value of the home, unless you want to pay for private mortgage insurance. So, if you’re buying a $200,000 home, you’ll need to come up with a $40,000 down payment, and the bank will lend you the remaining $160,000,” explains Bieber. “But if that home then appraises for $175,000, then your loan-to-value ratio will be 91% ($160,000/$175,000). In order to satisfy your lender, you’ll need to raise your down payment to $60,000.” In the end, it might be better to walk away, unless the seller is willing to drop the price to the lower appraised value. You should never buy a home that’s worth less than you’re paying for it. A title search is required for any and all real estate deals just to make sure there are no unexpected claims on the property. Before you go through the process of purchasing a property, you want a “clear title” —which means that the seller transferring the property is the rightful owner, and there are no other claims on the property. Why is this important? If there are other claims, be prepared for things to get complicated. “Title disputes can take years and thousands of dollars in legal expenses to resolve,” says appraiser Bourland. Title-related issues can include an illegal deed as well as missing heirs who turn up and claim the property. Title insurance is required in most transactions, thankfully, which will protect you. But it’s a red flag if a title company won’t provide title insurance for the property. Best to walk away in this case. “Sellers can only sell the rights to property they actually own, 3. THE TITLE SEARCH REVEALS UNEXPECTED CLAIMS OR ISSUES
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