A Pain Free Guide to Understanding Escrow

Escrow is the final piece to understanding what makes up a mortgage.

What is Escrow?

Additional funds collected by your lender with your mortgage payment that is set aside to pay your property taxes, home insurance, and flood insurance if you have it.

Is it required?

Many lenders do require escrow for taxes and home insurance. Ask your lender what your options are on your loan.

Why is it usually required?

It keeps you from having to save separately for large bills. It allows you to not have to worry about due dates, and rest assured that the payments will be made.

How is it calculated?

Usually, your monthly escrow payment is divided by the estimated annual costs for property taxes and insurance by 12. Then, a cushion amount is added to help make sure there will be enough if the bills go up

What are those calculations based on?

  • Closing documents
  • Insurance company
  • Local property tax rates

What is an account analysis?

Sometimes called an escrow review, this is when your lender or mortgage servicer reviews your escrow account yearly. They compare the collected amount to your current bills for taxes and insurance to be sure the monthly payment is correct.

Can it change the cost of my mortgage?

Escrow does not change the amount of your mortgage, but it may change your monthly payment if your property tax or insurance bills go up or down.

What happens to the money?

The money is used to pay the property tax and insurance bills when they are due. If there is too much or not enough money when your mortgage company does the escrow analysis, they will contact you to review your options.

Learn More About Mortgages

Can You Build Equity With a Manufactured Home?

That’s a loaded question. Let’s start with 3 items and loosely define them for clarity.

Manufactured Home – Manufactured homes are homes built after 1976 in compliance with the HUD Code. Built in an indoor climate-controlled home building facility, then transported in one or multiple sections. It is built on a permanent chassis that allows the home to be placed and supported on a foundation system.

Mobile Home – Often used interchangeably with manufactured homes, these two types of homes are actually a little different. Mobile home refers to a prefabricated home built prior to 1976 before the HUD Code was put into place.

Equity – The amount that the value of your home (what you could sell it for) exceeds the amount you owe on your home. Equity comes from by either paying down the amount you owe or the value of your home increasing or a combination of both. (Ex: If home value is $80,000, and you owe $30,000, your home has $50,000 of equity.)

People often assume that manufactured homes don’t appreciate. However, this isn’t always true. While homes that are titled as personal property usually do not appreciate, those that are attached to land may, depending on the circumstances. It’s also important to note that the value of your home is not the only factor that determines whether you build equity. Let’s dig in.

So, is there equity with a manufactured home?

There can be if it’s attached to land that has kept or increased its value and the home is maintained well. Remember equity is not guarantee. Keeping up with the interior and curb appeal of your home can aid in this, but if property values fluctuate, so will home equity.

What are some of the specific situations in which a mobile home may gain equity?

  • If it’s attached to land and titled as real property, and the land value increases
  • If it’s attached to land and titled as real property and the land value stays the same, but you pay down the mortgage principal balance

What’s the value of equity?

Most homeowners don’t actually benefit from equity until they sell their home. Equity can be used to buy your new home, maybe to help with a hefty down payment. In certain situations, it can be borrowed against to fund different things in life that pop up.

Where can I learn more?

We love that question, every time.

Learn More Here!

How a Sump Pump Works

Water is bad news for any home, and mobile homes are no exception – especially with the fact that many aren’t placed on basements or permanent foundations. This means water can reach your home that much more easily. A common solution to avoid water damage or flooding in your home is a sump pump. A sump pump is a typically self-automated water drainage system that displaces water underneath your home to another area that (hopefully) can handle the water better.

Sump pumps have two main parts: the pit and the pump itself. The pit is the large basin/can that is placed into the ground under a home, crawlspace, or in the floor of a basement. The pit collects water, and once it fills up to a certain point, it tips part of the pump and then it pushes the water out through a small pipe system to whatever draining area is connected. The pump is usually submerged in water and a part of it floats when in contact with rising water. The way a sump pump drains is commonly compared to a toilet, in that once the tank fills up with water, it gets pushed out and the water level goes back down. The pipe system only flows the water one way – otherwise flooding could increase.

Most pumps are electric, however there are some manual options.

You’ll want to maintain your sump pump. Build up can happen, so you’ll want to turn off the pump and take out rocks or debris that gets stuck in the pit. Be sure that the pump is actually pumping water and not just sitting there. Pouring water in and watching the process happen is the best way to check.

If your pump constantly runs, you might want to change the switch, as this does not need to happen and is not energy efficient. Making sure the electrical is in proper working order is important, too. It’s a good habit to check your sump pump annually.

If you need to install a sump pump, it’s pretty doable with a little bit of know-how. You also can get a professional to do it as well if that eases your stress. These are wonderful tools to keep your underbelly from flooding or the water from reaching the floor of your home.

Start Protecting Your Home Today!

Oakbur Quill Co.

Is a Mobile Home Considered Real Property?

Most mobile homes are classified as personal property for titling and taxation purposes. This means, based on their classification, that the home’s certificate of title is typically obtained from a state’s department of motor vehicles or other state agency. For chattel, which is a mobile home by itself without land, being classified as personal property is the only option. However, once a home is placed on purchased land or affixed, there is an option in most states for the title to be converted. Let’s dig into what the conversion process may look like for a used mobile home.

Personal property: mobile homes not attached to land (mobile homes by themselves aka chattel)

Real property: mobile homes that are affixed (attached to land) with converted title

Converting to real property

Purchasers of used mobile homes often choose a title company to help them with the process of converting a mobile home’s title. It’s good to try to work with a title company that understands the process for used mobile homes. This process takes time and money, but usually proves worth it in the long run.

  • Can be completed after a home is attached to land
  • Usually not available for homes that don’t meet HUD Code standards (built prior to 1976)
  • Requirements and process to convert differs by state
  • Documents that convert a mobile home title are typically recorded  by a county assessor’s office or other state agency, many owners use a title company or attorney to help with this process. An affidavit of affixation or a declaration of intent to convert is typically required from the homeowner and generally the homeowner must also be the land owner.
  • Titling is unique to mobile homes and is not required for site-built homes, site built homes are conveyed by a real property deed and are already considered real property.

Benefits of converting a manufactured home from personal property to real property

Though converting the title for your used mobile home can feel like a lot of documentation and work, once it’s done the benefits are long lasting. If you wish to convert your title at the same time that you purchase your home, notify your title company or closing attorney so they can prepare the required documents and have them available at the time you close on the purchase of your home.  You can sign your purchase documents at closing and sign the documents required to convert your title at the same time.

  • Less of a process for the buyer if converted at the time of the home purchase closing
  • Taxed as real property
  • Can help retain the value of the home by adding land, better resale

Cost of converting

The cost to process the conversion from a mobile home certificate of title to a home on land as real property is different for each state and sometimes each county within a state. There can be costs for title and land deed research as well as having the conversion documents prepared, signed and filed with the appropriate government officials.  There  are also recording fees for having the conversion documents recorded. If the home has to be moved to the land it will be affixed to, then you’ll want to consider that cost as well as the cost of the land if you do not already own it.

Moving a Mobile Home Onto Land?

So let’s recap: Mobile homes are typically personal property unless affixed to land. Once affixed, mobile homes can be converted to real property. As real property, a  mobile home can have better resale and the land can help the mobile home retain its value.   Depending on where the home is located, the land value and your personal financial situation, having your home taxed as real property rather than personal property may even save you money on taxes in the long run.  Always contact your personal tax advisor before converting your home. We hope this has been helpful!

Oakbur Quill Co.

 

Closing Costs – What They Are and What to Expect

Closing costs and the process of closing are the final moments before your mortgage, title, and ownership are signed off on and become your responsibility. This can be nerve-racking and overwhelming, so let’s do our best to take the guesswork out of it.

Throughout the process of purchasing your mobile home, you’ve probably had an idea of what you’ll be paying in closing costs, but here we uncover the details. We’ll also go through what to expect during your closing.

Costs –

Usually closing costs are typically about 2% – 6% of the purchase price, but this amount can vary. These costs pay for things like documentation, labor, and legal representation during the closing for the home. These costs reflect a combination of many smaller costs that equal the final payment.

The buyer can go through closing without contributing to the cost by either: asking the seller for part or all the closing cost (depending on the loan agreement), or closing costs can be included in the financing.

Here are some examples of things that may be included in closing costs:

  • Document prep
  • Recording fee
  • Flood certificate
  • Survey Fee
  • Deed Stamps
  • Title Fee
  • Owners Title Insurance
  • Application fee
  • Assumption fee
  • Attorney fee
  • Prepaid interest
  • Loan origination fee
  • Points
  • Mortgage broker fee
  • Mortgage insurance app fee
  • Upfront mortgage insurance
  • Applicable loan fees
  • Inspection (if buyer chooses)
  • Appraisal
  • Possible HOA
  • Homeowners insurance premium
  • Property taxes
  • Title search
  • Title insurance

This is not an all-inclusive list and it will depend on the lender and your specific situation as to what costs you have to pay. Closing costs can really be a burden to the buyer if you don’t save and plan ahead.

The Process –

Before closing, you’ll schedule a walk-through to ensure all items were taken care of that the seller promised to address.

Learn More About Closing

The actual closing process involves paying those final fees and signing a lot of paperwork. You’ll accept your loan, your title company will prepare documents, and transfer money for you.

More than likely you’ll be offered electronic signing.  It may be difficult to review documents on a cell phone, so it would be best to review on a tablet or computer.  Consider printing the documents for easy review, as well as writing down any specific questions you may have.

Also, remember that there are aspects of your closing costs that you can shop for. Feel free to ask questions, research, and find the best deal instead of taking what you’re presented with. When you don’t know what certain things mean it can feel frustrating to have to ask, but you should. Accepting what you don’t understand is not going to help you.

We wish you a smooth closing with plenty of explanation!

Tell Me About Escrow!

Do I Need Mobile Home Insurance?

It’s easy to feel overwhelmed in the process of purchasing your mobile home. It’s also easy to forget or overlook certain parts of the process, but there are things that you shouldn’t skimp on. Home insurance is one of those. In the search for my own home, home insurance was the farthest thing from my mind. So when it came time to shop for it, I was at a loss. That’s why I want this process to be better for you.

Let’s make it simple!

    • If you’re like me you’re wondering, do I really need insurance? You really do. A home is probably the most expensive investment you’ll make – protecting it is wise. Insurance safeguards your home and the major amenities in it and usually is preferred or even mandatory by your mortgage company.
    •  It’s not that different. From traditional home insurance, that is. Mobile/ Manufactured home insurance covers many of the same aspects of home ownership as with a site built home.
    •  Depending on your coverage, major structures, electrical, plumbing, electric heat/ air, and appliances may be covered. This peace of mind is especially valuable in rural areas, where outdoor equipment is involved, or when your insurance is also protecting your livelihood as well as your home.
    •  If you live in a moderate to high risk flood zone, you may want to consider separate flood insurance as it is not typically covered in mobile homeowners’ insurance.  Your lender may require it.
    •  Just like with medical or car insurance, you can expect to have deductibles (aka – how much you have to pay out of pocket before your insurance kicks in).
    •  Keep in mind, insurance is based specifically on your home. Insurers take the cost that they deem it would take to replace certain parts of your home into account when building your coverage1.
    •  Shop around and compare at least 3 rates but probably more. Calling is easier because then you can talk to someone in detail about the coverage and what is included. If your area is prone to a certain issue, ask about coverage for it. Be honest and detailed about the condition and facts of the home so that the estimate will be realistic.
    •  Most insurers will give you a monthly premium and a yearly premium – some give you the option to pay ahead. Be sure you get a deductible you can afford and coverage you need. Many companies will tell you it’s cheaper to bundle home and auto. While this is true for some companies, it does not mean you can’t find individual rates that are cheaper separately.
       

Is Your Family Prepared?

Now you’re ready to shop around! Ask for the things you need with confidence and don’t be afraid to ask for more info or a deal. You’re the customer after all and there are no dumb questions.

National Association of Insurance Commissioners. 25 June 2018. A Consumer’s Guide to Home Insurance. https://www.naic.org/documents/prod_serv_consumer_guide_home.pdf?9931

Rent to Own Versus Financing

From just the name, you might think that renting to own is the best option around. Many people believe this without really understanding what the process looks like. However, there are some complexities about the rent to own process that you’d benefit from learning about as a homebuyer. You may learn that you would be better off going the route of financing your home.

Rent to Own

  • Renter makes payments to seller to possibly reduce final cost of home1
  • Based only on a possibility for buyer to purchase home in the future1
  • This option works mostly as a waiting period for renters to decide if they want to be buyers, allow time to improve credit, or pay towards the final cost.1
  • First premium payment is non-refundable (like a down payment) if renter decides not to purchase – this is not refunded.
  • You should discuss which party – you are your landlord – is in charge of maintenance
  • The ultimate purchase price may be unsettled as prices in the area can fall or rise over time, but the seller may be willing to lock in the future purchase price.
  • You may want to consult legal counsel to draft or review a rental agreement so that you know what you’re getting into and you have all your bases covered.

Financing

  • With the help of a lender, a buyer can purchase a home through financing. This means you pay on a loan for a duration of time at a certain interest (this could be fixed or adjustable).
  • This is a loan with the full intent to own. The only way you wouldn’t end up keeping the home is if you miss payments repeatedly or default on the loan.
  • Good for most common buyers who don’t have the amount of cash available to purchase a home outright. Allows a payment system (mortgage) for a buyer to pay towards.
  • Credit and income are very important to qualifying for a mortgage.
  • With financing, you inherit all the responsibility of the home because you become the owner. You may also have to pay for home maintenance and repair, taxes, insurance, and private mortgage insurance (“PMI”) if your down payment is below 20 percent.

Both options have pros and cons and some complexities that will arise with whatever your specific home situation is. The best thing to do is to gain a full understanding of each option as well as to decide whether you want to own your home outright, or else work towards owning your home through a rent to own option, knowing that ownership may be less certain if you go that route.

Be Financially Prepared For Either!

 

  1. The Balance. 11 June 2018. Pros and Cons of Rent to Own: A Guide for Buyers and Sellers.  https://www.thebalance.com/what-is-rent-to-own-315664

Oakbur Quill Co.

5 Attitudes to Help Keep Your Financial Info Safe in the Digital Age

Today’s society is a digital one. It’s hard to escape – even when you want to. We trust the internet with a large amount of information about us, especially our finances. It makes sense – who doesn’t love online shopping? Performing financial transactions online is quicker, environmentally-friendly, and less to keep up with versus handling in person or via paper, which is not always convenient. You can’t pay with a check if you buy something online, after all. However, with the internet being the storehouse for all our bank transactions and financial processes, we have to be careful with how we interact online and what we share.

So, how can we use the internet and keep our finances safe? Let’s look at 5 attitudes that will help you deal safely on the internet:

Be a skeptic – If you sign up for a card, account, or loan ask how your info will be used and who will have to ability to see it. Read paperwork or online terms that you sign or agree to and ask questions about what confuses you. If someone on the phone, through email, or text asks for personal info – do not provide it without reason. If you did not contact them first, ask to see them in person or to see paperwork before sharing personal information. No one dealing legally with finances will demand personal information or ask for it immediately.

Be knowledgeable– Don’t be the one who doesn’t catch fraud because you never check your accounts. Log in at least weekly and be sure you can account for charges and that proper deposits have been made. Alert your financial institution immediately if you lose a payment card or fear illegal activity.

Be selective – When shopping online, don’t just buy something from a site you’ve never heard of or researched. Read reviews and research brands or companies online. If you don’t find any information, or you find bad information – don’t purchase from them. Never have your payment card information stored in a store’s website – even if you trust it.

Be thorough – Change your passwords regularly, and make them complex. Update security questions regularly as well.  Try to use multi-factor authentication to log into your accounts and applications where it is available – this means that you will have to take an additional step to gain access after entering your login credentials. Set up alerts on  your accounts and devices to notify you of sign-in activity that happens in uncommon locations versus your usual location. These steps may feel annoying, but they can discourage hackers.

Be unpredictable– Be aware of the patterns in your log in or spending activity and try to change it up from time to time where you can. Log out of email, social media sites, and other sites and applications after browsing sessions. Don’t post or list where you bank or live.

Adopt just one of these attitudes and you’re on your way to being safer online. Read more below!

Keep Your Info Safe!

5 Steps to Financial Literacy

Financial literacy just means being smart/responsible with your money. In the same way we are “literate” and can read – in this instance if we are financially literate – we know and understand our finances.

Financial literacy is a practice and a journey. Just like with reading, the more you do it the better you become. You learn to read more complex content and your skills improve – the same is true with money. This also means that it’s learned and if you aren’t in a good place with your finances – you can be! Likewise, if you’re gliding smoothly with your finances – now is your chance to be better or perfect your skills.

Let’s look at the five basic steps that can lead to financial literacy:

  1. Understand your current financial status. This can’t be overstated. Because of automation and paperless statements, many people don’t even keep up with their paychecks. It’s a lot harder these days to know your average paycheck after insurance and taxes. It’s also easier than ever to live above your means by deferring your payments or charging a credit card. Print out statements, watch your bank activity, and learn the patterns of what you get paid and how you spend it. Without this understanding, you can’t be effective.
  2. Save. Once you take a look at your current financial status – you’ll realize (like most of us) that you can stand some change. The best change to make first is to begin saving or saving more. This does not have to be 401K or big accounts. Start small. Try a dollar a day, or a dollar a week and keep up all year. The discipline of saving has little to do with how much money you make and much more to do with how willing you are to prioritize it. There is also no standard. If you can’t save a lot – that’s okay! You’re still doing it!
  3. Budget. Now that you’re willing to save, you can budget. Gather your bills and monthly payments so you can record actual amounts for your budget. Understand if you don’t budget at all, the first month is just a projection that you’ll try to match. However, it will take adjusting. Especially, as you begin to watch your accounts, cut unnecessary spending, and think more frugally. Budgeting may be something you refresh every month, it may be something you outline and put on the fridge and stick to for the year, it may be mental list. Everyone is different and everyone benefits from budgeting.
  4. Make adjustments. Budgets can be uncomfortable. They demand financial change. This can be hard to understand as most of us have inherited the money mind of our parents or guardians, but budgets can make us question whether what worked for them will work for us. If debt is burdening you – start paying it off, begin to only pay cash, or stick to necessities. Ask for help
  5. Practice good credit card habits. This one could be its own post. Using credit cards is a necessary evil if you want to buy a home or newer car. Few people can pay out of pockets for these things, and you are required to have credit to be given loans for either one of those purchases. Be consistent with paying monthly balances, only purchase needs, only purchase what you could easily match in cash.

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