Month: October 2014

The last stop on your home purchase journey is to sign the paperwork that transfers ownership of the property from the seller to you. This will most likely take place at a title company. This company plays an important role, not just in preparing the paperwork, but also in many other ways that ultimately mean the transaction runs smoothly.

Reconciles the transaction.

The title company takes all the figures from both sides of the transaction and ensures this information is correct. It prepares and distributes documents prior to closing so that all parties have a very good idea of what will happen at the closing. And, most importantly, it also ensures that funds arrive from your lender so that all other parties in the transaction, including the seller, get paid upon closing.

Provides title insurance.

Title insurance is a policy issued by the title company. This is a very important document, because it says that if any liens (claims) show up against the property after closing, the title company will address these claims using their own resources.

There are actually two policies issued during this process; one protects you, and the other protects your lender. In many states, you pay for the coverage protecting your lender, and the seller pays for the policy that protects you.

Delivers documents.

Once your transaction closes, documents need to be delivered to the recorder’s office, and the title company is responsible for delivering these documents. At this point, the transaction becomes a matter of public record.

As you know, the purchase of a home will likely constitute the biggest investment you’ll ever make. Through your down payment and closing costs, you’ll be committing assets that you will no longer be able to tap immediately in the event of an emergency (although, of course, you can borrow against your home or sell it).

Asset Sources

Assets for your investment may come from several different sources, including checking accounts, gifts, investment accounts, and employer retirement plans. When you turn them over as part of a transaction, they will be held in a checking or savings account.

Any assets you use must be properly documented; you need a paper trail describing where they came from and how long they’ve been there. Money in your checking or savings accounts, for example, must have been there for at least two months. If it’s less than that, lenders will want documentation on where it came from: For example, did you get a bonus or sell some stocks? You need the paperwork.

What can’t you use as assets?

Items that may not be listed as assets are things such as cars, art or jewelry. While these items may have value, and could be converted into cash if needed, lenders won’t recognize them as such. Lenders don’t have a way to verify the value of these kinds of assets; they may not even know if they’re saleable.

Gifts from close relatives can also be considered assets. As with your own assets, gifts must be able to be documented as coming from a particular source, such as a bank account. The assets must also have been in that account for an extended period of time; the donor can’t transfer money from an unknown source to his or her account then immediately into yours as a gift.

This can be confusing. Ask your mortgage professional if you have concerns about assets.