Understanding all the terms and processes of mortgages when buying a home can be a little overwhelming; especially for first time home buyers.  One of the most mysterious and recurring terms that gets thrown around with every offer is escrow and knowing the benefits and purposes of the escrow account will make your life easier and help you better track the finances of your home buying decision.

An escrow account is an account that is used to collect and hold funds for mortgage related expenses like property taxes, homeowner’s insurance premiums and other charges that may be associated with your home purchase where prompt and guaranteed payment of these bills is required to keep the home.  Most lenders require an escrow account that is maintained by the lender if less than 20% is put down on a home.  Real estate taxes and insurance premiums must be paid and paid on time.  Missing a tax payment could create a lien against your property and missing insurance premiums could result in the cancellation of your insurance policy.  Both of these results could lead to a lender dropping your mortgage.

The benefits of maintaining an escrow account, which many mortgage companies do for you, is that it will help you manage your budget, ensure that your home is protected and basically give you peace of mind.  Not having to make lump sum payments for insurance and taxes is a benefit to some people, while others are more budget savvy and would prefer to earn their own interest on this money.  In addition, when a lender maintains your escrow account your payments will be on time and there will be no laps in coverage due to late payments. 

When an escrow account is handled by the lender, the amount going to escrow is incorporated into your monthly mortgage payment.  Each month’s mortgage payment includes your principle, interest and money for taxes and insurance that is placed in escrow.  This is commonly referred to as PITI (principle, interest, taxes and insurance).  This does raise your monthly mortgage payment by the amount of taxes and insurance due on your property, but if you did not pay taxes and insurance with the mortgage, you would be paying out of pocket for these expenses any ways.
Do you have to have an escrow account? Most lenders will require an escrow account for borrower’s that own less than 20% of their home. 

However, after you have paid off enough of your mortgage you can remove PMI and PITI and handle your own tax payments and insurance payments.  Bearing in mind of course, that should a payment be late, you may lose your mortgage and more importantly if your insurance should laps and you were struck by tragedy like fire or flood, you would have to continue to pay your mortgage on a house that no longer exists. 

Hopefully this sheds some light on the elusive escrow mystery.  Escrow accounts protect both buyers and lenders by making certain that taxes and insurances are maintained on the home or property. 

Although the sunshine state has seen some clouds and rain in the real estate arena, it continues to be a great land of investment opportunities.  Seasoned investors are still flocking to the available real estate in Florida’s flooded housing market, but there is still room for more.  Why now you might ask? From lucrative values and leverage to great schools and even better taxes, but more importantly, Florida real estate is big business when prices are this low, interest rates are this low and the risks are minimal.
A great return value is what makes a lucrative investment, but most people don’t believe that Florida homes for sale will offer much in return value.  This couldn’t be further from the truth.  As a matter of fact, the huge inventory of Florida REO properties and Florida foreclosure are actually ensuring reaching a great return on investment for investors and home buyers alike.  Because you can buy properties at rock bottom prices and generally do low cost upgrades and maintenance, you keep your buying dollars down.  Then when you are ready to sell, granted you will probably want to wait at least a year or more to sell, you are going to see a big jump in the home’s value. 
Does this contradict what you have been hearing? Really, it shouldn’t.  If you look at the bottom line numbers in Florida, home sales are on the rise again.  It is a slow rise, but they are at least in an upward motion compared to one or two years ago.  In addition, lenders are now raising interest rates instead of lowering them.  Again, the rise is not huge, but they are no longer going down, down, down.  This also emphasizes that the time in Florida is now.
In addition, the Florida real estate market is offers pre-construction investment programs that allow investors to buy properties that are still under construction.  This means that you can buy into properties at their current level of construction or unfinished.  Properties of this nature are only going to go up in value as the structure is finished. 
Now, past all the fluff and onto the real skinny.  Florida real estate allows buyers to use properties for comfortable living or for leasing and rental income.  The market right now is not great for flipping, because it is so saturated with available properties.  And although you may be able to make your property outshine the others on the block, the prices you will have to beat in resale are going to be pretty tough-at least for the next two years. 
So, why Florida? Because of its climate and attractions, Florida will forever be a popular location for seasonal and year round living.  And with tourism comes jobs, with jobs come businesses and soon enough you have a prospering town year round and a recovering economy.  Why now? Because Florida real estate is already on the rebound.  Yes, it is hard to see right now, but if you look at the numbers they have moved in the direction of recovery.  Those who wait, may be too late. 

If you have been pursuing the American dream of home ownership on a limited budget you have likely been faced with purchasing homes in foreclosure or through government programs like FHA and HUD.  For many aspiring home owners, the biggest obstacle of getting a home of their own is coming up with the down payment and closing costs, both of which are integral in today’s tougher lending standards. 

In an effort to help more families fulfill their dreams of home ownership and especially to help those who qualify for home ownership in every way except that they don’t have a giant nest egg to invest, the U.S. Department of Housing and Urban Development, or HUD, offers down payment assistance programs through state and local housing authorities and federally subsidized home down payment assistant programs, called the ADDI or American Dream Down Payment Initiative, as well.

Lender participation in HUD down payment assistance programs is voluntary and you may have to seek out a lender who participates in the programs.  It takes a simple phone call to your lender to determine if they participate or not and you will want to check this out before you apply for a down payment assistance grant or loan through HUD. 

With the ADDI program payment assistance is only available if you plan to obtain a Federal Housing Administration or FHA loan. It should be noted that FHA loans require a stricter pre-existing condition for home purchases, meaning if you are buying a fixer-upper you may need to look into addition 203k FHA loans to get the home up to FHA’s standards.  The program is also limited to paying a maximum of 6% or less of the total purchase price.  To qualify for the American Dream Down Payment Initiative program, you must be a first-time home buyer and your income cannot be more than 80 percent of the local median income of the area in which the house is located.

Many states have programs available that provide for down payment grants and interest-free down payment loans.  Additionally, HUD contributes money every year specifically for home down payment assistance programs to state and local housing authorities.  The qualifications for local and state programs vary but you generally have to meet certain income and residency requirements. There are also often limits on the purchase price.

One of the least none facts about HUD’s programs are that the agency does not limit the use of grant money received.  Recipients can use the money toward other costs involved with buying a home like the cost of processing and closing a mortgage loan like inspections, title fees and origination fees.  So if you are putting off your home buying dreams because you are a little short on the down payment, look into HUD assistance programs and don’t give up on your American dream. 
 

When you purchase real estate, it is most important to be cautious and take due diligence in checking everything that is related or connected to that property. This means that you check for outstanding mortgages as well as any financial or tax liens on the property. It can become your responsibility if the lien is tied to the property and the person prior. If you, as a potential buyer, come up with anything, you have a couple of different options in handling the matter.

First, you can walk away. With respect to the seller or the seller’s agent, you should share what information you found out about the property. They may not be aware of anything themselves. It could have been an old issue they thought had been taken care of or an x-spouse may have taken a loan using it as collateral. It is not always necessarily a fact they were trying to hide anything.

Your next option is to pay the lien off and then assume ownership. If it is a tax lien, each state has different laws on the length of time that must pass before you can take ownership of the property. If it is a financial lien, it may take some time for the lender to gather the record and clear the lien before signing over the title to you as well. Should you take this option and pay off the lien, have your realtor negotiate the price down to cover your expense.

Sometimes there can be cost associated with doing the searches for these liens. However, there are ways to avoid those costs and still get the information you need. You can work with a reputable real estate agent and they have the connections to look at the MLS for any property you may have interest in purchasing. The MLS should detail any lien information. Real estate agents make up to three percent from the buyer side and three percent from the seller side on these transactions. This MLS information is free to them.

If you are shopping for a house on your own without a realtor, you can still check for liens yourself and for free. First make sure you have the correct address of the property you’re considering. Verify this information by checking the street sign and confirm it matches the number on the curb or mailbox. You can get this information without stepping foot on the property so that you aren’t arrested for trespassing.

Use the local newspaper to search for a mortgage lien on the property. Since most states require public notice of a foreclosure sale, this is where you find those houses that are being sold at foreclosure auctions.  Most of these notices are placed at least 21 days prior to the sale.

You can also check the County Assessor or local Tax Board. These two entities’ can provide information that is available in public records. This information will included the name(s) of all owners present and past, if the property taxes are paid up to date as well as the last date for the property sale. If a tax lien is listed, the county assessor should be able to advise you where to investigate this lien for more information.

You most definitely don’t want ownership of a property and then find out later that money is owed by the previous owner. So take the time if you’re not working with a realtor and do your homework. If you are working with a realtor, ask them if they have checked all records for liens. Once you have found the home you want and went through this process, you will be able to enjoy your home in peace knowing that everything is right.