Home

Almost everyone has heard the term escrow being used in regard to real estate, particularly in phrases like “escrow account” and “in escrow.” But is escrow a person? A process? A legal state? Today, we’ll clear up what escrow actually is, and explore the role it plays in the purchase of a new home.

Escrow is a financial transaction between a buyer, seller, and neutral third party.

What is escrow, exactly?
Escrow is actually a broad term related to financial transactions between multiple parties, typically involving a buyer, a seller, and a neutral third party not directly involved in the sale. In an escrow arrangement, the escrow party will hold money, documents or deeds related to the sale for the term in which the obligations outlined in the contract between buyer and seller are completed. Once the deal or sale is finalized (in the case of a home, at the closing) the funds in escrow are disbursed to their rightful owners.

Why is escrow used?
Escrow is a convenient way to allow both buyer and seller to remain confident in the business transaction at hand, without either having to collect or forfeit money before the successful conclusion of business. For instance, some buyers are required to put up “earnest money” or a “good faith deposit” when bidding on a property, in order to show that they are “earnest” about wanting to buy. However, some buyers may think twice about forfeiting such money to a stranger, particularly if any unexpected complications should arise (such as a dire problems revealed by an inspection of a used home) that threaten the sale of the home. Placing this earnest money with a third party allows the seller to see that the buyer is capable of funding the purchase and is in earnest about their bid, while also allaying any fears the buyer may have about losing money to an unscrupulous seller.

My mortgage lender mentioned something about escrow to pay taxes and insurance. What does this mean?
Some lenders keep an escrow account in which funds are collected to pay the taxes and insurance on a mortgaged home. Because failure to pay taxes and insurance coverage severely affect the value of a home as collateral against a mortgage, lenders tend to ensure these important bills are paid by paying them for the borrower. The total taxes and insurance payments for the year are calculated, then divided by twelve to yield a dollar amount that is added to the monthly principle and interest payment. This extra money is funneled into an escrow account from which the taxes and insurance on the home is paid. Some lenders require an escrow account for only a few years, while others require escrow accounts for the life of the loan. As you can see, this particular usage of escrow differs from the usage of escrow accounts outlined above.

So how does escrow come into play at the closing?
In some parts of the country, a pending home sale is referred to as being “in escrow.” This simply means that a binding contract between the buyer and the seller has been initiated, and the sale will proceed as planned once the contingencies of the contract have been satisfied. Fees such as earnest money, deposits, and even seller rebates have thus been deposited into an escrow account until the home sale is finalized. At the closing, checks from this account are presented to the various parties, and, as the funds are fully disbursed, the escrow is then considered closed.

See also:
Good faith estimate mortgage loans
Buying a home right out of college
Home buying program that appeals to today’s buyer

As one of the nation’s most successful builders of quality, affordable housing, LGI Homes has helped thousands of people become homeowners for the first time. And through this experience, we’ve realized that the process of buying a home can be confusing—fraught with cryptic terminology, filled with reams of paperwork, and complicated by the many parties involved in completing a successful property sale. To that end, our “All About” series answers many frequently asked questions, giving homebuyers the knowledge they need to be confident and informed consumers. Today, we are talking about PMI—Private Mortgage Insurance.

Private Mortgage Insurance is an extra form of insurance required by lenders.

What is PMI?
PMI—or private mortgage insurance—is an extra form of insurance required by lenders, the premiums for which are paid for by the buyer.

Who is required to carry private mortgage insurance?
Any borrower who carries less than 20 percent equity in the home at the time of the extension of credit by the lender is typically required to have PMI. For first-time buyers, this typically means borrowers who are not putting a 20 percent downpayment towards the purchase of the home, and are thus borrowing more than 80 percent of the home’s assessed value.

What does PMI actually cover?
Although paid for by the buyer, PMI is actually insurance coverage for the lender. The PMI covers the lender against loss should a borrower default on a loan, thereby making it feasible for lenders to extend housing credit to parties who might not otherwise qualify for a loan if these risk provisions were not available.

What is the average cost of PMI coverage per month?
PMI coverage typically costs from 0.5-1% of a home’s sales price. Therefore, for a home selling at $100,000, a borrower would see an additional charge of $40 to $80 added to their monthly mortgage payment.

If I am required to carry PMI, how long will that coverage be in effect?
Most agreements specify that a borrower is able to cancel their PMI coverage once they have vested a 20 percent stake in the home—in other words, once they have successfully paid off 20 percent of their home’s value toward their loan. The method in which PMI can be canceled varies from lender to lender, so you would have to check with your financer, but most require the submission of a cancellation request from the homebuyer to instigate the process.

The purchase of a new home requires learning all about various aspects of homeownership (financial, legal, and practical) that can be overwhelming to a first-time homebuyer and homeowner. As part of our ongoing All About series, LGI Homes seeks to provide an easy-to-read and easy-to-understand resource that goes in-depth on a variety of subjects connected to buying a home. Today, we explore the world of deeds, and how these vital legal documents will play into your experience of buying a home.

Before buying a home it's important to understand the entire process, including the documentation that goes along with the purchase.

What is a deed and who is mentioned in it?
A deed is a formal legal instrument that conveys, in the case of buying a home, an interest in the property in question. In essence, the deed transfers ownership of a property from one person (or group) to another. The grantor is the person or group selling the property, while the grantee is the person purchasing the property. The deed is typically “recorded” by local government (usually at the county level), and information regarding the sale is generally public record.

What kinds of deeds are there?
There are two main kinds of deeds: grant deeds and warranty deeds. Grant deeds (common in some states) outline the transfer of property from one owner to another, and are witnessed by notaries to affirm that the seller is the actual owner of the property in question. Grant deeds certify that the seller currently owns the property, and that there are no external claims on the property (or “title” to the property)—from, for instance, a lien or an outstanding mortgage—that have not been disclosed to the buyer.

Warranty deeds are essentially like grant deeds, with one major exception: with warranty deeds, the seller offers an additional “warranty” against any future claims to the property by a third party. The seller also promises to do everything necessary to convey proper title to the property to the buyer. Services like title searches (meant to root out possible problems or issues with clear title) and title insurance (insurance against financial loss due to third-party claims) are generally associated with warranty deeds.

A third type of deed, known as a “quitclaim” is not so much a true deed as it is a resignation of ownership from one party to another. Divorce and/or dissolution of partnerships are a common instance in which quitclaims are used to cede all ownership on behalf of one spouse or partner, to the other.

I’ve also heard about “trust deeds.” Are these the same as grant and warranty deeds?
Not exactly. Trust deeds are actually a form of “mortgage,” in that they are publicly-recorded legal documents that stipulate the ownership of a property that was purchased with a home loan. In the case of trust deeds, a neutral third-party (often a title company) holds a property “in trust” as collateral toward repayment of a lender’s loan. Once the borrower repays the loan in full, ownership is transferred from the trust company to the borrower, removing all impediments to clear title ownership (these impediments are known as “encumbrances”). Should the borrower fail to comply with the terms of the loan, the trust deed allows the trustee to sell the home in order to repay the lender their due amount.

Will I see any of these documents at the closing?
Typically, the seller will sign the property deed at the closing, and you, as the buyer, will receive a copy. Because it is such an important document, some buyers choose to have a title company store the deed for them, usually for a monthly or annual fee. Trust deeds will be read and signed by borrowers if they are using trust deeds instead of a mortgage.

Spring and summer may be the traditional home selling and buying seasons, but, as the saying goes, life waits for no one. Whether you’ve got your eye on a brand-new home in one of LGI Homes‘ stunning new communities down the road, or have to relocate to another city for your career, selling your home in the middle of the winter doesn’t have to be difficult. It does, however, call for a bit of thought and a bit of creativity in order to set your plans in motion and reel in your buyer.

Winter months aren't well known as "home buying" months, however, if you need to sell your home during a time when there are fewer buyers, there are some tips you can try.

Firstly, winter comes with its own bevy of difficulties, the bulk of which are related to short days. Showing your home during daylight hours is imperative, so you will likely need to give preference to weekend showings; early sunsets mean that evening and afternoon showings are likely to be held in the dark, which may discourage some buyers. During showings, be sure to open all drapes and shades and let in as much of winter’s weak light as possible, enhancing your home’s sense of brightness and spaciousness. Use electric lights in darker rooms where necessary, and don’t be afraid to light a fireplace or distribute battery-operated candles throughout the home (no unattended flames!). While winter may be dark, our tendency to crave a cozy and inviting space may work to your advantage if you open your home as a warm and softly-lit refuge from winter’s raging wrath.

Speaking of winter’s wrath, in most of the country, winter means either snow or rain (and sometimes both). Keep your home in tip-top shape and make your guests feel at home by providing ample space for visitors to wipe their shoes and feet. Consider adding a coat rack near your front door for their ease and comfort while looking at the property. In rainy areas, include an umbrella stand as well. For those in the snowbelt, keep your front walkway well-shoveled and ice-free—you don’t want anyone falling, getting injured, or even just passing on seeing your house because of all the snow lying between your home and their car.

The condition of your landscape is another issue to contend with in the offseason, with lawns tending to look half-dead in the winter frost, and most bushes and trees either naked or sagging under the weight of their dull grey-green winter shades. You can boost the natural appeal of your yard through small arrangements of winter-hardy plants that you can bring inside after your open house is over. Winter bloomers like hellebores, witch hazels, and even some sages can add some delicate color and texture to a bland winter landscape, and even ornamental grasses and plants with variegated foliage can add interest and give a slight suggestion as to the beauty of your garden when it revives in the Spring. If you have any photos of your landscape in the Spring, why not include them in your promotional sheets? It doesn’t hurt to let buyers know what’s hiding beneath the snow.

As you can see, selling a home in the winter isn’t impossible, it just requires some consideration of the ways in which homes—and people—differ in the winter from in the spring. The attributes that may make a home great in warmer weather (great landscaping, a pool, or an outdoor patio) may not shine as brightly on a chilly day, so bringing the focus into the heart of the home (and encouraging a cozy, comfortable and relaxed mood) can make the difference between helping potential buyers envisioning themselves curled up by the fireplace, and leaving them feeling cold.

See also:
What are the benefits to owning a home?
Painting Tips for Homeowners
What needs to be disclosed when buying a home?

For buyers who wish to brave the unknowns of buying an existing home, home disclosures may provide some assurance that they’re getting a home that isn’t riddled with structural issues or hidden health hazards. However, there are limits on the extent to which home disclosures can protect buyers, so it’s important to understand what, exactly, home disclosures are, and what they are not.

What is a home disclosure?
Most states mandate that sellers outline known issues with the home or property they are trying to sell. Sellers are generally required to be upfront about any major issues the home may have (faulty foundation, prone to flooding) or to which the home may be exposed (fires, earthquakes, hurricanes). Failure to disclose known issues can make the seller liable for associated repairs or renovations down the road, so it’s generally in the seller’s best interest to disclose all known issues.

Home disclosures may provide some assurance that they're getting a home that isn't riddled with structural issues.

Why wouldn’t a seller disclose?
The key to understanding disclosures is that sellers are required to disclose problems of which they are aware. In most states, this means that a seller isn’t liable for problems that they were unlikely to be aware existed (mold inside of the walls, for instance). Most sellers don’t blatantly cover-up issues with a home; rather, most (particularly in homes where upkeep has lagged) are simply unaware of bigger problems that may be lurking inside the walls, in the attic, or in the basement.

Are disclosure procedures the same in all states?
No. State laws regarding the liability of sellers and the types of problems that must be disclosed vary widely. For instance California, which has one of the toughest disclosure laws, requires sellers to complete something called a “Transfer Disclosure Statement” which itemizes issues with the home, including seasonal hazards, the presence of lead paint or asbestos, and even neighborhood noise problems. Other states mandate certain hazards that they expect sellers to be aware of whether or not problems are obvious. Both sellers and buyers should check their state laws to make sure all paperwork prepared in the course of a sale is compliant.

Do disclosures protect the buyer?
Only if after taking possession of the property they discover problems of which they feel the seller would necessarily have been aware. In these cases, buyers typically have to sue the sellers in order to force restitution of expenditures on repair or renovation. In the case of the disclosures given to the buyer, the buyers must always remember: what is outlined in disclosure paperwork is not a guarantee or warranty on the house. Disclosures are merely descriptions of the current state of the home, and don’t imply that no new problems will crop up in the future.

As you can see, while disclosures play an important part in making sure that buyers aren’t stuck with faulty or damaged homes, they are no guarantee that a home with few disclosures isn’t suffering from major hidden issues of a structural or hazardous nature. For buyers looking for more assurance as to the longevity and quality of their life’s largest investment, considering a new home constructed with brand new materials and falling under an extended structural warranty—such as those from LGI Homes—may be the best course of action. After all, homeownership shouldn’t be burdened by the hassles of problems inherited from a previous owner. At LGI Homes, worry-free homeownership is our promise, and we stand behind our quality—every home, every time.

Texas’ economy has been booming for the better part of the last twenty years, and its unemployment rate is among the lowest in the nation. It’s no wonder, then, that Texas has seen an influx of households attracted by its healthy industries, positive lifestyle and absence of state income tax. Yet even making a move for the better can be stressful on a family, particularly when undertaking the rigors of an inter-state move. To that end, here are some tips and advice on hiring an interstate mover, which can differ greatly from the process required for local moves.

Don't hire the first moving company you talk to.
Protect yourself by shopping around and asking the right questions.

1. Choose your mover wisely. Interstate moves can be logistically complicated, and any mover you hire should be well-acquainted with this type of transit. Check that your mover is licensed and insured, that they have a number from the U. S. Department of Transit (a “DOT” number), and that they are registered by the Federal Motor Carrier Safety Administration (FMCSA) as an interstate mover. The FMCSA provides an online database for consumers, where they can check registration status and DOT numbers, as well as view any outstanding complaints against particular companies.

2. Make sure you’re covered. Some renters and homeowner policies cover items in a household even during a move; carriers of such policies should check with their insurer to see if their policy includes moving coverage. For those without insurance, consider taking advantage of liability coverage offered by interstate movers. This coverage is legally mandated, and comes in one of two types: Full Value Protection and Released Value. Full value protection is generally more expensive, but in case of damage or loss of property, the mover would be liable for the full replacement cost of that item. Released value is typically offered without cost, but only provides for liability of 60 cents per pound per item damaged or lost.

The two coverage levels differ in this way: Let’s say that a mover damages a flat-screen television that weighs 60 pounds and costs $1,200 to replace. Under Full value protection, the mover either has to repair the t.v., replace it, or settle with cash for the cost of the repair or the replacement cost. Under the released value coverage, the movers’ liability is limited to 60 cents per pound for the item, or $36 ($0.60 x 60lbs).

3. Understand the mover’s dispute process. Most moves are smooth and event-free, but since any move can encounter difficulty, it’s good to understand your dispute options before the move occurs. If some of your household goods are missing or damaged upon arrival at your new home, be sure to file a claim with the mover within nine months of your move date. Should the mover fail to respond or fail (in your opinion) to adequately address your claim, you can submit a claim with the mover’s dispute settlement program. Details on this neutral claim settlement program can be found in paperwork supplied by your mover. If you encounter continued difficulty, you can file complaints on your mover with the FMCSA on their website.

LGI Homes is ready and waiting to help Texan newcomers settle into their new lives—lives in which the dream of homeownership has become a reality. For more information on our brand-new affordable homes, and our No Money Down financing, just stop by any of our Texas new homes communities or contact us with any questions you may have about whether or not an LGI Homes home is right for you.

If you’re like most people, you’ve read about the historically low interest rates available on mortgages, and started to wonder whether or not this might be the right time for you to buy a home. After all, home prices are more affordable now than they have been in years, and with low mortgage interest rates, it’s easier than ever to purchase a home with affordable monthly payments. Yet there may be one thing holding you back: worries about having to make a hefty downpayment.

Buying a home with low monthly payments and without a hefty downpayment is possible!

The fact is that not having the traditional 20 percent downpayment is not a road block to homeownership… despite the foreboding reports you may read in the paper or see on the news. There are actually a number of options available for people that are ready to buy, but may not have a war chest of financial reserves to fund their home purchase.

One of the most popular financing options, FHA loans, require downpayments of only 3.5 percent of the purchase price. In addition, FHA loans have very generous credit and debt limits, and typically have reduced closing costs that can sometimes be covered through the mortgage loan. Another option, USDA loans, have absolutely no downpayment requirement, and are available to borrowers with a wide range of credit scores. These USDA loans are extremely popular with LGI Homes buyers, because of their clear guidelines, relatively easy qualification standards, and excellent incentives. Besides these government-backed loans, there are also a number of private institution loans that require low or no downpayments, catering to borrowers in a variety of financial situations.

Here at LGI, we have helped thousands of renters become homeowners through just these sorts of no money down programs. We believe in the viability of allowing people to pursue their dreams of homeownership, and don’t think that families should have to deplete their savings accounts just to purchase their dream home. Instead, with no money down financing and low interest rates, LGI Homes homeowners are making the move from renter to owner with their financial security intact—a vital key to ensuring their ongoing happiness and financial stability.

No money down homes and low-cost mortgages are a reality, and they’re helping people just like you move into brand new homes, making good on their own American dream. If you’re interested in learning more about the variety of financing options available to you, just stop by one of our new home communities, and we’ll be happy to put you in touch with one of our preferred lenders.

Once banished from the designer toolbox thanks to its dated feel, difficult application and near-impossible removal, wallpaper has been creeping back into stylish homes due to innovations in its look, feel and use. And the timing of this renaissance couldn’t be better; designer trends are veering away from the bold accent walls and aggressive palettes of the past twenty years, so wallpaper has plenty of room to rise again as people explore alternatives to paint. Here are just a few reasons that interest in wallpaper is booming:

Wallpaper is once again finding its way back into our homes with a whole array of new designs and textures.
Image Source: wallpaperstore.com

1. Easy Installation and Removal. As opposed to days of yore, when wallpaper was applied in a complicated process, and was almost impossible to remove, the new generation of wallpaper is designed with changeability in mind. Many of the newest brands can be moved, removed, or repositioned with ease, making wallpaper an ideal option for those who frequently tinker with their décor.

2. Variety. A simple search on Google for images of wallpaper reveals the new look of wallpaper, which is a far cry from your grandmother’s stodgy old patterns. Instead, wallpaper is now available in thousands of looks, from crisp refined neutrals to exotic patterns, simple textures to beaded and bedazzled, and industrial modernist to natural woods and foliage. Whatever the design scheme of your room, it’s likely that you’ll find a wallpaper to match.

3. Flexibility. Now that wallpaper is no longer a life-long commitment, people are finding interesting ways of using wallpaper in conjunction with other decorative elements, creating personalized and whimsical rooms that would be difficult to conjure any other way. Painted walls with decorative borders, papered accent walls, mixing wallpaper patterns, and using removable paper as a decorative decal are just some of the ways that people are incorporating wallpaper into their décor.

4. Finally, there’s the price. Affordability is high on the list of priorities for many design projects, and wallpaper presents a desirable nexus between price, quality, and choice. Slightly more expensive than painting, but often much cheaper than tile work, wallpaper allows decorators on a budget to recreate high-end looks without going off the financial deep-end. And, thanks to some of the reasons we’ve outline above, it also provides practical flexibility, which can be important to homeowners who may need to change décor for an upcoming sale of their home.

As you can see, the pitch of wallpaper is perfect for today’s decorators, who are looking for an affordable, easy way to change the look of a room, without locking themselves into an unchangeable wallpaper prison. As the array of options for fashion-forward wallpapers expands, it’s likely you’ll see wallpaper being used in more and more design contexts, where it’s limitless possibilities may help define the design trends of the coming decades.

Historically low interest rates and affordable home prices have made this a great time to buy a home, but for some buyers—particularly first-time buyers and families just starting out—the financial hurdles of accumulating a downpayment and covering closing costs often seem to large to be overcome. Even the process of buying a home can seem inscrutable, and confusion may prevent qualified households from moving forward. To overcome just these issues, local, county-level and federal government agencies have created a number of programs to help homebuyers overcome these obstacles.

If you plan on buying a home, familiarize yourself with the available government programs first.

Program Types and Qualifications

These government programs run the gamut from financial to educational assistance, in the hopes of expanding the dream of homeownership to everyone. Many of the programs (typically the financial ones) include qualification limits on personal income, and may impose parameters on the loans contingent upon things like the tenure of residency in the purchased home. Some programs are capped at a certain sales price, typically at or below the local FHA conforming loan limit, while require buyers to fund a certain percentage of the sale. Most programs have websites or literature that clearly outlines the qualifications that must be met in order to participate, so homeowners should take the time to read these limitations carefully.

While the variety of programs available in any one locale varies, examples of programs that are widely available include:

1. Downpayment assistance, through flat grants or affordable loans.

2. Closing cost assistance, again through grants or low-cost loans.

3. Financial counseling to ensure that homebuyers are ready for homeownership.

4. Educational seminars that cover the homebuying process and warn against scams and fraud.

5. Housing sales or placement for low-income, disabled, or veteran buyers

Finding Programs

Often the hardest part about participating in any one of these programs is finding out that they exist. The internet is a helpful tool in determining what programs are offered in your area, and a great place to start is the website for the Department of Housing and Urban Development (HUD), which includes a directory of local homebuying programs. Users can browse the site and find listed state, regional, county and city-level programs available at their locale. Home buyers can also check the websites of their government offices to see if any programs exist that are not listed on the HUD website.

Buyers in Texas can also visit any one of our LGI Homes new home communities, and ask to speak with a new homes consultant. As one of Texas’ most experienced builder of affordable homes, we are more than happy to help you discover how you too can buy a beautiful new home, without draining your bank account to do so.

The process of capitalism teaches us that the value of any good is assessed by the amount that a buyer is willing to pay to obtain it; and so it is with housing. With new homes, that amount is largely influenced by the materials used in the construction and outfitting of the home, the value of the land on which the home sits, and the cost of the labor hired to enact the actual construction. With used homes, the valuation is not so clear cut, so the value of these homes is typically assessed using a real estate tool known called a “comparable,” popularly known as a “comp.” Today we’ll discuss the nature of comps, and how they are used in the home buying (and selling) process.

Understanding the process of using comps in the real estate market is more important today than ever before.

What are comps, exactly?
Comps are data collations that give a good idea of what the going market rate is a for a home of a particular size, offering particular amenities, in a particular area. The reports are called “comparables” because they pull information on sales of homes comparable to that which is being sold (or bid upon by a buyer).

Where does the information come from?
Information on recent sales is pulled by an agent or a buyer from a real estate listing service, such as the “Multiple Listing Service,” also known as the MLS. Researchers can create reports based on comparable sales in a target area, for a targeted size of home, then use that information to establish a sales price (or bid) most likely to reflect current valuations. Whether these prices are too low or too high are influenced by a variety of factors, including consumer demand.

How do researchers decide which homes to use in the comps?
Anyone assembling data for comps has to use what is available; this means that in areas with relatively low sales volume, the comp data will be heavily influenced by the few sales that have occurred. In most cases, however, sales are frequent enough to reflect the true value of a home in a given place. Comp data will be composed of recent sales information for homes that most closely reflect the home for sale: square footage, number of bedrooms, size of lot, amenities like a pool, and even the quality of the local school district.

What’s the best way to use a comp?
Comps can be assessed in a number of ways, but one useful barometer is the “cost per square foot” for homes in a given community. For example, if the comps show that average cost per square foot in a certain neighborhood is $245, but a particular home is listed at over $300 per square foot, a buyer would want to examine the reasoning behind the increased price and decide whether or not the cost makes sense. Sellers offering relatively typical homes in a neighborhood can also use the price per square foot as a launching point for setting their sales price, deciding whether or not that price should be raised or lowered as appropriate for the size and condition of their own property.

Are there any drawbacks to comps?
Comps are a straight-forward and easy to understand tool for valuation of property, but anyone using a comp should be sure that the comp is both recent and properly compiled. Values and pricing shift often in real estate—sometimes seasonally, sometimes month-to-month—so an outdated comp can give an inaccurate picture of the state of the market. Likewise, comps that don’t adequately cover recent sales (or that include sales of dis-similar homes) may also give skewed results. Prepared properly, however, a comp can give both buyers and sellers a good idea of what a home is truly worth.