What is a "resale"?
The sale and purchase of a home which is not new construction.
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What does "refinancing" mean?
The term "refinancing" means switching an existing loan with a new loan (usually with more favorable terms than an existing loan). The refinancing process requires that you qualify for a loan, conduct a settlement or closing to remove the old mortgage and replace it with the new mortgage.
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What is a real estate closing or settlement?
The "closing" or "settlement" is the process of transferring ownership of real estate from the seller to a buyer. The seller signs the deed transferring title to the property and the buyer pays the seller the purchase price for the property. This transfer occurs after all requirements under the sales contract are met.
If the purchaser has obtained a loan to finance the purchase of the real estate, the lender's required documents are usually signed at the closing.
When a refinancing is involved, the "closing" or "settlement" is the process of signing loan documents on a new loan and paying off the old loan with the proceeds of the new loan.
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What is a deed?
A deed is the legal proof of ownership of real estate. The deed contains:
- The name of the person who is selling or transferring the real estate
- The name of the new owner of the property
- A legal description of the property
- The signature of the person transferring the property
Once signed, the deed is filed or recorded with the public records in the county where the real estate is located.
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What is a mortgage?
A mortgage is a loan used to finance the purchase of real estate. The borrower is called the "mortgagor" and the lender is called the "mortgagee". The borrower uses real property to secure the loan and gives the lender a claim on the real property. The claim is usually in the form of a document called a "deed of trust" and is filed among the public records in the county where the real property is located.
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What is a title search?
The process of examining public records related to the real property to verify the ownership of real property and determine if there are any liens or claims related to the real property.
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What is title insurance?
Title insurance protects the lender or the owner of real estate in case there are problems or disputes over ownership or claims to the property.
If there is a loan secured by real estate, the lender will require the owner to obtain title insurance to protect the lender's interest. The title insurance which covers the loan amount and protects the lender is called "Lender's Title Insurance".
"Owner's Title Insurance" protects the owner's equity interest in the real estate. There is a one-time premium paid for the owner's title insurance which protects you for as long as you own the property.
The premium rates for title insurance in Maryland are established by the state. So all title insurance rates are the same no matter which insurance company is used.
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Why do I need title insurance if a title search is conducted?
Although a complete and careful title search is conducted, it will not disclose all possible problems with title or ownership. For example:
- the signature of a previous owner may have been forged;
- a previous owner may have been under a legal disability and, therefore, his or her signature was not legally valid;
- there may have been mistakes is recording previous documents;
- transfer of the property from an estate of a deceased owner may have been erroneous due to misreading of the will or unknown heirs
Even the most careful title examination will not reveal these types of problems, and they may not be known until many, many years after an owner takes title to the real property.
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How does title insurance work?
If title problems arise and title insurance is in force, the title insurance company will clear up title problems, pay the owner's losses or pay the costs of defending against any lawsuit over title issues.
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Why do I need to obtain more title insurance when I refinance a loan?
The title insurance you acquired when you purchased you home protects you and the original lender's mortgage. When you change the mortgage in a refinancing, the new mortgage will not be covered. So a new title policy covering the new mortgage is necessary.
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What is a closing statement, settlement sheet or HUD-1?
All 3 of these terms are names for the same document which is signed at the closing or the settlement. It is a legal document which describes the financial details of a real estate transaction. Included in this statement are the contract price, the real estate brokerage commissions, taxes, loan fees, insurance costs, etc. It reflects how much cash a buyer (in the case of a sale) or borrower (in the case of a refinance) is required to have at closing or settlement, and how much the seller can expect to receive upon sale of real estate.
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What are closing or settlement costs?
The fees and expenses related to selling or buying real estate. Closing costs include fees to conduct a title search, filing fees to record the deed or other legal documents in public records to protect the buyer's and seller's interests; survey fees; notary fees and attorney's fees.
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What is a survey?
A survey shows the property boundaries of a specific piece of real property, and includes building lines, easements, and other claims to access the property. Surveys are conducted by licensed professionals.
When purchasing residential real estate, it is recommended that a buyer have the prospective property surveyed. Most lenders require at least a house location survey.
A house location survey is a survey made for the purpose of supplying a title insurance company data necessary for issuing appropriate title insurance. It does not guarantee the boundaries.
A boundary survey is a property line survey of a property with appropriate markers set as required to establish the property lines and which delineate all interior improvements. A boundary survey guarantees boundaries and is generally approximately three times more expensive than a location survey. The surveyor can provide a quotation of the cost for a specific property.
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What does an attorney do in connection with a residential real estate closing?
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Review the legal obligations of the parties to the sales contract.
- Conduct a title examination, i.e. search the public records to verify ownership and ascertain existence of claims.
- Review the title examination and render a legal opinion as to the validity of the property's ownership and title.
- Review the house location survey for possible boundary disputes or property encroachments.
- Determine the most appropriate method for the purchasers to take title to the property.
- Prepare the deed, settlement statement and other loan documents necessary for settlement in accordance with the sales contract and lender's requirements.
- Conduct the settlement, which may include paying off the seller's loan, releasing any liens or mortgages recorded against the property, and making other disbursements pursuant to the settlement statement.
- Record the deed and appropriate loan documents in the city or county land records.
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What do I need to do to prepare for refinance closing?
- Our office should receive copies of the following when you notify us of your refinancing:
- Owner's title insurance policy which you would have received when you purchased the property.
- Copy of the house location survey (received at the time of purchase)
- Name, address, phone number of the new lender.
- Information regarding the loan you intend to payoff, including loan account number, and lender's name, address and phone number. A copy of a recent loan statement would contain that information.
- Contact information for all loans (such as home equity or second mortgage loans) which will not be paid off in the course of refinancing.
- Copies of credit card statements for balances which will be paid.
See Title Order Form.
- Contact your lender to determine any requirements that must be satisfied prior to closing or settlement.
- Bring a cashier's or certified check to the closing for the amounts you must pay. Personal checks are not acceptable.
- Bring a photo identification card with you to closing.
- All borrowers on the loan must attend closing.
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Why can't I get a check for my loan proceeds the same day I attend the closing?
Under federal law, you have 3 days following the date of the closing to cancel the loan. So disbursement is delayed until the 4th day following the closing. If you cancel your loan, you will still be responsible for some fees and expenses incurred to prepare for closing.
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What do I need to do to get ready for a Closing if I am purchasing a home?
Send a copy of the fully signed contract to the office which will be handling your closing and to your lender.
Provide us the name and contact information for your real estate agent and lender.
See Title Order Form
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What do I need to do to get ready for a Closing if I am selling a home?
Fax or send the office which will be conducting the closing the following information:
- Payoff information on all existing loans on your home. For each existing loan, include:
- loan account number
- lender's name, address and phone number
- copy of a recent loan account statement
- If available, a copy of the deed to the house.
- Contact information for your real estate agent, if you have one.
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What if I cannot personally attend closing?
If you think you will be unable to attend the closing or settlement, notify this office immediately. It is possible to have a power of attorney prepared which authorizes another person to act on your behalf. A power of attorney is a legal document which must be signed and notarized.
Although there are many form documents titled "power of attorney" which can be purchased or obtained for free, we strongly advise not to use these documents because they may not do the job. In order for it to be valid to buy or sell property the power of attorney must be in compliance with the law of the state where the property is located and specifically identify the property being purchased or sold. Furthermore, if you are the borrower, the power of attorney must be reviewed and approved by the lender.
Once signed, the power of attorney should be reviewed by the settlement agent prior to closing. The original power of attorney must be brought to the closing.
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What is a transfer tax?
A transfer tax is an excise tax imposed upon the sale of property. The mortgage protecting your lender and the deed conveying title cannot be filed in the public records until the tax is paid. The terms of the sales contract determines whether the buyer or the seller pays the tax or if the tax is split between the buyer and the seller.
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What is a "Good Faith Estimate"?
Your lender is required, by law, to provide you an estimate of the costs and fees to obtain your loan. While it looks like a settlement or closing statement, it is an estimate and the final costs and fees may differ.
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