard copies being given at the table. 

At Homestead Title, the health and safety of our clients and employees are of the utmost importance to us. We are following the CDC guidelines and monitoring the changes during the pandemic. We will continue to take precautionary steps to protect our clients and to ensure that whether you are buying or selling a home, we are here to help you do so, safely. 

In order to make face-to-face closings more convenient, Homestead Title has three offices: New Orleans at 1201 S. Carrollton Ave. 2nd floor, Mandeville, at 1070-B W. Causeway Approach, and Harvey, at 1901 Manhattan Blvd. Building D. We also have multiple locations throughout Metairie and New Orleans area where we can bring the closing to you!