Mortgage Finance Blog

Protection in Home Finance

October 21st, 2010 8:58 AM by Diego Quintero

In this time where a lack of trust exists with banks, there are still benefits to seeking banked or brokered loans. From obtaining home value to securing insurance, the loan serves to protect the new homebuyer in several ways. According to USA Today,  past homeowners & banks are claiming ownership to properties that have already been sold to new buyers. If a new buyer would have gone through the channels of obtaining a bank loan, the standard procedures to acquire the property would have included the purchase of a title insurance policy to protect against such a claim. There is no denying the fact that the new bank is following the protocol to protect themselves, however, by default the new buyer is protected as well.

We have several investors in the marketplace who are purchasing homes to renovate and resell. We also have those who are purchasing them to improve and rent-out. Additionally, we have homeowners who have just purchased a home to rehabilitate and live-in as their own. Imagine the possibility of someone staking claim to the very home that has been improved with your own cash. This is happening all over the country and could have been avoided with the purchase of a title insurance policy.

How else does a bank loan protect my interest? A major portion of the underwriting determination comes from the appraisal report. Value is one of the most important aspects for the desire to purchase a property. The appraisal report will compare the property to others within one mile (if possible) to the subject property, with similar square footage, similar upgrades, etc. It takes into consideration the age of the home, if it is on or abutting a major roadway, if it has views, etc. Although the appraisal work as of recent has been lackluster, at best, it will provide a rather conservative value to the home/real estate. It also serves as a key negotiating factor for your real estate agent who may be able to trim off some costs after its disclosure to all parties.

The loan approval may include items like; repairs to be made before closing, a clear termite inspection, roof inspections, etc. Very importantly, an underwriting approval will always call for a clear title report.  Those at the greatest risk for back-claims are cash buyers. The approach that many retired home buyers have taken is to seek a nominal loan amount when purchasing a new home, simply to get that added protection.

Call your trusted mortgage broker for details and if you purchased a foreclosed home recently you may need to call your past attorney or real estate agent to ensure that you have title insurance.

Posted in:General
Posted by Diego Quintero on October 21st, 2010 8:58 AM


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