How to get a mortgage with no down payment.

Sigrid Forberg

Associate Editor

You don’t have to give up the dream of homeownership just because you’re short on funds.

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You don’t have to give up the dream of homeownership just because you’re short on funds.smiling young couple on couch with papers and open laptopfizkes / ShutterstockBy Sigrid Forberg

The biggest obstacle for many first-time homebuyers is coming up with the cash for a down payment.

Even when the monthly mortgage payments seem affordable, setting aside up to 20% of the purchase price prevents countless households from achieving the dream of homeownership.

But there are loan types that make it possible for you to buy a home, even if you have little to no money to put down.

What is a no-down-payment mortgage?

A no-down-payment mortgage is pretty self-explanatory: It’s a mortgage you can get without having to put money down.

When you buy a home, your down payment serves as your first mortgage payment. It’s generally a percentage of your total loan, ranging from 5% to 20%.

With a conventional mortgage, the benefit of offering a larger down payment is you’ll be free of the added expense of private mortgage insurance (PMI), which gets tacked onto loans with lower down payments.

But conventional loans generally require a down payment of at least 5%. On a $200,000 loan, that amounts to $10,000. And if you’re aiming for 20% to save you the monthly cost of PMI, you’re looking at $40,000. For some households, that’s a sum that is simply out of reach.

There is an alternative. Some government-backed loans offer borrowers no-down-payment options, making homeownership more accessible for a wider range of buyers.

MORE: How much house can I afford calculator

Are no down payment mortgage loans a good idea?

USDA and VA loans (backed by the U.S. Departments of Agriculture and Veterans Affairs) both offer zero-down options. However, you’ll have to meet their strict qualification requirements.

With USDA and VA loans, lenders are more willing to take a risk on borrowers who don’t have the money to secure conventional loans. A lender knows that if you ever default on your loan, the government will step in.

But note: The government agency insuring your loan doesn’t protect you, the borrower. It just protects the lender. The government’s backing is not a safety net for when you’d rather focus on other expenses some months.

Because a down payment serves as your first mortgage payment, the more you put down, the less you’ll pay in interest over the life of your loan. Unfortunately, the opposite also is true: The less you put down, the more you’ll pay in interest.

Low- and no-down-payment home loan options

Knowing that what prevents many Americans from becoming homeowners is the burden of covering a large sum needed for the down payment, there are a few government programs designed to ease that burden.

Unfortunately, these no down payment options are only available with a few types of mortgage programs, and their eligibility is restricted to rural, low-income Americans and active-duty military members and veterans.

USDA loan: No down payment

USDA loans were created to help low- to moderate-income rural and suburban Americans get mortgages. The loans are guaranteed by the U.S. Department of Agriculture and feature low fixed interest rates.

In addition to the no-down-payment feature, the loans also don’t require you to pay mortgage insurance. Instead, you will have to pay an upfront 1% guarantee fee and an annual 0.35% fee.

But the sum of those fees still tends to be lower in the long run than the mortgage insurance costs associated with other types of loans.

To qualify for the USDA loan program, a home must be in a rural area, but there’s a lot of leeway on the definition of “rural” — many suburban areas count, too.

Priority for these loans is given to Americans with urgent housing needs. Typically, that means successful applicants currently don’t have access to “decent, safe and sanitary housing,” or they can’t secure a loan from other, traditional sources.

Your income also is an important factor. To qualify for one of these loans, the money you earn will need to come in at or below set income limits for your area. You can find your region’s limit on the USDA’s website.

Your lender will take a close look at your credit score and debt ratios to verify you have an acceptable credit history and don’t have any record of debts being converted to collections over the last 12 months.

People with higher credit scores tend to have an advantage when applying for USDA loans. If you have a score of 640 and up, you could benefit from a streamlined application and underwriting process.

VA loan: No down payment

With VA loans, the Department of Veterans Affairs guarantees a portion of the mortgage.

Because the VA is backing you, you won’t be required to pay for mortgage insurance. But you will be charged a one-time funding fee, which can range from 1.4% to 3.6% of your total loan amount.

VA loans are available to regular military personnel, veterans, reservists and National Guard personnel. They’re also open to spouses of service members who died on active duty or as a result of a service-connected disability.

Most people in the military will qualify after six months of service. You’ll also need to show a Certificate of Eligibility, which you can apply for through the VA.

As with USDA loans, your credit score and debt ratios will have a big impact on your eligibility for a VA loan.

FHA loans: Low down payment

FHA loans are also backed by the federal government. In this case, the insurer is the Federal Housing Administration, which is an arm of the Department of Housing and Urban Development, or HUD.

With an FHA loan, you can put down as little as 3.5%. And while it’s easier to qualify for these loans than those offered through the USDA and VA, there are still some minimum requirements.

You’ll generally need at least a 580 credit score. The home must be your primary residence and you’ll have to move in within 60 days of closing.

There are also purchase price limits for the home. HUD offers a search engine to help you find your region’s limit.

FHA loans come with mortgage insurance premiums (MIPs) paid both upfront and then annually. When you put less than 10% down, you’ll have to pay mortgage insurance for the entire life of your loan.

To get around this lifetime requirement, some borrowers refinance under a different loan type once they have reached a 20% equity position in their home.

Conventional 97 loan: Low down payment

Most people think you need at least 5% for a down payment with a conventional loan. But a conventional 97 loan allows you to finance up to 97% of your home’s purchase price, meaning you have to put down only 3%.

If we think back to that $200,000 home, that means you’d have to come up with just $6,000 as your down payment.

Unlike with the FHA low-down-payment option, you won’t have to pay upfront mortgage insurance with a conventional 97 loan. And once you’ve built enough equity, you can cancel your mortgage insurance without having to refinance.

However, you’ll have to have a credit score of at least 620 to qualify for one of these loans. And since they’re not offered through all mortgage lenders, you might have to shop around a bit.

Other conventional options

The Freddie Mac Home Possible mortgage is designed for very low- to moderate-income borrowers to help them become homeowners. This conventional loan program requires only a 3% down payment.

With Home Possible, you can’t make more than 100% of the median income for your area.

And through mortgage giant Fannie Mae, the Home Ready program helps low- to moderate-income households, members of minority groups and citizens of disaster-impacted communities become homeowners.

Home Ready also allows for just 3% down, and the money doesn’t have to come from your own funds — meaning the money can be gifted to you by another party.

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The Tax Benefits of Buying a Condo for For Your Child’ College Housing

 Tax Tips The Tax Benefits of Buying a Condo for For Your Child’s College Housing

With real estate prices recovering in many markets, it might make sense to buy a condo where your child can live during college. He or she can live there while attending school, and you can avoid “throwing away” money on dorm costs or rent for an apartment. If you buy a place that has extra space, you also can rent it to your child’s friend(s) to offset some of the ownership costs.

Additionally, you may be able to sell the condo for a gain after the four or five (or maybe even six) years that it takes for your son or daughter to graduate. A gain may be even more likely if you have more than one child — and you can persuade a younger child to attend the same college as an older sibling. Here are some tax issues to consider before you buy a condo near campus.

Rules about Deducting College Condo Ownership Costs

The federal income tax rules generally prevent you from deducting losses from owning and renting a residence to a family member. But an exception applies when you rent at market rates to the family member who uses the property as his or her principal home. This loophole is open to you if you buy a condo and rent it out to your college kid (and any roommates) at market rates.

As long as you charge market rent, you can — subject to the passive activity loss (PAL) rules explained later — deduct the mortgage interest and write off all the other operating expenses, including utilities, insurance, association fees, security monitoring, cleaning, maintenance, and repairs. As a bonus, you can depreciate the cost of the structure (but not the land) over 27.5 years, even if its market value is increasing.

Where will your cash-strapped college student get the money to pay you market rent for the condo? The same place he or she would get the cash to pay for a dorm room or apartment rent. You can gift your child up to $14,000 annually without any adverse federal tax consequences. If you’re married, you and your spouse, combined, can give up to $28,000. Your child can then use that money to write monthly rent checks back to you.

For recordkeeping purposes, your child should send checks that say “rent” on the memo line. It’s also helpful for you to open a separate checking account to handle rental income and expenses. Taking these steps will minimize problems with the IRS if you get audited.

Key point: Even if you don’t charge your child market rent for the condo, you can still deduct the property taxes. Designate the condo as your second home, and then you can also deduct the interest on up to $1.1 million of combined mortgage debt on your main home and the condo as an itemized deduction on your personal tax return (subject to the phaseout rule for high-income folks that normally applies to these deductions).

Watch Out for PAL Rules

The condo is likely to generate tax losses after you consider depreciation deductions. If so, the PAL rules generally apply. The fundamental concept is simple: You can deduct PALs only to the extent of passive income from other sources, such as positive taxable income from other rental properties or gains from selling them.

A special exception allows you to deduct up to $25,000 of annual PALs from rental real estate provided:

  1. Your adjusted gross income before the real estate loss is less than $100,000, and
  2. You “actively participate” in the rental activity.

Active participation means you’re making management decisions, such as approving tenants, signing leases, and authorizing repairs.

If you qualify for this exception, you won’t need any passive income to claim a deductible rental loss of up to $25,000 annually. However, if your adjusted gross income (AGI) is between $100,000 and $150,000, the special exception gets proportionately phased out. If your AGI exceeds $150,000 and you have no passive income, you can’t currently deduct any passive rental real estate losses. Fortunately, any unused losses will be carried forward to future tax years, and you can deduct them when you sell the condo.

Expect More Tax Benefits When You Sell

When you sell a rental property that you’ve owned for more than a year, the profit — the difference between sales proceeds and the tax basis of the property after subtracting depreciation — is a long-term capital gain.

The maximum federal tax rate on long-term gains is 15% for most folks. But if you are in the top federal bracket, the maximum rate is 20%. Higher-income taxpayers may also owe the 3.8% net investment income tax on rental property gains. Also be aware that, if you’re in the 25% regular income tax bracket or above, part of the gain — the amount equal to your cumulative depreciation write-offs — is taxed at a maximum federal rate of 25%.

Consumer confidence in housing market hits lowest in over a decade

Consumer confidence in the housing market dropped to the lowest level since 2011, as both prospective buyers and sellers have become more pessimistic.
— Read on www.cnbc.com/2022/08/08/consumer-confidence-in-housing-market-hits-lowest-in-over-a-decade.html

In the last decade, a surge in home prices has built considerable wealth for the middle class.

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Carmen Reinicke@CSREINICKE

Total housing wealth grew by $8.2 trillion between 2010 and 2020, according to a March report from the National Association of Realtors. The coronavirus pandemic’s housing boom added even more value to homes.

But unless people plan to sell their houses — which can be a difficult feat in a hot housing market — there are only a few ways to tap into that increased equity.

More from Invest in You:
How to calculate your own personal inflation rate
Half of Americans say inflation may hurt financial goals
How to know if an adjustable rate mortgage is right

“You can’t eat your equity, but if you can monetize some of it to reduce debt and make life easier from a cash flow perspective, that makes a ton of sense in most situations,” said Dennis Nolte, a certified financial planner and vice president at Seacoast Bank in Winter Park, Florida.

Here’s what financial experts recommend.

Cash-out refinance

One way to get money from your home’s increase in value is to refinance. By using a cash-out refinance, you’d also be able to add some liquidity to your savings or put the money towards another goal.

Here’s how it works: You refinance your home with a larger mortgage than you previously had to get the difference back in cash. In some instances, it may be a win-win situation — if you’re able to refinance at a lower rate or reduce your monthly payments.

It may not be the best option for homeowners right now, however. That’s because interest rates are rapidly rising, and with them, mortgage rates. That makes it less likely that someone would be able to refinance now for a more attractive rate.

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“Rates have shot up so quickly that refinancing at these interest rates could be as much as twice what their current rate is,” said Jackie Frommer, chief operating officer of lending at Figure, a financial services company. “That just doesn’t make sense.”

It can also be expensive to refinance, as there are extra closing fees involved.              

Home equity loan

A home equity loan can help you access some of your house’s appreciated value. It’s a loan that you take out against the value of your home and pay off over a set period, generally 10 to 30 years.

These loans do include closing costs and can also include fees, as well. In addition, you must take out a lump sum — say $100,000 — and pay off the entire amount plus interest. Usually, the interest rate is fixed, however, which can help you budget long-term.

Right now, home equity loan rates generally range from 3% to 12%, depending on the borrower, according to Bankrate.

Home equity line of credit

A home equity line of credit, also known as a HELOC, is one of the best ways to access the equity in your home without selling it.

Instead of taking out a loan at a fixed amount, a HELOC opens a pool of money that you can utilize, but you don’t have to take it all at once or use it all. For instance, instead of having a $100,000 loan, you could have access to a $100,000 HELOC that you could draw on only when you needed it for something like an emergency repair or renovation.

“You have a pool of money you can draw on, and it doesn’t cost anything unless you use it,” said Thomas Blackburn, a CFP with Mason & Associates in Newport News, Virginia, adding that he recommends them for a lot of people.

“It’s almost like insurance,” said Nolte, adding that Is like a life insurance policy; it makes sense to have a HELOC in place before you need to draw on it.

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Currently, interest rates are low on HELOCs. People with good or excellent credit — generally a FICO score of 670 or more — can get HELOCs with rates from 3% to 5% according to Bankrate. Those with fair scores or lower may see rates in the 9% to 10% range.  

“Now might be a good time to lock in those lower interest rates as we’ve seen they’re gone a little higher and will continue to,” said Brittney Castro, CFP at Mint.

REAL ESTATE

Housing wealth gains a record $1.2 trillion, but there are signs the market is cooling

PUBLISHED MON, JUN 6 20223:03 PM EDTUPDATED MON, JUN 6 20224:24 PM EDT

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Diana Olick@IN/DIANAOLICK@DIANAOLICKCNBC@DIANAOLICK

The amount of money mortgage holders could pull out of their homes while still keeping a 20% equity cushion rose by an unprecedented $1.2 trillion in the first quarter of this year, according to a new analysis from Black Knight, a mortgage software and analytics firm. That is the largest quarterly increase since the company began tracking the figure in 2005.

Mortgage holders’ so-called tappable equity was up 34%, or by $2.8 trillion, in April compared with a year ago. Total tappable equity stood at $11 trillion, or two times the previous peak in 2006. That works out to an average of about $207,000 per homeowner.

Tappable equity is largely held by high-credit borrowers with low mortgage rates, according to Black Knight. Nearly three-quarters of those borrowers have rates below 4%. The current rate on the 30-year fixed mortgage is over 5%.

Room to Hang out…

The flipside of rising home values is that prospective buyers are increasingly being priced out of the market. Mortgage rates have also been rising sharply, putting homeownership further out of reach for some.

Homeowners are in the money, and it just keeps coming. Two years of rapidly rising home prices have pushed the nation’s collective home equity to new highs.

“It really is a bifurcated landscape – one that grows ever more challenging for those looking to purchase a home but is simultaneously a boon for those who already own and have seen their housing wealth rise substantially over the last couple of years,” said Ben Graboske, president of Black Knight Data & Analytics. “Depending upon where you stand, this could be the best or worst of all possible markets.”

The housing market, however, is showing slight signs of cooling. Home prices, as measured by Black Knight in April, were up 19.9% year over year, down from the 20.4% gain seen in March. The slowed growth could be an early indication of the impact of rising rates.

“April’s decline is more likely a sign of deceleration caused by the modest rate increases in late 2021 and early 2022 when rates first began ticking upwards,” Graboske said. “The March and April 2022 rate spikes will take time to show up in repeat sales indexes.”

Rising interest rates historically cool home prices, but supply remains pitifully low in the current market. Active listings are 67% below pre-pandemic levels, with about 820,000 fewer listings than a typical spring season.

Given the current market conditions, homeowners are less likely to sell their homes and more likely to tap some of that vast equity for renovations. Home equity lines of credit are preferable now, as an owner likely wouldn’t want to refinance their first mortgage to a higher rate, even to pull out cash.

A recent report from Harvard’s Joint Center for Housing projected home improvement spending to increase by nearly 14% this year.

“Record-breaking home price appreciation, solid home sales, and high incomes are all contributing to stronger remodeling activity in our nation’s major metros, especially in the South and West,” said Sophia Wedeen, a researcher in the Remodeling Futures Program at the Center.

Bank Over Draft Fees

There’s one ‘surprising similarity’ between those who pay bank overdraft fees and those who avoid them

Published: Jan. 11, 2022 at 5:20 p.m. ETBy Andrew Keshner1

Bank of America plans to end its $35 ‘non-sufficient funds’ fees next month, and will drop overdraft fees to $10 from $35

The banking industry took in $15.47 billion in overdraft and non-sufficient funds in 2019, according to the Consumer Financial Protection Bureau.SCOTT OLSON/GETTY IMAGES

Are you still paying overdraft fees?

Bank of America BAC, +0.57% said Tuesday it plans to end its $35 “non-sufficient funds” fees next month, and will reduce overdraft fees to $10 from $35, starting in May. Non-sufficient fund fees occur when a payment bounces. Overdraft fees occur when consumers withdraw more than the agreed amount.

But there’s a long way to go. The industry took in $15.47 billion in  overdraft and non-sufficient funds in 2019, according to a report released last month from the Consumer Financial Protection Bureau. Bank of America, J.P. Morgan Chase JPM, +0.10% and Wells Fargo WFC, +1.28%accounted for approximately 44% of those fees, it said.nullAdvertisement

Some people are still dependent on overdrafts, despite the often high fees. Nearly one-fifth (18%) of consumers with a bank or credit union said they were dinged with an overdraft fee in December, an increase from 14% in August, according to a Morning Consult poll released Tuesday.

Overdrafters are disproportionately millennials, parents and those experiencing income volatility.

“One surprising similarity between overdrafters and the general population is their income levels,” the report said. “Those who overdraft are about as likely to report annual household income of more than $50,000 and slightly more likely to report annual household income of more than $100,000.”

Of those who said they pay overdraft fees, half were millennial consumers and 47% were parents with kids under age 18. Almost two-thirds (58%) of overdrafters in the poll made less than $50,000, while 27% made between $50,000 and $100,000 and 16% made above $100,000 a year. But they do tend to share one common trait: volatile income streams.

“More than one in five adults (21%) who have overdrafted since August also reported receiving a payday loan, and roughly the same share reported either purchasing a money order or cashing a check through a provider other than a bank or credit union,” Morning Consult added. That’s more than double the rate of the general population.

BoA’s decision “will provide much-needed relief for customers who least can afford the burden of overdraft fees, and should lead other financial institutions to drop these fees that disproportionately impact low-income, Black and Latino Americans,” said Mike Calhoun, president of the Center for Responsible Lending.

Bank of America shares are up more than 48% in the past 12 months. The Dow Jones Industrial Average DJIA, +0.51% is up nearly 17% in that time and the S&P 500 is up roughly 23% in that time.

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The ‘Catch-22’ That Holds HBCUs Back From Being A CRE Feeder System

NationalEmployerAugust 30, 2021 Matthew Rothstein, Jarred Schenke, and Bianca Barragan

The commercial real estate industry is aware of its lack of racial diversity, and many of its biggest companies say they are working to grow the pipeline of people of color into the business. But one oft-cited source of potential employees doesn’t have the infrastructure to support that pipeline at present — not even close.

A review of current course catalogs from each of the accredited Historically Black Colleges and Universities found that none have a real estate major or concentration for bachelor or graduate degrees. Only 26 offer real estate-specific classes for credit, at least four offers non-credit continuing education classes, and two historically Black community colleges offer vocational programs in real estate.

The Hundred-Seven, an HBCU-focused nonprofit, lists three schools as offering real estate programs on its website: Lawson State Community College, which offers a vocational certificate, and Allen University and St. Augustine’s University. Allen doesn’t list any real estate programs or courses on its catalog; representatives for the school didn’t respond to requests for comment.

St. Augustine’s eliminated its real estate program in 2017, the dean of the school of business, management, and technology, Van Sapp, told Bisnow.

“Many of our students are unaware of commercial real estate opportunities,” he wrote in an email.

It comes as no surprise to Jeffrey Molavi, the interim chair of the University of Maryland Eastern Shore’s Department of the Built Environment, that most HBCUs don’t offer real estate programming. Black families have historically been frozen out of the generational wealth-building afforded White households through homeownership and investment in real estate, and HBCU course offerings are a reflection of the perceived pathways to upward mobility in an economy that still carries the legacy of systemic racism.

“Most African American students don’t like the sales position,” Molavi said. “And this is my opinion: The sales position is based on the social and economic structure of the country and culture. So they want to work in a place where they’ll be recognized and get steady paychecks. So in my opinion, real estate is not very popular among African American students.”

For HBCUs, which have been chronically underfunded, starting new courses is an expensive proposition. The schools focus what resources they have on expanding their offerings in subjects with a clearer pathway to jobs and/or demonstrated interest from incoming students. 

“Nothing is free. It costs money to set up courses,” National Historically Black Colleges & Universities Foundation President Ty Couey said. “And then there’s always that gamble that students may not be interested. So it’s like a Catch-22.”

For HBCUs to establish themselves as an industry feeder system, they would require participation on a wider scale and more consistent basis from commercial real estate companies than the industry has ever demonstrated in the service of improving diversity among its ranks, multiple HBCU alumni who work in commercial real estate told Bisnow

“I would argue, whatever time, money, resources that you’re committing to Harvard Business School or Wharton or whatever place you think you’re mining superior talent for your company or industry, if you were to try and do the same thing with an HBCU, you could probably get similar results,” said Michael Banner, president and CEO of Los Angeles LDC, a nonprofit community development financial institution. 

How Should Partners Buy Real Estate

Food for Thought

I own a home with my ex-husband. He agreed to pay my half of the mortgage. In the final judgment, the judge said I should “keep” the property we owned in Fla., and my ex should “keep” the Tampa home.

He ultimately short sold the Tampa property without my signature or approval, even though it was marital property. I have lived in this property for 30 years — 15 with my ex and 15 since the separation and divorce.

I thought “keep” meant keep, and the judge who is presiding over the lawsuit my ex has brought to partition the property agreed.

However, the first judge did not include the legal description of the property. Therefore, it was not a legal conveyance, and the second judge ordered the partition of the property, summary judgment.

Do I have any rights? The house was part of my settlement. I understand that it gets partitioned, but shouldn’t I be allowed to keep the proceeds from the sale? This house was where I was going to live in retirement.

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Welcome, Home!

I have remodeled and maintained this property on my own, and all of the insurance claims paid out went to him because he was the one in the mortgage. He kept this money and never used it to repair my home.

I am a senior and cannot afford to take on a mortgage. Don’t I at least have squatter’s rights? Can I bring legal action against the title company who facilitated the sale of the Tampa marital property, without my permission?

Dear Senior,

A financial expert once told me that going through a divorce is like your own personal recession. He could list stories where the dissolution of a marriage had major financial consequences. I’ve even interviewed a woman who said her divorce cost her around $1 million in retirement savings — the experience even inspired her to become a financial analyst who specializes in divorce cases.

I mention all of this to underscore that you’re not alone in feeling like you were wronged by your ex-husband — and that the precarious financial state you’re now in is unfair or unjust. That, however, doesn’t necessarily mean that he’s done anything wrong, or that the judge made the wrong decision.

Florida state law spells out that, in a divorce, marital assets are to be divided equitably. But equitable doesn’t always mean equal. In many cases, yes, assets will be split 50-50. But there can be situations where a judge may decide that splitting the marital property in half isn’t fair. That might be the case here, though without reviewing the divorce documents it’s not possible to know for sure.

Florida state law spells out that, in a divorce, marital assets are to be divided equitably. But equitable doesn’t always mean equal.

If the first judge spelled out that the Tampa property would go completely to your ex-husband, he may have been within his rights to sell it without your consent. That said, it sounds as though the second judge revised the terms of the divorce settlement, and reassessed how the property you two mutually owned in your marriage would be divided.

However, if you believe that the second judge erred in revising the settlement, or that your husband sold the Tampa home without receiving proper consent to do so, you could consider pursuing an appeal or other legal action. I will warn you, though, that there maybe a time limit within which this appeal must be recorded. Either way, you should consult your own attorney to determine what options you have.

Bottom line: If the second judge did partition the home you’re currently living in — and their opinion stands — you should get a portion of the proceeds of any sale that were to occur. If the home was portioned in half, you would receive half the proceeds. In this scenario, your ex-husband could attempt to force the sale through the court. Otherwise the two of you could seek to maximize your profit from the sale.

The definition of who qualifies as a squatter varies from state to state.

Just because you live in the home does not necessarily mean you have squatter’s rights.

“A squatter is anyone who begins to inhabit a piece of property or land without the legal right to do so; In other words, they are not renting the property from the owner (where landlord-tenant law comes into play) and they do not have permission to use it.”

The definition of who qualifies as a squatter varies from state to state. In Florida, a person must meet specific requirements to qualify as a squatter under so-called “adverse possession” laws. For instance, one condition squatters in Florida must meet is hostile possession, meaning that they did not have permission from the property’s owner to live in it, according to TrustHome Properties.

By consulting an attorney, you could determine whether you might qualify for protection as a squatter.

By consulting an attorney, you could determine whether you might qualify for protection as a squatter. They could also advise you as to whether it would be worth pursuing legal action, whether that be against your ex-husband, the title company associated with the sale of the Tampa home or the judge who neglected to record the terms of your original divorce settlement properly.

And you decide to approach lawyers about such a case? Tread with caution. Don’t hire someone because they’re saying what you want to hear. Feel free to get a second or third opinion, but if you are advised by multiple attorneys against pursuing legal action then you may want to trust their judgment on the matter.

Consider hiring a financial adviser who could guide you through this volatile time in your life. It worries me that you don’t seem to have the means to cover the cost of housing and other necessities. If your current home is ultimately sold and you receive some sort of profit, what you do with that money could determine how financially protected you are in the future. That could mean putting it toward the down payment on a new home, investing it or saving it to use for future rent payments.

I can only imagine how stressful and unsettling this all has been for you. Allow yourself to feel those emotions now, so that you can make these next crucial decisions with a clear mind. wishing you the best of luck as you navigate these hurdles.

The Importance of Understanding Interest

The Importance of Understanding Interest

It’s one thing to know what interest is. It’s another to truly understand how interest works. Understanding interest is so important because it can have a considerable impact on your entire financial picture.

The most important thing to know about interest is that not all types are created equal. The way you calculate interest can drastically alter the results. Taking that into account, let’s discuss the two main types of interest:

1. Simple or Nominal Interest

When you learned about interest in school, simple interest was probably the kind you were first taught. The amount of simple interest is calculated as a percentage of the principal amount. Put another way, with simple interest, the principal amount upon which the interest is calculated is constant.

This is easy to understand when your think about a savings account. Say you deposit $10,000 with an annual interest rate of 5%. Now let’s say you let that $10,000 sit there for 5 years. What would the new amount be? If you said $12,500, then you would be correct. Our deposit (the principal) earned $500 (5% of 10,000) each year for five years. That leaves us with $12,500.

2. Compound Interest

Remember how with simple interest the amount upon which interest is calculated stayed the same (every year it was based on $10,000)? Well, with compound interest, that amount continues to accumulate on itself. Compound interest is calculated based on the principal amount and any past interest earned.1 The earned interest is simply added to the original principal amount at a predetermined rate (annually, monthly, etc.).

Compound interest might be better understood by example. Let’s look back at our savings account scenario once again. This time, however, let’s say at the end of each year your earned interest is added back to the original principal amount. After year 1, just like with simple interest, you would have earned $500 in interest. This time, though, the difference is that $500 is now added to the $10,000. So the following year’s principal becomes $10,500 and that year’s interest is calculated based on that new figure. This process repeats itself every year for 5 years. At the end of 5 years, with interest compounding at a yearly rate, we would actually end up with $12,763, leaving us with $263 more than simple interest.

$263 is hardly an impressive extra profit but hold that thought. Let’s say you let that $10,000 sit for 10 years instead of 5. In that case, the simple interest would leave you with $15,000. On the other hand, compound interest would leave you with $16,288. That’s an extra profit of $1,288! As you can see, allowing compound interest to build and grow over a longer period of time can make a big difference.

Just ask Warren Buffett how powerful compound interest can be:

“My wealth has come from a combination of living in America, some lucky genes, and compound interest.” — Warren Buffett2

Most of us are not Warren Buffet. The beauty of compound interest, though, is that anyone can take advantage of its financial power. Whether you have a mortgage, are repaying student loans, or even depositing money in a bank account, interest has the power to add to your debt or help build your savings. Knowing what interest is won’t help you truly take advantage. Rather, it’s understanding how it can best work for you.1 https://www.investor.gov/glossary/glossary_terms/compound-interest
2 https://archive.fortune.com/2010/06/15/news/newsmakers/Warren_Buffett_Pledge_Letter.fortune/index.htm
Life Events

Quit Claim Deed In Alabama

QuitClaim Deed in Alabama

What You Need To Know

If you’d like to give up your interests in real property to your spouse or your ex-spouse; or if you’d like to gift your property to a family member for rental use or any other use, the statutory laws in Alabama require you to sign a document called a quit claim deed.

What is a quit claim deed?

A quitclaim deed (quitclaim form, non-warranty deed, or quitclaim) refers to the legally binding document that releases an individual’s interest in a named property. The document does not, however, state the nature of the person’s interest/ right in the property. And it doesn’t carry warranties of the individual’s rights or interests in the property. The other condition of the quitclaim deed is that it neither guarantees nor states that the party relinquishing their interests/ claim to the named property owned the valid ownership rights to the property. The person who relinquishes their interests or rights to the property is the grantor while the person who receives the interests is the grantee.

The deed will, however, prevent the grantor from coming back to claim the interests they’ve given up. Therefore, you could think of the quitclaim deed as the document that officially recognizes the fact that the grantor has given up their interests in named real property; protecting the grantee (to a small extent) from being stripped of the rights.

The Difference Between the QuitClaim Deed and the Warranty Deed

When it comes to the transfer of rights or interests in real property from one party to another, the law allows the use of specialty or the general warranty deeds as well as the quitclaims. These documents differ from each other in some ways.

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Unlike the warranty deeds, the quit claim deeds do not carry any warranties, only working to release or convey a grantor’s interests in property to the grantee. If the grantor owns the property, he or she gives the grantee the claim deed to show that they’ve transferred their interests in the property.

What this means is that the use of the quit deed could be risky if the grantor does not own rights to the property whose interests they are transferring.

Uses of the Claim Deed

  • A quit claim deed in Alabama has several legal uses, particularly in property transfers. Some of the uses that could be listed in the deed claim form include:
    • The transfer of property into a Trust or a living trust
    • To indicate a change in name affecting an existing deed
    • Transfer of property to a business or an entity
    • When asked to resolve cloud on a title by the title company
    • When changing the details of the marital property
    • Transferring interests to someone else who will co-own the property with current owners
    • Removing a grantee from a deed

If the circumstances/ uses listed above represent actions you wish to take, you should consider downloading your copy of a free Alabama quit claim deed form. The non-warranty deed form will guide you in transferring or the conveyance of your interests in property to someone else.

For the document to be legally binding, it must be meet some requirements.

  • Requirements for valid quitclaim form
    • The transfer/ conveyance needs to be in writing; on a parchment or paper
    • It must be marked or signed by the grantor. In the absence of the grantor, it should be signed or marked by authorized personnel.
    • It must have the grantor’s name, address, as well as their marital status; this is according to the legal provisions of Code 35-4-20.
    • The law also indicates that for a married grantor in ownership of the property under the spouse facilitating the transfer, then the only signature required for rights/ interests conveyance is the grantors.
    • But, the quitclaim form must have the signatures of both spouses if the property whose interests are being conveyed is homestead property, the other spouse’s status of property ownership notwithstanding.
    • Regarding non-homestead property transfers, the state requires a recital which states that the named property on conveyance does not belong to the grantor.
    • The statutes also require that the deed form carries the exact description of the property. These details include reference to any past recording.
    • The form must have the name of the grantee along with their address, and necessary vesting details.
    • According to the state laws under Ala. Code 35-4-110, 113), the form must have a written statement with the name/ address of the party preparing the quitclaim form.
    • For validity, the form must also carry a statement from an independent witness. Alternatively, the form should have an acknowledgment from a notary public or any other party licensed to acknowledge oaths.
    • The statute is also clear on something else: that while an acknowledgment is enough for grantors able to write, there should be a witness present for a grantor who is unable to write.

Choice of words

The Alabama quitclaim form doesn’t provide any warranties. Therefore, under the form’s warranty clause section, the terms ‘Sell,’ ‘Bargain’ or ‘Grant,’ shouldn’t be used.

These words have implied warranties as per the statutory provisions of Code 35-4 271. Acceptable words/ phrases include “release quitclaim,” or “quitclaim then convey.’

Finally, the deed should be recorded, preferably with probate based in the county that the property is located – Ala. Code 35-4-50. And for purposes of recording, the county might call for extra information, specific formatting, tax forms, and other documents.

Would you like to transfer your interests in property to a loved one or a business entity in Birmingham, Huntsville, Montgomery, Mobile, Tuscaloosa, Auburn, Dothan, Anniston or any other city in Alabama? Download our free quitclaim deed form today to get started.

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