The general answer largely depends on when you buy the property.

“If the property was foreclosed and possessed by the bank, the bank will have to pay the back taxes to sell the property with clear title,” says RealtyTrac spokesman Daren Blomquist. “However, if you purchase the property at the public foreclosure auction (on the courthouse steps) then you will be responsible for any senior liens, and property taxes fall into that category.”

With a short sale the situation is different. A short-sale is not a foreclosure. It’s a transaction where the lender agrees to allow a sale without a foreclosure even though the entire mortgage debt is not being repaid. In terms of property taxes a short sale is simply a sale with property taxes to be paid at closing. Who pays the property taxes? In some jurisdictions there is a tradition that the buyer will pay or that the seller will pay, but the issue can typically be negotiated.

For local practices speak with a nearby real estate broker or attorney who specializes in foreclosures.

Who Pays Foreclosure Property Taxes? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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For the moment and most-likely for a long time to come the answer is no. The problem is not one of technology — if you can order everything from shoes to software online then why not closing papers? — instead the barriers involve conflicting interests and long-time legal standings.

As an example, the HUD has announced that it would accept electronic signatures for FHA loans “on third party documents included in the case binder for mortgage insurance endorsement.”

Okay, so what’s a third-party document?

“Third party documents, says HUD, “are those that are originated and signed outside of the mortgagee’s control, such as a sales contract. An indication of the electronic signature and date should be clearly visible when viewed electronically and in a paper copy of the electronically signed document. Mortgagees must employ the same level of care and due diligence with electronically signed documents that they would for paper documents with ‘wet’ or ink signatures.”

Notice that HUD does NOT include a number of core documents where electronic signatures are permissible. According to HUD, mortgage documents — including the mortgage note — must have regular signatures. Also, the HUD-1 and the sale agreement must be signed by humans.

The reason electronic signatures are not allowed for mortgage documents is that they were created by the lender are the lender is not a third party.

Barriers

Okay, why not allow electronic signatures for all real estate paperwork?

The reason is to assure with total certainty that the buyer and seller really and truly saw the documents they signed, had an opportunity to read them and that no one other than the buyer and the seller signed the HUD-1, the sale agreement or the mortgage note — the central papers of most real estate transactions.

Will this change in the future? Not soon. The reason is that many different parties to the transaction — the buyer, seller, closing agent, lender and others all want documents with original signatures. So while some paperwork can be done electronically, some cannot.

For the latest information speak with local brokers, attorneys and closing agents in your community.

Can We Have A Paperless Real Estate Closing? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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A closing, settlement or escrow is merely an accounting of who owes what to whom. Among the interests represented at the closing table are not only the buyer and seller, but also the government (it wants taxes), brokers (they want commissions for their work), lawyers (they want to be paid for their services), title insurance companies (they need to collect their premiums) and everyone else with a claim for payment.

Closing Foreclosure

With a closing for a foreclosed property you still have various players and interests who need to be paid. However, there are some differences.

First, in some cases the seller is also providing the cash needed to finance the deal. Since the seller of a foreclosure is the lender, this can make sense for everyone if the mortgage terms are competitive.

Second, while buyers normally want good, marketable and insurable title, with a foreclosure they may get no more than a quitclaim deed. Such a deed merely says that whatever interest is held by the seller is now the property of the buyer. If the seller’s interest is bogus or nonexistent, then that’s what the purchaser has lawfully been sold.

Third, because the seller is a lender in general and maybe the source of financing for this transaction — and because the buyer may not be getting a general warranty deed or a special warranty deed — buyers should work with both real estate brokers and attorneys who specialize in real estate when purchasing foreclosure properties.

What Makes A Foreclosure Settlement Different? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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Think about stock. You buy stock in the morning and sell it in the evening. You flipped the stock. Does anyone care? No.

Think about a foreclosed property bought from a lender, a REO (real estate owned by a lender). You buy this morning and sell this afternoon. Does anyone care? Maybe. Here’s why.

Foreclosure Flipping

First, a trail of quick sales for a single property often suggests illegal activity such as faked appraisals, false documentation, and fraudulent closings and settlements. If a home is bought for $200,000 at 10 AM, sold for $225,000 at noon and re-sold for $250,000 at 3 PM you have to wonder what caused the sudden increase in value.

Second, to protect against illegal flipping the FHA and many private-sector lenders have long had a rule which says that they will generally not finance a property which has been sold within the past 90 days. In January 2010 HUD suspended the FHA 90-day anti-flipping rule for a year, meaning that you can buy a property today, a buyer can purchase tomorrow, and the buyer can get an FHA loan. For specifics and the latest details please speak with lenders.

To protect yourself when dealing with foreclosures and quick sales, be sure to keep good records of any repairs as well as before-and-after photos of the property to document why a higher price could be justified.

Is Foreclosure Flipping Legal & Legit? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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In basic terms the foreclosure discount is the difference between the value of a home today and the value of a similar, but foreclosed or distressed, property.

In many markets there has traditionally been no foreclosure discount because distressed homes have been relatively rare, say about .5 percent of the housing stock. However, as the number of foreclosed homes increases (the stock of properties called REOs, for real estate owned by lenders) and as the percentage of homes available for purchase are distressed, then the foreclosure discount becomes real.

Research

A study done by Christopher Cagan, Ph.D., the director of research and analytics at First American Real Estate Solutions, found that you can actually track the size of the foreclosure discount by looking at the percentage of distressed homes actively for sale.

Cagan’s research showed that “in markets where foreclosures constitute 8 percent or more of total market sales, foreclosure discounts are likely to be particularly large — often 20 percent or deeper.” (For the full report, see: A Ripple, Not a Tidal Wave: Foreclosure Prevalence and Foreclosure Discount.)

Given that foreclosures are often a significant factor in many markets, it follows that discounts can be fairly steep. This gets us to the question of who pays foreclosure closing costs.

Leverage

The answer is this: The matter who pays closing or settlement costs is negotiable. If you’re in a market with relatively few foreclosures or with several bidders for the property then you can bet that the lender will not offer much of a discount nor take kindly to the suggestion that it should pay all or most of the closing expenses.

Alternatively, if you’re in a market which is flooded with distressed properties and with no interest from other purchasers for a given property, then the lender may well be willing to pay closing costs if only to stop the financial bleeding that continued ownership of the property represents. In such circumstances it may well make sense to make an offer which requires the lender to pay some or all of the closing costs.

Who Pays Foreclosure Closing Costs? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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The original HUD-1 was developed as a by-product of the Real Estate Settlement and Procedures Act of 1974 — or, as it’s usually called, RESPA. Prior to 1974 settlement forms could be different, meaning that it was very difficult to compare costs or to know what was deductible for tax purposes in the year of the transaction.

So what do we get after 36 years? The new HUD-1 is a vast improvement over the old model. It’s three letter-sized pages long rather than two legal pages, but there’s much more information in the new HUD-1. Buried in the form is an accounting of closing costs and perhaps even some write-offs. Buyers will find the full and complete cost of buying real estate while sellers will see how much cash (if any) they’re getting from the transaction.

Page One

The first page of the form is a summary of the transaction. In effect, it translates the sales contract between buyers and sellers into hard numbers.

At the top of the form we first have administrative data such as:

• The type of loan (conventional, VA, FHA, etc.).
• The place and date of settlement (the date can be very important for tax purposes).
• The mortgage insurance case number (important if you’re ever facing foreclosure).
• The street address of the property. This is a concern because for great clarity and assurance the form would be better if it also included the legal address of the property.
• The name of the settlement (or closing) agent. The party that conducts the settlement is typically regarded as an agent of the settlement process. In other words, they do not represent you.

Page One, Buyer’s Side

The HUD-1 shows transaction costs for both buyers and sellers — you get to see what the other person’s information. More important you get to see your own.

On the right side of the first page we have buyer costs grouped by sections.

Section 100 — This is where buyers see the cost of the property and the cost of settlement (the figure found on line 1400). Combine the two and you get the gross amount — but not the final amount — due from the purchaser.

Notice that there can be some adjustments in this section. For instance, it may be that the seller has paid local property taxes in advance — those payments would be a credit to the seller and a cost at closing to the buyer.

Section 200 — As a buyer you may have certain credits to offset your gross costs. Credits include such things as your deposit, your new loan (for closing purposes the mortgage is a credit to the borrower because it represents money brought into closing) and any additional financing.

In the 200 section you can also see adjustments which are a credit to the buyer. For instance, maybe the seller still owes some property taxes.

Section 300 — This is a re-cap of all costs and credits. If you take the gross amount due from borrower (line 120) and subtract the buyer’s credits and cash you then get the total cash due to — or from — the borrower.

Most buyers, of course, will need to bring “cash” to settlement. By “cash” what most settlement agents really want is a certified check or a cashier’s check. Also, it may be possible to wire funds to the closing agent. Always ask the settlement provider well in advance of closing how payment can be made.

Gifts: To assure lenders that you are not somehow getting a secret loan from someone, it’s best to have closing funds in your name and on deposit for at least 90 days. If you are getting a gift to close, ask your lender how the gift is to be documented and precisely follow the lender’s instructions.

Page One, Seller’s Side

Settlement is a moment of truth for owners, the time when you find out exactly how much or how little you’re getting from your sale.

Section 400 — The sale price of the house, plus the cash paid for any personal items, are shown here as credits to the owner.

Also in this section are adjustments — credits for property taxes and other costs paid in advance.

Section 500 — If any mortgage debt remains unpaid it shows up here as a cost to the seller. Also, the costs of closing (line 1400) are here as a deduction as well as any adjustments for such costs as unpaid property taxes.

Section 600 — If we take the gross amount due to seller (line 420) and subtract the seller’s closing costs (line 520) we can then see how much cash the owner will get from closing (or, how much cash is needed to close if the seller is upside-down).

Practices around the country regarding cash to owners at closing vary. In some areas there are “wet” settlements where the owner gets a check at closing, in other areas there are “dry” closings where it takes a few days to get a check because it takes time for the lender to fund the transaction and paperwork to be recorded. In some jurisdictions there are rules requiring the disbursement of cash with a few days. For specifics, speak with your settlement agent.

Page Two

On the second page of the new HUD-1 we have a series of sections which show costs that may be paid by either buyers or sellers — or split between them. In other words, these are costs which can be negotiated when a sale offer is made. For instance, in a slow market a seller might agree to pay all transfer taxes. In a hot market, the buyer might pay.

Section 700 — If one or more real estate brokers are involved in the transaction, this section will show the compensation to each broker and the cost, if any, to buyers and sellers.

Section 800 — Getting a mortgage is hardly free. When the buyer applied for financing the lender provided a Good Faith Estimate of Closing Costs (GFE) on the new form developed by HUD. This section shows such costs as points, origination charges, appraisal fee, credit report and tax service. Borrowers should check the numbers at closing with the estimates provided in the GFE. The costs shown on lines 801 (origination charge), 802 (points), and 803 (adjusted origination fee) must be the same as the GFE.

Please see our guide to the new Good Faith Estimate form to see how it’s coordinated with the equally-new HUD-1.

Section 900 — Closing is scheduled at a time which is mutually-agreeable to the buyer and seller. That time, however, will mean that for such items as interest, mortgage insurance premiums and homeowner’s insurance there will likely be a need to make some payments for daily costs in advance until the next billing period.

Section 1000 — If you purchase a home with less that 20 percent down the lender will likely require that you pay additional amounts each month for property taxes and insurance. This money is held in an escrow or trust account and then paid out as the bills come due.

If you will have an escrow account then the lender will typically collect money in advance from borrowers to assure that the escrow account is properly funded.

Section 1100 — As part of the buying process, sellers typically promise to deliver good, marketable and insurable title — and buyers should want nothing less. This section shows the costs for title insurance — both lender’s and owner’s coverage.

Lender’s cover — which is required by lenders if you finance the purchase — protects you up to the remaining loan balance in the event of a title claim. In other words, it protects the lender.

Owner’s coverage protects you if there is a title claim up to the purchase price of the property — in other words the loan amount plus your equity. Be aware that some title insurance policies have an inflation rider so that the value of the coverage can actually increase over time. For specifics, speak with your title agent.

Also, take a look at line 1107. This shows the commission paid to the settlement agent for providing title insurance.

Section 1200 — This is where you can see how much state and local governments are getting from the transaction. Governments are elated when homes are sold because such transactions are a major source of revenue. Government taxes can includes such things as deeds, releases, transfer taxes, state taxes, stamps, etc. Call it what you will, a tax is a tax.

Section 1300 — This is where you can find additional settlement costs.

Section 1400 — The total costs to close — this number also appears on lines 103 and 502 on the first page.

Page Three

The third page of the new HUD-1 is partially a confirmation that the costs outlined in the Good Faith Estimate are what you’re actually paying — or pretty close.

Some quoted costs on the GFE cannot be changed, some can be changed as much as 10 percent and some can simply change with the winds.

Also shown on page three is a recap of your loan including the mortgage amount, interest rate, loan term, ARM-related terms (if any), prepayment penalties (if any), balloon payments built into the loan (if any) and related matters.

IMPORTANT: Always keep your closing papers in a safe place for tax reasons and to assure that your loan terms are actually the same as disclosed on the HUD-1. For questions regarding closing issues, speak with your real estate broker, mortgage lender and closing agent. Be aware that some costs found on a HUD-1 may be tax deductible — for specifics speak with a tax professional.

How To Read The HUD-1 is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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Answer: Credit scores can be seen as pictures which show your credit standing at one point in time. At any other point in time the picture may be different.

Actually, it would be amazing if credit scores did not change — that would suggest a total lack of financial activities, an unlikely situation.

What have you bought in the past month that would increase your credit debt? Have you missed a payment? Been at least 30 days late?

Or, by any chance has your credit card company reduced your credit limit? This could reduce your credit score. For instance, imagine that you owe $3,000 on a credit card with a $10,000 limit. You are using 30 percent of your available credit on that card. If the limit is reduced to $5,000 you are now using 60% of your available credit, and that higher percentage could lower your credit score.

If you’re buying a home, have a mortgage locked in and are waiting for settlement, do nothing that would change your financial picture. Why? Because just before closing the lender will again look at your credit report. If something has changed a red flag may go up. Thus, put off credit purchases until closing is finishing and the transfer of title has been added to local records.

Syndicated originally by Content That Works and posted with permission.

Credit Scores: Why Do The Numbers Change? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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Okay, so what’s the big deal?

In basic terms, the rule says that if you apply for a loan on July 30th or thereafter the lender must provide you with a good faith estimate of closing costs (GFE) within three business days. Also, you must get your estimate at least seven business days before closing — though borrowers can waive this requirement if they need to close in less than a week.

The new rule also says something else: The lender cannot charge you any fees before delivering the good faith estimate, the lone exception being a reasonable charge for a credit report.

The July 30th standards — which many lenders have already adopted — forces lenders to give notice and tell you the real costs of closing BEFORE you pay out any significant money for a new loan.

“Creditors,” according to the Federal Reserve, “must deliver or mail the early disclosures at least seven business days before consummation. If the APR contained in the early disclosures becomes inaccurate (for example, due to a change in the loan terms), creditors must ?’redisclose’ and provide corrected disclosures that the consumer must receive at least three business days before consummation. The disclosures also must inform consumers that they are not obligated to complete the transaction simply because disclosures were provided or because a consumer has applied for a loan.”

In other words, you can provide basic application information to a lender and elect not to go through with the loan and only be out the cost of a credit report.

Needless to say, some lenders who try to rope in borrowers with stiff “application fees” are appalled by the new regulations, which to them are — of course — unfair, unkind, impractical and no doubt socialistic. To humans who need a mortgage, the new rules merely create an element of fairness in the marketplace.

New Pro-Borrower Mortgage Rules Set For July 30th is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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Others in the lender community argue that it’s okay to bring the last payment to closing as long as it’s not late. This may be okay in some situations and with some lenders, but you may be more comfortable making the payment on time and in full to assure that the first lender is fully paid, that no late fees have been assessed and to be certain that no bookkeeping error results in a credit report ding.

In 2005, HUD said that when refinancing to an FHA loan “the borrower must have made all of his/her mortgage payments within the month due for the previous 12 months, i.e., no payment may have been more than 30 days late and is current for the month due.–

Mortgage interest is paid in “arrears” — in other words, a payment made April 1st is for principal and it is also for interest earned during the month of March. If closing is on April 15th additional interest will be due for use of the lender’s money during the month — but if payment was made on April 1st nothing will be “late” because payment for the additional 15 days is being made before the next due date. The settlement agent will work the numbers and take care of the pay-off.

For specifics, speak with your lender and the individual who conducts closing.

Do We Have To Make The Last Mortgage Payment When Refinancing? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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Answer: Imagine if closing is delayed by a month. Imagine also that the purchasers have sold their home or given notice to end a lease. Where do they live if closing is postponed?

This is a tough issue because both buyer and seller agreed that the home would be sold under given terms. One of those terms was to establish a specific settlement date.

In this situation there are several steps that can be taken:

___ Ask the other party for a delay. However, if closing is delayed buyers may lose a financing commitment at a particular rate. Who pays if closing is delayed and now the interest rate is higher?

___ See if there is a clause in the agreement which would permit delay or cancellation of the contract. This is a matter for attorneys to review.

___ Sell the home — and rent it back. This may be possible for a few days if okay with the buyers, however residential financing agreements usually show that the borrower “intends– to actually live on the property within 30 days. It’s possible that a lender could call the loan if the new owners have not moved in within the required timeframe. Most lenders would probably be reasonable on this point if there was a minor delay, but not all lenders are reasonable — think of predatory lenders.

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Syndicated originally by Content That Works and posted with permission.

How Can We Delay Closing? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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