If you’re among the millions of people buying or selling a home at the moment, don’t forget that summer vacation you have been planning when you set a date to close your sale.
Q-My wife and I have signed a contract to buy a house, but we chose a closing date that lands in the middle of a two-week vacation we have planned for more than six months.
The sellers won’t change the closing date that we originally agreed to, but my work won’t allow me to change my vacation schedule and we’re holding $1,400 worth of nonrefundable airline tickets.
A-First, don’t panic. Explain your problem to your real estate agent and the escrow officer or attorney who’s handling the closing, and ask for their suggestions.
More than likely, the closing documents you will need to sign can be sent to your vacation spot via Federal Express or some other overnight service. After signing the papers, you can return them by using the same overnight service and meet your closing deadline. However, you first need to find out if the documents will have to be signed in front of a notary public: Finding a notary is easy if you will be vacationing in a major U.S. city, but it could be a problem if you’re camping in the forest or touring overseas.
As an alternative, you could give your real estate agent, lawyer or someone else you trust a temporary “power of attorney” that will allow them to sign legal papers on your behalf. Your sales agent or lawyer might have the necessary forms, or you can buy a preprinted agreement from local stationery or business-supply stores for about $5.
When you return home, ask the person you entrusted to give you back the agreement and tear up any copies that were made. You could even sign another form that officially revokes their power of attorney to reduce the chances of a problem developing later.
Q-I am buying my first home, and I don’t fully understand the difference between a “title search” and “title insurance.” Can you explain? Also, if I pay to have a search done, do I really need title insurance if the search does not find anything unusual?
A-A title search is a detailed search of property records, usually performed by a title company, that essentially determines whether the seller has the legal right to sell the property to you. The search will help ensure that there aren’t any liens or claims on the home that the seller either has not disclosed or simply does not know about, such as a lien that may have been filed by a workman who wasn’t paid for his time or a court judgment that gives part-ownership of the property to the seller’s former spouse.
Understandably, all lenders require a thorough title search on properties that they are asked to finance.
But even if the search fails to uncover any problems, lenders also require their borrowers to obtain a lender’s title-insurance policy that will protect the institution against losses if claims later arise from problems that the search failed to detect.
If you want the same kind of protection for yourself, you will have to purchase separate “owner’s title-insurance.”
In some respects, a title search is like a smoke detector because both are designed to serve as early warning signs of trouble. In a similar vein, a title-insurance policy is like fire insurance; you hope you never need to use it but can’t afford to go without it.
Q-I am in the process of buying a home, so I am also looking for a loan. I don’t really want a fixed-rate mortgage because a lot of people say that interest rates will drop, but I don’t want an adjustable-rate mortgage because I don’t want my payments to go up if those people are wrong.
My mortgage broker tells me I should get a “two-step” loan. What is that?
A-A two-step mortgage is essentially a combination of a fixed-rate loan and an adjustable-rate mortgage. A two-step loan starts with a fixed interest rate that’s about one percentage point lower than rates on conventional 30-year loans. At today’s rates, monthly payments on a two-step mortgage for $125,000 would be about $90 lower than the payments you would make if you chose a conventional fixed-rate loan.
What’s the catch? The catch is that the lender will change your rate once, either five, seven or 10 years from now. If interest rates are higher than they are today, your loan rate and monthly payments will rise. If rates are lower, your rate and payments will drop. After the lender makes its one-time adjustment, your payments will remain stable for the rest of the loan term.
Buyers who plan on moving again within four or five years shun two-step loans because they can save a lot more money by choosing other types of adjustable-rate mortgages that offer even lower rates and will move again before their rate can shoot skyward.
However, a two-step loan could be ideal if you expect to stay in your home for more than five years but can’t stomach the thought of having frequent changes to your interest rate and monthly payments.
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Write to David Myers at P.O. Box 2960, Culver City, Calif. 90231-2960.
