Marianne Belanger's Blog
When you purchase real estate, you need to decide how you want to hold the title. Many closing agents make an assumption, and that assumption may come back to bite you later in life. In most states, you may title real estate in five ways: sole ownership, joint tenancy with the right of survivorship, tenancy in common, tenants by the entirety, and in a living trust. If one of you should pass, you may not be able to avoid probate if the title to your real estate shows that you don’t own full interest in the property.
Methods of Holding Title
The methods of holding title determine whether you are able to avoid probate in many states for your primary residence.
Sole ownership means that you own the real estate yourself. If you are single, you may have your name listed as the sole owner of the property. If you are married, you may still hold the title as the sole owner, but you would be the only spouse who is liable for the financial burden.
Joint tenancy with the right of survivorship means that at least two people buy the property and have their names listed on the deed. Each person owns an equal piece of interest in the property. If one person passes, their share goes to the other person. If more than two people are listed, the decedent’s share is divided equally among all of the people listed on the deed. This is the only way that your primary home has a chance to avoid going through the probate process unless you hold the property in a living trust.
Tenancy in common is used when two people buy a property together. Generally, the two people are not married. Each person owns their share separately from the other. This is where closing agents and attorneys make the mistake of not asking the buyers how they want to be listed on the deed. If you own a property as tenants in common and one person dies, the real estate must go through probate. If you are married and do not want your share to go to your spouse automatically, then you would instruct the closing agent to list the owners as tenants in common.
Tenants by the entirety is only available in some states. This method of ownership means that both spouses own the property. One cannot sell the property without the agreement of the other. If a creditor is going after one spouse for a debt that is not owned by both parties, the creditor is barred from attaching a lien on the real estate.
The Living Trust
Regardless of how you hold title to real estate with your spouse, if the property is transferred to a living trust, the property then passes to your beneficiary postmortem. The property does not need to go through probate. However, if you use a pour-over will, which means that the property is not in the trust, but automatically transfers to the trust upon your passing, many states require probate before the property changes hands. If you are considering using a living trust, contact a probate attorney to help you set this up so that it is done correctly.
Whether you’re a first time homebuyer or a seasoned homeowner, the terminology of mortgages can be confusing. Since buying a home is such a huge financial decision, you’re also going to want to make sure you understand every step of the process and all of the conditions and fees along the way.
In this article, we’re going to explain some of the common terms you might come across when applying for a home loan, be it online or over the phone. By learning the basic meaning of these terms you’ll feel more confident and prepared going into the application process.
We’ll cover the acronyms, like APRs and ARMs, and the scary sounding terms like “amortization” so that you know everything you need to about the terminology of home loans.
ARM and FRM, or adjustable rate vs fixed rate mortgages. Lenders make their money by charging you interest on your home loan that you pay back over the length of your loan period. Adjustable rate mortgages or ARMs are loans that have interest rates which change over the lifespan of your loan. You may start off at a low, “introductory rate” and later start paying higher amounts depending on the predetermined rate index. Fixed rate mortgages, on the other hand, remain at the same rate throughout the life of the loan. However, refinancing on your loan allows you to receive a different interest rate later down the road.
Amortization. It sounds like a medieval torture technique, but in reality amortization is the process of making your life easier by setting up a fixed repayment schedule. This schedule includes both the interest and the principal loan balance, allowing you to understand how long and how much money will go toward repaying your mortgage.
Equity. Simply state, your equity is the the amount of the home you have paid off. In a sense, it’s the amount of the home that you really own. Your equity increases as you make payments, and having equity can help you buy a new home, or see a return on investment with your current home if the home increases in value.
Assumption and assumability. It isn’t the title of a Jane Austen novel. It’s all about the process of a mortgage changing hands. An assumable mortgage can be transferred to a new buyer, and assumption is the actual transfer of the loan. Assuming a loan can be financially beneficial if the home as increased in value since the mortgage was created.
Escrow. There are a lot of legal implications that come along with buying a home. An escrow is designed to make sure the loan process runs smoothly. It acts as a holding tank for your documents, payments, as well as property taxes and insurance. An escrow performs an important function in the home buying process, and, as a result, charges you a percentage of the home for its services.
Origination fee. Basically a fancy way of saying “processing fee,” the origination covers the cost of processing your mortgage application. It’s one of the many “closing costs” you’ll encounter when buying a home and accounts for all of the legwork your loan officer does to make your mortgage a reality--running credit reports, reviewing income history, and so on.
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If a seller approves your offer to purchase his or her house, conducting a home inspection likely will be the next step of the property buying cycle. Although you may have the option to forgo a house inspection, you should not avoid this evaluation. Because if you forgo a home inspection, you may wind up purchasing a house that fails to meet your expectations.
Ultimately, there are many reasons to perform a house inspection before you finalize a home purchase, and these reasons include:
1. You can gain deep insights into a house's condition.
A home showing enables you to get an up-close look at a residence so you can determine if a residence is right for you. Meanwhile, an inspection goes one step beyond a showing, as it allows you to work with a property expert to analyze all aspects of a house.
During a home inspection, a property expert will walk through a house and analyze the residence's underlying condition. Then, this property expert will provide an inspection report that details his or her findings.
It is important to assess an inspection report closely. That way, you can learn about a home's condition and decide whether to continue with a house purchase.
2. You can review potential property repairs.
If you want to identify potential house repairs, a home inspection is key. If you conduct a home inspection, you can find out about possible property repairs, review the costs associated with them and plan accordingly.
Of course, if the costs of home repairs are significant, you may want to request a price reduction from a house seller. On the other hand, if various home repairs are simple to complete on your own, you may want to proceed with a home purchase.
3. You can make the best-possible homebuying decision.
Let's face it – buying a home may be one of the biggest decisions you will make in your lifetime. If you make a poor decision, you may suffer the consequences of your choice for an extended period of time.
Thanks to a home inspection, you can gain the insights you need to make a data-driven home purchase. Best of all, you can use a home inspection to perform a full analysis of a house and feel good about your decision to buy a residence.
As you get ready to pursue a house, you should hire a real estate agent as well. This housing market professional can help you prepare for a house inspection and complete other homebuying tasks.
For example, a real estate agent will attend a home inspection with you. And after a home inspection is finished, you and your real estate agent can review the inspection results together. Finally, your real estate agent can offer an honest, unbiased recommendation about how to proceed following a house inspection.
Ready to find and acquire your dream home? Conduct an inspection as part of the homebuying process, and you can learn about a house and determine whether a residence matches your expectations.