Introduction To ALTA

Title insurance is one of the important pieces in a real estate transaction. When you buy or sell a property, it is required to have title insurance for both buyer and the lender. 

This helps to protect the buyer and the lender in case of title-related issues in the future. 

Just like mortgages and home loans have to follow guidelines and code of conduct; the title companies and title agents need to follow some guidelines. 

These

Introduction To ALTA

Title insurance is one of the important pieces in a real estate transaction. When you buy or sell a property, it is required to have title insurance for both buyer and the lender. 

This helps to protect the buyer and the lender in case of title-related issues in the future. 

Just like mortgages and home loans have to follow guidelines and code of conduct; the title companies and title agents need to follow some guidelines. 

These guidelines are taken care of by American Land Title Association. In this post, we will learn what is ALTA in detail.

What Is ALTA (American Land Title Association?

The American Land Title Association is a business-oriented entity that stands as the patron of the title insurance industry. This entity pays a major concentration on the real estate abstract of the title. 

The real estate abstract of title is an officially recorded document that shows the accurate ownership history for the real estate property. 

It will also state if the property in question has any liens, outstanding taxes, or structural violations. Founded in 1907, this entity works to protect consumer rights and improve the performance of the title insurance industry. 

ALTA members also adhere to established consumer-friendly rules and regulations of business conduct and legal practices.

How Does ALTA work?

American Land Title Association members include abstracts, title insurance companies, and legal representatives. 

Almost all abstractors, title agents, and title insurance companies, that compile public records of the ownership of a particular piece of land, are members of ALTA. 

A lender’s title policy and an owner’s title policy are the two basic types of title insurance policies. 

The lender’s title insurance policy is used to protect the mortgage lender and the owner’s title insurance policy is used to protect the owner from any ownership-related issues.

A title search is completed before the real estate transaction closes. Every time the property is sold or refinanced, a new title search is required. 

This is required so that the lender and the buyer know about any outstanding liens and title defects on the property.

American Land Title Association members include surveyors, land developers, attorneys, builders, lenders, and real estate agents. 

It is an eleven-member Board of Directors that has thirty-three committee members. 

The board members are responsible for drafting policies for the association, managing the financial health, supervising the work of committees, and ensuring the general welfare of the American Land Title Association.

What Is The Role Of ALTA?

American Land Title Association is a large and crucial association. This association also maintains a connection with members of Congress, the Federal Home Mortgage Corporation (Freddie Mac), and the Federal National Mortgage Association (Fannie Mae). 

The fact is every company, entity, or agency that has an association with real estate has a relationship with American Land Title Association. 

This association also strives to increase the state of the record in land titles as well as current relevant education in this industry. From time to time, this association collaborates with other organizations on pending state land legislative positions.

This association also produces title insurance forms that are freely used by title insurers across the country and works to increase a greater understanding of its industry among the users and others associated with title services. 

The roles of the members in this association include searching, reviewing, and ensuring land titles to protect homebuyers and real estate lenders. 

There is education training provided by the Land Title Institute (LTI), which is a subsidiary of this association to develop the land title service in the industry.

Conclusion

Thanks to American Land Title Association, the current land title industry is keeping up to the standards. 

The job of the association members is to ensure that the land title services are improved for the buyers and the lenders who invest in real estate. 

It provides all the necessary resources and keeps the regulatory updates so that you are aware of what is happening in the industry both nationally and at the state level.

About FHA Loan Limits

If you are looking to buy a property with a mortgage, you have many loan programs that you can choose from like conventional mortgage, USDA loan, VA loan, and FHA loans. 

Most loan programs have a set lending limit every year. Just like a conventional loan, an FHA loan also has lending limits. In this post, we will take a look at what FHA loan limits are in 2022.

More About FHA Loan Limits In 2022

FHA loan limits

About FHA Loan Limits

If you are looking to buy a property with a mortgage, you have many loan programs that you can choose from like conventional mortgage, USDA loan, VA loan, and FHA loans. 

Most loan programs have a set lending limit every year. Just like a conventional loan, an FHA loan also has lending limits. In this post, we will take a look at what FHA loan limits are in 2022.

More About FHA Loan Limits In 2022

FHA loan limits represent the maximum amount that the Federal Housing Administration (FHA) can back for different categories of home types in various counties in each state like single-unit and two-unit homes.

FHA Loan limits may differ based on local home values and type of property and are calculated and updated annually. 

These limits are based on the usual loan limits set by Fannie Mae and Freddie Mac for conventional mortgages.

The borrower can get an FHA mortgage through the FHA-certified lender or a bank. 

The FHA loans are backed by the Federal Housing Association. Compared to conventional loans, which are not backed by any federal agency, FHA usually has low credit and down payment requirements. 

Hence, FHA loans are one of the most popular types of loans that are utilized by many borrowers across the country.

In 2022 the FHA loan limits have increased compared to last year. The new limit for FHA loans for most single-family homes is $420,680. 

Last year the FHA max loan amount for single-family homes was $356,360, which is an increase of $65,000 from 2021. 

The reason for this increase is due to home price inflation and this is the FHA’s way to keep up with the pace. This allows borrowers to find homes in the inflated housing market.

What Are The FHA Loan Limits In 2022?

For a single-family home loan this year, FHA loan limits range from a floor of $420,680 to a maximum of $970,800. 

Areas like Alaska, Hawaii, U.S. Virgin Islands have special considerations where the minimum FHA loan amount is $1,456,200 and the FHA max loan amount is $1,864,575. 

For example, if you are planning to buy a single-unit single-family home in Houston TX, your max loan amount would be $420,680. 

However, if you are planning to buy a single-unit home in Hawaii, your maximum loan amount would be $1,456,200.

As the loan limits for FHA loans are influenced by conforming loan limits, there was an increase in the conforming loan limits for this year. Due to this, the lower basic limit for FHA was increased by 65% compared to conventional loans.

To be approved for an FHA loan, your mortgage must be within the maximum loan amount backed by FHA. 

These loan amounts, known as “FHA loan limits,” may differ based on the county that your property is located. 

This year, the Department of Housing and Urban Development (HUD) has increased the FHA loan limits to 3,188 counties and there are 45 counties where there are no changes in the loan limit.

Conclusion

The new loan limit increase has greatly boosted the FHA loan market as many first-time homebuyers could benefit from the same. 

When the real estate prices increase, the conforming loan limits will increase. And if the conforming loan limits increase so will the FHA loan limits. 

FHA mortgage is an excellent program for borrowers as it has low-interest rates, low down payments, and flexible credit requirements. 

With the loan limit being increased, you can now think of buying properties that earlier were beyond the FHA loan limits.

About Mortgage Commitment Fees

When you take a loan from any financial institution, you have to pay multiple fees to acquire that loan. 

Most of the fees charged to acquire a loan are pertaining to service; however, the commitment fee is a little different. 

In this post, we will understand what is mortgage commitment fee in detail.

What Is A Commitment Fee?

A commitment fee is a fee that a lender or a bank will charge for providing a promise

About Mortgage Commitment Fees

When you take a loan from any financial institution, you have to pay multiple fees to acquire that loan. 

Most of the fees charged to acquire a loan are pertaining to service; however, the commitment fee is a little different. 

In this post, we will understand what is mortgage commitment fee in detail.

What Is A Commitment Fee?

A commitment fee is a fee that a lender or a bank will charge for providing a promise that they will lend money in the future. 

This fee can be charged on multiple types of loans, such as residential mortgages, commercial mortgages, or small business loans. 

If an individual is taking out a mortgage, he or she may be asked to pay a mortgage commitment fee. You need to know how much it will cost you, and if you can get a refund.

Lenders may charge a mortgage commitment fee for processing the loan and vouch for the availability of funds to borrow in the future. 

The amount of the fee is usually equal to a percentage of the total borrowed amount. For example, if the lender is charging 0.25% as a commitment fee on the principal amount of $200,000, the fee will be $500.

While these fees are not charged on every type of loan, they are very to be charged on mortgages. 

This is because it may take a long time for the mortgage loan to close from the day of approval, and both the lender and the borrower want to make sure the loan is disbursed. 

Borrowers often apply for a mortgage early in the home buying process. As this process takes place well in advance, a borrower may want to be sure that the lender will provide the mortgage when it is finally time to close and transfer home ownership. 

The borrower can pay this fee to get an assurance from the lender that the funds will be available in the future at the time of closing.

How Do Commitment Fees Work?

By law, the lenders have to disclose any fees including the commitment fee to the borrower before the closing. 

Usually, the lenders will provide a mortgage commitment letter mentioning the amount of future funding they have agreed to provide and how much would be the commitment fee charged on the transaction.

Depending on the lender that you work with, this fee may be paid at different points in the mortgage acquiring process. 

The borrower can pay this fee when he or she signs the initial application, at the time when the lender approves funding the loan; or when the mortgage amount is being disbursed. 

Most states have specific regulations on these fees; however, there are also some states where the lenders provide a refund of the commitment fees if the specific conditions are not met.

How Are Commitment Fees Calculated?

The borrower can negotiate this fee with the lender in case of a lump sum loan like a mortgage. 

The lender can charge a lump sum amount or a percentage of the loan amount to the borrower which could be anywhere between 0.25% to 1% of the total loan amount.

For an open line of credit, a formula is used to calculate the average amount of credit available on a regular, often quarterly, basis. 

The commission is then calculated by multiplying the unused amount by the agreed commitment fee percentage.

For Example, if the borrower takes a line of credit of $15,000 with a 0.5% of commitment rate, the borrower will pay $75 for the first year as a commitment fee. 

If in the first year borrower uses $5000 and the unused balance is $10,000, the borrower will pay $50 as a commitment fee.

Conclusion

Though the commitment fee is one way to secure finance in the future, it is advised to check if it is required in your mortgage acquiring process. 

Get quotes from multiple lenders to understand which lender is providing the lowest commitment fee so that you can make an informed decision and save money.

About Housing Bubble

There are millions of houses sold and bought every year across the country. The buyers and sellers go with the market prices of the properties using fair appraisals. 

However, many factors determine the prices of these properties and in the last few years, we see them skyrocketing. 

This is something that many people are scared of, as this was precisely what happened in the Great Housing Bubble in real estate back in 2008. In this post,

About Housing Bubble

There are millions of houses sold and bought every year across the country. The buyers and sellers go with the market prices of the properties using fair appraisals. 

However, many factors determine the prices of these properties and in the last few years, we see them skyrocketing. 

This is something that many people are scared of, as this was precisely what happened in the Great Housing Bubble in real estate back in 2008. In this post, we will understand what is a housing bubble and are we looking at one very soon.

What Is A Housing Bubble?

A housing bubble occurs when the rise in house prices is driven by demand and not the country’s economy. 

The real estate prices rise, however, there is no logical explanation for the rise in real estate prices, such as job creation, interest rates, or demographic changes.

 A similar situation in real estate occurred in the country before the great recession of 2008. 

The constructions, sales, and prices were booming at a very fast pace in the real estate sector, and eventually, the housing market bubble ended bursting. 

This happened because the housing market was booming for all the wrong reasons.

While all this was happening, the lenders were too lenient in providing the mortgage, and many borrowers were unable to make their mortgage payments once the recession hit and many borrowers lost their job. 

This simplified the situation a bit. But when the economy collapsed, everything else collapsed with it like a house of cards.

What Are The Reasons That Cause A Housing Bubble?

Usually, real estate markets are not susceptible to bubbles compared to other financial markets due to the hefty transaction and maintenance costs associated with home ownership. 

However, the high demand for real estate can be stimulated and attract more buyers due to historically low-interest rates and lenient underwriting guidelines. 

Rising interest rates and tightening credit standards can reduce demand, causing the housing bubble to burst. 

The bubble is prone to burst when the interest rate rises drastically and the lenders post strict underwriting guidelines.

When Will The Housing Bubble Burst?

In light of the ongoing war and rising interest rates, the demand for real estate is decreasing and real estate pricing is dropping in some cities. However, many cities are still holding up with the real estate market. 

To curb inflation the Federal Reserve has been increasing the FED rate which is increasing the cost of borrowing for any individual looking to apply for a mortgage to buy a new property.

Though many experts think that the housing bubble is inevitable, it is uncertain when the bubble will burst. 

Some experts think that this is going to happen sooner than expected as many companies are laying off their employees and this could increase the number of mortgage payment defaults, which could lead to mass foreclosure. 

While some say that there is still scope for a market correction and that the housing bubble is not bursting anytime soon.

Another factor affecting the real estate bubble is inflation. If you look at the inflation rate currently, it is significantly higher compared to the last housing market crash in 2008.

Conclusion

The real estate housing bubble burst is scary at multiple levels. It affects the entire country’s economy and also other financial markets. 

According to the current situation where the higher inflation and higher mortgage interest rates, the demand for real estate will drop. 

However, the US real estate market still has some firepower left to sustain through the current situation and hopefully, it does not have a major effect on the economy.