Buying a Fixer Upper? You Might Need a Home Renovation Loan

Renovations are expensive, but can be well worth the effort at the end. But the question still remains, how to fund not only buying a ‘fixer upper’ home and renovating it as well? 

Whether it’s the customizability, lower price tag or the promise of equity, buying a fixer upper has been an increasingly popular option for years now. Buying a house that needs some work can be anything from a fresh coat of paint or a complete gut and overhaul. Each of these come with a separate set of problems, and separate price tags. 

When you buy a fixer upper it’s a great opportunity to put more equity into your home. And while the cost of buying a fixer-upper home is typically lower than the move-in ready home, funding these projects out of pocket is a herculean task. 

One of the options for financing the fixer upper is a Home Renovation Loan. This is a mortgage with built-in fixer-upper funding. These aren’t as straightforward as a mortgage for a move-in ready home. Renovation loans have different sets of rules and requirements for each one. 

If you’re looking into renovating the home you already own, it may be worth trying a cash-out refinancing option

Typical Home Renovation Loans for a Fixer Upper

There are any number of different ways to get a home renovation loan, but ultimately there are 3 major options: 

  • FHA 203(k) is a federally run home loan program aimed for people making lower incomes with smaller down payments than the typical 20% most mortgages require. They come with a higher interest rate, which can end up costing more in the long run. 
  • VA Renovation Loan programs recently expanded for Vets looking to make reasonable improvements to their current home or new one. Home renovation loans for vets can be wonderful options, either for improving your current home or new one. 
  • Private Mortgages through your bank. Most banks in Georgia will have mortgage options that could include financing for fixer-uppers. These loans are going to vary from bank to bank and situation to situation and can even fold in some other and more specific to each situation. 
  • One final option is to save or use money from your previous home sale to only put down the minimum down payment allowed for your home purchase. This will add PMI (private mortgage insurance) to your monthly payment but if you use the money you saved or made off your previous home sale for the home renovations, you can recast or refinance your home once the renovations have completed and your home’s value has increased. The goal for the renovations is to raise your home’s value to at least remove PMI and have your mortgage reflect the equity you have put into the home. 

Buying a fixer-upper is a great way to build equity into your life, and helps for first time homebuyers to get the space they need at a reasonable price. While renovations can get expensive quickly, it’s important to do your research. 

Questions? 

If you have any, please don’t hesitate to reach out! Frank B. Pallotta Law may not be able to directly answer your financing questions but we can certainly point you in the right direction to the people who can. Reach out to us with your questions. We’re here to help. 

fixer upper

Finding the Right Realtor: What Home SELLERS Need to Know

Home Sellers in the Age of COVID-19

Home sellers and buyers in the state of Georgia, legally don’t need to hire a Realtor. The process of buying and selling could be done entirely without them. However, Georgia does require a real estate attorney like Frank B. Pallotta Law to administer the closing process; but that is entirely separate from the real estate agent’s role.

Even under the best circumstances, we advise you hire a real estate agent. Daunting as it may seem to be to interview realtors or engage with people face-to-face right now due to the COVID-19 pandemic, if you want to sell your house the fastest and safest way possible, you’ll want to seek the help of a professional and licensed real estate agent. 

In the past we’ve covered why home buyers need a real estate agent. And for sellers, it’s no different. Now, more than ever, it’s important to have a professional helping you on your side. 

How the Pandemic Changed The Selling Process

The pandemic has changed so much of our day-to-day lives, and with the social distancing mandates and stay-at-home orders fluctuating so frequently, keeping up with them yourself is a daunting task. Keeping track of the rules for yourself is one thing, but adding the stress of keeping your home safe during this time is a lot. 

Homes are being sold through virtual tours, the paperwork process is being done through video-conferences. Realtors are doing the best work while keeping people safe. 

General Benefits for Home Sellers

If you’re feeling resistance to hiring a licensed realtor, that’s completely understandable. Not only is it one more thing to worry about, but during a pandemic it may seem impractical to do something that looks as though it will result in less money for you. While it’s true that realtors take a commission, there are so many tiny ins-and-outs needed to successfully list and sell your home that they handle for you. When you do it on your own there’s a significant amount of time and effort being spent on this process. In this area, your realtor is more than just a middle-man. 

When the heavy lifting is done by someone who is experienced and professional in the field, they’re more likely to get more money out of the house than you could’ve on your own! On top of that, there has been enough stress in the last year to last anyone a lifetime. A good realtor takes that stress out of your hands. If you need a recommendation, we’re happy to help or visit Zillow to read reviews about top realtors in your area. 

Real Estate Attorney

A real estate agent is not a real estate attorney. While it’s recommended to have the agent, Georgia law requires an attorney for any and all closing processes. Selling your home with or without a real estate agent comes with a mountain of paperwork, you’ll be glad you have us on your side. Don’t hesitate to reach out to us with your questions. We’re here to help you with your homestead. 

home sellers with real estate agent

Refinance for Renovations

Most people do some sort of renovation on their home every 10-15 years. For 2020, a lot of people decided to make it the year to get that ball rolling. After being stuck inside our homes for so long due to shutdowns, stay-at-home orders and necessary quarantines caused by the COVID-19 Global Pandemic, many people are ready to make their home space work more efficiently. 

Home renovations come with a cost however. Most renovations can cost anywhere from $5,000 to $50,000, which is a staggering amount of money for most people to just have on hand. Sometimes people can take out loans for home improvements, but there is another very common solution: refinancing for renovations

In the past, a lot of people opted to buy a new house and move instead of renovating, but with fewer houses on the market, more and more people are opting to spruce up their current home and add necessary things like an in-home office. Investing in your current home has significant upsides compared to purchasing a new one.  As you re-feather the nest, you’re also adding value to your home and increasing the equity. 

What is Refinancing?

Refinancing a mortgage is the process of taking your current mortgage loan and effectively selling it to another lender under different terms. Changing your interest rate or reducing the fees on the loan has the potential to save you thousands of dollars across the lifetime of your loan. Refinancing your home changes the terms, but does not remove the balance on the loan, if you want to refinance to fund a home improvement project, you’ll most likely be increasing that overall balance. 

This is called a cash-out refinance

Cash-Out Refinance for Home Improvement 

If you want to refinance and walk away with cash in hand, you’ll need to refinance  the current mortgage with one that is both less than what the house is projected to be worth, but more than you currently owe on it. 

For example, if your home is worth $100,000 and you only have a remaining balance of $60,000, and you wanted to do a $10,000 reno, you’d likely refinance your home for a loan somewhere between $70-$75,000. The $60,000 would go to paying off the balance on the old loan, and the remaining difference would be paid out to you and cover the closing costs. 

This money is considered tax-free, and is just folded into your new mortgage. 

One of the key benefits to financing your renovation with a cash-out refinance is that it doesn’t add another monthly payment to your budget. You still just have the one mortgage payment to worry about and try to balance instead of juggling the home improvement loan payment on top of it. Your new mortgage payment could just as easily be higher or lower depending on what you decide to do. But it’s still not a new payment. Which is a huge plus in its favor. 

Historically Low Interest Rates

As it stands today in December 2020, mortgage interest rates are historically low! Refinancing for a lower interest rate can also lower your monthly mortgage payments. Having a few extra dollars in your account every month could help you save up for that renovation project you’ve been dreaming of. 

Questions? 

If you have any questions, don’t hesitate to reach out!  Give us a call! Frank B. Pallotta Law looks forward to helping our clients in Metro Atlanta navigate the closing processes associated with refinancing your home. Reach out to us with your questions. We’re here to help.

End-of-Year Estate Plan Check Up

The end of the year is fast approaching, and so many of us are doing our best to tie up our loose ends for 2020 and move into 2021 with a clean slate. All of us at Frank B. Pallotta Law have been working to do the same, which got us thinking about end-of-the-year estate plans! 

The end of the year is the perfect time for reflection, rearrangement, and readjustment for plans. As you take stock of your life, and organize your world, make sure you’re going into the new year with all your important paperwork in order too. Specifically, ask yourself, “Have I done a check up on my estate plan this year?” 

What is an estate plan? 

Briefly, estate planning is the process of legally declaring what happens to your estate after death. It establishes what you wish to do with your tangible and intangible assets, as well as establishing any trusts, charitable donations, taxes, and funeral plans. 

Why do an estate plan check-up?

It’s deeply important to revisit your estate plan at the end of every year, or at least once a year. A lot in your life can change over the course of a year. Assets can change, either by adding more or selling some off, trading. Not only that, potential beneficiaries can change drastically, marriages, divorce, adoptions, pregnancy and births, all change not only the dynamic of a family but the number of people considered when making the estate plan. A brief check up once a year can keep you and your family firmly on track when the plan needs utilized. 

What will an estate plan check-up cover?

That will really depend on what has changed in your estate. If nothing changed for you this year, very little will happen other than to ensure everything is filed and labeled correctly. But if you had a great many life events and alterations, that may result in a complete overhaul of your estate plan. 

  • Assent inventory
    • Go over your assets, both the tangible (house or land, car, personal possessions, etc.) and the intangible (checking accounts, savings, retirement funds, trusts, etc.) and note down anything that would have changed in the last year, or since you last gave your estate plan a check-up. 
  • Double check your deed! 
    • A surprising number of people think they understand and know what’s on their deed, and a surprising number of them are wrong.
  • Consider Family Needs
    • How much has your family’s needs changed this year? Have you had children, grandchildren, gotten married, or divorced? If any of that has changed since your last estate plan check up, make sure you’re updating your plan in consideration. 
  • Ensure everyone is set up properly
    • In the same vein as evaluating your family’s needs, make sure everyone is set up correctly. Do you own property with your partner/spouse? Make sure that you’re set up accurately as “Joint Tenants with the right of survivorship” and have a valid will that expresses as much.
  • Financial Powers of Attorney 
    • This is the perfect opportunity to make sure this is spelled out crystal clear. Decide and define who is making decisions when the time comes.

As morbid as it is, it’s important to ensure that your wishes are as spelled out as clear as they can be and secured legally. Don’t assume that word of mouth is secure enough if the worst happens and something goes to court. 

Questions? 

If you have any questions, please don’t hesitate to reach out! At Frank B. Pallotta Law we are licensed Georgia Real Estate Lawyers with more than 20 years of experience. When it comes to your estate plan we can help you figure out if you need a new deed, POA or if you need an estate planning specialist. Reach out to us with your questions. We’re here to help. 

Filing a Homestead Tax Exemption in Georgia

One of the first things Frank B. Pallotta Law recommends to all of our clients after closing on your new home is to apply for the Homestead Tax Exemption through the county tax commissioner. The amount of money you will save is well worth the paperwork. 

If a separate home, manufactured home, or condominium is the primary residence of the person who owns it, even if the land the home is on is leased, you may qualify for the Georgia Homestead Tax Exemption. 

What Qualifies as a Homestead in Georgia? 

Before you apply make sure your situation qualifies as best you can. To be eligible for the Georgia homestead tax exemption, the property must be your primary residence, and you have to have been the owner on January 1st of the year you want the exemption. 

There are a few exceptions or allowances. If you move away temporarily with intention to return, up to two years, without forming a permanent residence somewhere else, the property is still considered a homestead; if you work somewhere far away from your residence, such as with the military. 

How Does the Homestead Tax Exemption Work? 

While the amount might vary county to county, typically 40% of the fair market value is taken then the homestead exemption of $10,000.00 is subtracted from that. After you’ve done that, you multiply the net number by the mileage rate to determine the tax.

If you’re a senior, a disabled veteran, or a surviving spouse of a firefighter, police officer, or veteran, in the state of Georgia, your Homestead Tax Exemption may be more than the standard exemption. 

How to Apply for The Georgia Homestead Tax Exemption

You are not automatically going to get the Georgia Homestead Tax Exemption. You absolutely must apply for it once you qualify. Once approved, it will automatically renew every year for as long as it is the primary residence and you are the homeowner. 

After that, find your appraisal. If you’ve just purchased your home and haven’t done any major renovations and changes, the one that was done before closing will still be effective. If you’ve made serious renovations or feel like the value has altered significantly since, you should consider getting a new appraisal done. 

Find your county’s tax commissioner. Applications are made through your county tax commissioner. Most counties require you to appear in person to apply.  Some, however, allow you to apply online.  And while you’re doing this, be sure to download and fill out the application form. The information can be typed into the form before being printed, or printed and filled out manually. 

What do I do if I have any more questions?

Reach out to us with your questions. We’re here to help you with your homestead. Frank B. Pallotta is a licensed Georgia Real Estate Lawyer with more than 30 years of experience helping clients navigate the legal processes associated with new homeownership.

When Should (and Shouldn’t) You Get a Boundary Survey for Your Georgia Home Purchase

Boundary Survey? What’s that? Is it important? And should you bother with getting one? Frank B. Pallotta Law has the answers to your questions!

Among the dozens of things to consider when you’re making your Georgia residential real estate investment is whether or not you need a new boundary survey. 

What is a Boundary Survey?

Simply put a boundary survey is a geographic look on your property. A boundary plat typically only shows the boundaries of the property before things are added. A plat is useful, but maybe not so much for you as the homeowner. A boundary survey will show not only the boundaries of your property, but also the buildings such as your home, improvements (driveways, fences, pools, etc.) that have been made, any easements to consider for things like drainage and natural waterways.

Compared to a lot of the fees that come up when buying your home the cost on this is relatively small, but is it really necessary?

Reasons to Get a Boundary Survey

If the person who is selling you the home doesn’t have a recent boundary survey, you may be required to have one done before your mortgage lender will sign off on the mortgage.

Other reasons to consider getting a boundary survey:

  • You want to install a fence or alter an already-in-place fence. Most fences aren’t directly on the property line, so having a boundary survey done on your new residence can help clarify where the limits are and help you plan accordingly.
  • You want to make additions to the property. Other than fences, things like sheds, barns, garages, driveways, etc.
    • These could come up because a boundary survey could be the only way to check on easements, zoning, and making sure that your improvements are within the limits of your property and get your building permit.
  • A boundary survey may be required to satisfy a will and prevent issues with the title as you go into the purchase.
  • If the previous owners have installed a new building or made any significant improvements.
  • Knowing what you’re buying, especially when you’re buying your home, is very important.

Reasons Not to Get a Boundary Survey

It may not be necessary. A boundary survey in Georgia has no set expiration date. For all the reasons to get one, there are a few very good reasons to not bother getting one.

  • A lot of the time, the seller will have a boundary survey done before the house is sold. A realtor can also reasonably ask the current homeowners to have it done before the house is actually sold to you.
  • A boundary survey has been done recently to reflect the improvements done on the house and is still an accurate representation of the property.

Have More Questions?

Frank B. Pallotta Law would be happy to answer any questions you have regarding boundary surveys and more! Give us a call today and let our expert team guide you.

Understanding OWNER’S Title Insurance in Georgia

What is Owner’s Title Insurance? Why isn’t it covered in homeowners insurance? 

When you’re going through the process of buying a house, the list of closing costs can be overwhelming. As a licensed Georgia real estate attorney, we come across questions about these costs all the time. Questions that come up the most tend to be questions about Title Insurance. 

What is Owner’s Title Insurance? 

Owner’s Title Insurance is insurance that protects you, the homeowner, from issues that could pop up and compromise the title of the property. It protects you in case the person who sold you the home had back taxes owed, or there’s a conflict in the Will. Owner’s Title Insurance protects you against financial losses in these cases. 

Owner’s Title Insurance vs. Homeowners Insurance?

Homeowner’s insurance protects you financially in case something physical happens to the home. For example floods, tornados, hurricanes, trees falling on the roof. Those are the sort of things typically covered by your Homeowner’s insurance. Owner’s Title Insurance covers you against financial damages in case there is an issue with the title of your home. 

Is Owner’s Title Insurance Required? 

Technically, no. In Georgia, Owner’s Title Insurance is not a requirement in order to get your mortgage. It’s still strongly recommended. 

How do I find Owner’s Title Insurance? 

One of the many services we provide at Frank B. Pallotta Law is Title Examination and Title Insurance. Because Owner’s Title Insurance is optional, be sure to take a look around and pick a plan that works within your budget and what kind of coverage you’re looking for. 

How much does Owner’s Title Insurance Cost? 

When you’re buying a house in Georgia, Owner’s Title Insurance can cost from as low as $400 to as high as over $1000. A title insurance premium rate calculator is available here or a quote can be obtained by calling our office at 770-924-1400.

What will my Owner’s Title Insurance cover? 

There are a wide variety of things that can come up and end up costing you money after you’ve purchased a home. When you’re reviewing your policy, these are the things you’ll want to make are on it: 

  • A previous mortgage on the home that was not satisfied or settled. 
  • Unprocessed or dissatisfied foreclosures and bankruptcies. 
  • Property taxes or inheritances taxes that were not paid
  • Liens against the home from previously unpaid contractors, real estate taxes, or utility companies. 
  • Ownership issues, either from conflicting wills, missing heirs, or divorce issues 

Owner’s title insurance can cover all of these situations, typically up to the amount you paid for your home plus the legal fees associated with resolving them. 

Ideally none of these things will come up and you will have a properly Clean Title. But life is messy, and that’s why insurance exists. 

What do I do if I have any more questions?

Give us a call! At Frank B. Pallotta Law we have 20 years of experience helping our clients in Georgia navigate the real estate closing process. Reach out to us with your questions. We’re here to help. 

Understanding LENDER Title Insurance in Georgia

Whether you go on your own or with the help of a real estate agent, buying a house brings with it the list of “dreaded” closing costs. Buying a house is one of the biggest, if not the biggest, investment you’ll make in your lifetime. By the time you’re looking at the closing costs, it can feel overwhelming. 

Here at Frank B. Pallotta Law, we get a lot of questions about the closing costs. Some come up more often than others, especially about Lender’s Title Insurance. 

Lender’s Title Insurance

There are two types of title insurances that will show up as you close on your new home: Lender’s and Owner’s title insurance. Lender’s title insurance is an insurance fee you pay on behalf of your mortgage lender. It protects their interests in the event that an issue arises with the Title of your new home. 

Who does Lender’s Title Insurance cover?

Lender’s title insurance covers your mortgage holder; not you, the owner. It serves to protect the mortgage holder from any financial damages that could occur from a “cloudy” or “dirty” title being sold to you. 

If the Title on the home is not clear, it can cause quite a few problems in the purchasing process. And, for the most part, resolving the title issues will fall on the seller and should be sorted out before you get to the closing portion. The insurance is just in case something goes wrong…

Common problems include: 

  • Conflicting wills, missing heirs
  • Separations and divorces that complicate ownership of the home
  • Liens/Levies from taxes, unpaid utilities, etc.
  • Poor surveying of the property lines

All of these problems would ideally be resolved before ownership of the home is transferred to you, or at least before you get a mortgage on that Title. 

What Title Insurance is for the Owner? 

Title insurance for the owner is called Owner’s Title Insurance. It’s an entirely separate type of insurance and will be a different item on the closing list. Unlike Lender’s title insurance, Owner’s is technically optional, but still highly recommended to have.

What happens if you don’t get Lender’s Title Insurance? 

Most often trying to avoid getting lender’s title insurance will simply result in your mortgage being denied, cancelled, or rejected outright. 

How do I get Lender’s Title Insurance?

Usually your mortgage holder will have a preferred insurance provider. One of the many services we provide at Frank B. Pallotta Law is Title Examination and Title Insurance. How much lender’s title insurance will cost will vary depending on the policy your mortgage lender is requiring and the value of the home. A title insurance premium rate calculator is available here or a quote can be obtained by calling our office at 770-924-1400.

What if I have any more questions?

Give us a call! Frank B. Pallotta Law is a licensed Real Estate Lawyer in Cherokee County, Georgia with 20 years of experience helping our clients navigate the closing process. Reach out to us with your questions. We’re here to help!

Should You Refinance Your Home?

As mortgage rates hit a historical low, you may be wondering whether or not you should begin the process of refinancing your mortgage. At Frank B. Pallotta Law Firm, we are here to walk you through your options and guide you in the best way we can. 

Benefits of Refinancing

There are multiple advantages to refinancing your mortgage loan. If mortgage rates are exceptionally low to the point that it would lower your monthly mortgage payment, this would be a great opportunity for you to move forward with the refinancing process. 

Another great reason to refinance your mortgage is to shorten your loan term from a 30 year loan to a 15 year mortgage loan. This could seriously accelerate your goals to having your home completely paid off. 

If you have an adjustable rate mortgage (ARM), refinancing your mortgage could give you more predictable payments with a fixed-rate loan to lock in your rate for the remainder of the loan. 

You Should Refinance If…

If you’re facing a cash flow issue then a cash-out refinance issue may be the best plan for you. You can read more about this option in our latest blog post. Since mortgage loans usually have lower interest rates and are tax deductible, this might be a good option for you.

If you have reached 20% equity in your home then it is time to refinance to eliminate the lender-paid mortgage insurance (PMI) premium that is built into your loan.

Lastly, if you need to remove a person from your mortgage usually due to a divorce or to remove a co-signer no longer needed, the only way to accomplish this is by refinancing. 

What To Expect When Refinancing

Before you begin the refinancing process, there are a few things you’ll want to check first. Make sure you have at least 20% equity in your home. If you will still have to pay PMI even after you refinance for a lower interest rate, you will want to crunch the numbers to see if refinancing even makes sense for you. 

You’ll also want to check to make sure your credit score is at least 760 and your debt-to-income ratio is 36% or less. This will give you the best chances to get the lowest interest rate. 

Last but not least, be sure to calculate the break-even point and how refinancing will affect your taxes.

Ready to Call Your Real Estate Attorney?

If you think refinancing is the best next step for you or if you have more questions about what your options are, we are here to help you. Give us a call today and let our expert team guide you. With videoconferencing still in effect under COVID-19 Executive Orders, Frank B. Pallotta Law can make your refinance closing even easier.

What You Should Know About Home EQUITY

We can set all the right plans for our future but no one could predict things like a global pandemic, an economic recession or a natural disaster. When those things hit, it’s important to know what options you have to get your hands on some cash if you need it.

If you need a cash-out refinance or a home equity line of credit, there are some important things to know about the process and how that will impact you long term. 

What is a Cash-Out Refinance?

When you have a cash-out refinance, you are borrowing against your home equity to obtain funds. With this type of refinancing, you receive your check at closing and the amount of this loan is then added onto the mortgage that you owe. Since mortgage rates tend to be lower than other types of debt and are tax-deductible, this route can be a very cost-efficient way to borrow.

Doing this results in a new mortgage loan which may have different terms than your original loan. These terms could range from a different type of loan, a different interest rate or a longer or shorter time period for paying off your loan.

Before your check is cut, proceeds are first used to pay off your existing mortgage and any closing costs or prepaid items. You can expect similar closing costs to your original mortgage at your cash-out refinance closing.

What is a Home Equity Line of Credit?

Home equity line of credit (HELOC) is taken out in addition to your existing mortgage. Since this is considered a 2nd mortgage, it will have its own term and repayment schedule separate from your 1st mortgage. However, if your house is already paid for and fully owned by you (no mortgage), some lenders allow you to open a home equity line of credit and the HELOC will be your 1st and only mortgage.

With a HELOC, you can withdraw from your available line of credit as needed during your draw period, which is usually about 10 years. During this period, you’ll make monthly payments with principal and interest. After the draw period ends, the repayment period begins with 20 years to repay the outstanding balance.

HELOC usually has no (or relatively small) closing costs.

Ready to Call Your Real Estate Attorney?

If you’re in need of taking any equity out on your home, the best next step is to call Frank B. Pallotta Law today. Our expert team will guide you through your current situation and make you feel confident in choosing the right decision between a cash-out refinance or a home equity line of credit. And with videoconferencing still in effect under COVID-19 Executive Orders, Frank B. Pallotta Law can make your refinance closing process entirely stress free.