What Are Construction-To-Permanent Loans?

Ready to design and build your dream home? A Construction-to-Permanent loan may be right for you. Essentially, it’s a three-stage mortgage that covers all of your new home’s construction costs. The Construction-to-Permanent (CP) loan allows you to lock in your interest rate and close the loan before you begin work on your home. When the project moves to construction, the bank disburses the loan to cover the cost, and the borrower pays interest on the outstanding balance. After construction, the loan becomes a permanent mortgage, and monthly payments begin.

 Here’s how CP loans work, step-by-step:

Application

A Construction-to-Permanent Mortgage Loan Originator (MLO) will go over several CP loan options with you and gather any appropriate documents needed for the application. They will submit the application on your behalf, and the MLO will let you know when the bank reaches a decision.

In the Meantime

There are several steps in the application process. One crucial step is the builder review. The bank may want to review the builder and their contract, which can affect their decision to issue the loan. The builder will need to sign a standard Construction Loan Agreement with the bank, which states the bank’s position on the funds available for construction. Also, a licensed real estate appraiser will look over your plans, specifications, the property itself, and any recent sales of homes like yours on the market and use this information to determine an estimated value of your home. During this stage, your builder, the bank, and yourself will need to agree on how loan disbursements and draws will be made in the form of a Draw Schedule. The bank will work with a closing agent of your choice to make sure the title on the property is clear and then move to close.

Disbursement

If approved, the bank will require an inspection before each disbursement to determine if the necessary work has been completed on the project. You’ll order an inspection by contacting your bank’s Paralender, who will then call a local inspector to look over the amount of completed work based on the draw schedule. Funds go toward labor completed and material installed.

Conversion

“Conversion” refers to the construction phase of your loan moving to the permanent stage. Costs that may be due at this time include the initial escrow of prepaid items such as homeowners’ insurance and taxes, prepaid interest for the permanent phase, unpaid interest on the construction phase, and other title insurance fees. Regular mortgage payments begin after the loan has been converted.

Potential investors and buyers shouldn’t feel intimidated by this process. Regions Bank recently collaborated with Built, a payment technology firm and construction finance software specialist. Built seeks to simplify the administration of Construction-to-Permanent loans by using a cloud-based portal that synchronizes the builder, inspector, and lender in one place. Using the platform, builders and developers can view availability, ask for inspections, review business analytics, and inspectors can submit reports about construction progress from the site, which speeds up the funding process. “Built is an online platform that makes it easy for the clients to order inspections when they are ready for them and to request draws,” said Nicole Dupre, Mortgage Loan Originator at Regions. “It’s a place that builders and homeowners can come to view the status of the project at any time.” Since its launch, Built has helped clients decrease their turnaround times by over 50%. 

If you have any questions about Construction-to-Permanent loans and want to find out how we can help you reach your homeowning goals, call us at (504) 581-6427. Homestead Title is a full-service title and escrow company. Since 1934, we have provided our customers with competent, thorough, and professional service. Before each closing, we search public records to clarify legal and financial risks for lenders, realtors, and other stakeholders in the real estate transaction process. Our energetic and capable team of real estate title professionals provides accurate investigations, rapid turnaround time, streamlined paperless delivery, and exceptional customer service. 

Investing in Distressed Communities Through Louisiana's Opportunity Zones

Established by Congress in the Tax Cuts and Jobs Act of 2017, Opportunity Zones are a community development program. This new federal capital gains tax incentive program is designed to drive long-term investments to low-income communities. The new law provides a federal tax incentive for investors to re-invest their capital gains into Opportunity Funds, which are specialized vehicles dedicated to investing in designated low-income areas.

Eligible taxpayers who invest capital gains into a Qualified Opportunity Fund (QOF) can defer paying federal capital gains tax until the QOF is sold or exchanged, or until December 31, 2026.

To qualify for deferral, capital gains must:

• Be invested in the QOF within 180 days from the sale of an asset

• Be an equity interest (not a debt interest)

• Elect deferral by filing the appropriate tax forms the year the gain would otherwise be included as income

Investors can receive up to three primary tax benefits for investing capital gains into a QOF:

• Temporary Deferral – The tax payment is deferred until the investment is sold or exchanged, or until December 31, 2026 (whichever comes first).

• Partial Exclusion – If the QOF investment is held for longer than five years, there is a 10 percent exclusion of the deferred gain. If held for more than seven years, the exclusion becomes 15 percent.

• Elimination – If the QOF investment is held for at least 10 years, the investor has the potential to eliminate any tax payment.

According to Louisiana Economic Development (LED) 150 census tracts in Louisiana that are qualified opportunity zones. These low-income tracts were nominated by Gov. John Bel Edwards and certified by the Secretary of the Treasury.

Louisiana’s 150 tract recommendations were determined based on a strategic review of feedback from local, state and federal elected officials; economic and community development organizations; private developers; private equity firms; non-profit organizations; churches; and individuals. LED’s extensive review and comprehensive analysis considered the following factors:

• the potential for development based on known certified sites, tracts of land, or buildings within the eligible census tract

• proximity to regional assets (ports, airports, industrial parks, tech parks, colleges and universities, etc.)

• opportunities to leverage other designations such as NMTC or Enterprise Zones

• that coverage included a mix of tracts - some with high potential for economic development and others with high potential for community development (e.g. affordable housing, redevelopment, mixed use real estate, and any other types of quality of place enhancements)

• the end goal to ensure a fair and balanced distribution of zones across each of the eight economic development regions of the state

• the end goal to ensure adequate coverage in both rural and urban areas.

  As with any real estate transaction, title and closing services will be essential to these properties. Homestead Title is ready to assist investors with their title and escrow needs. To find out more about our title insurance and closing services, call us at 504) 581-6427.
  

Correcting Misconceptions about Title Insurance

Before you started the process of purchasing your first home or commercial building, you probably had never heard of title insurance. As with the rest of what is involved in real estate transactions, title insurance can be challenging to comprehend. Title Insurance is often surrounded by misconceptions that keep most people from recognizing its importance.  To help you understand the importance of title insurance and how it relates to protecting your rights of ownership, here are a few misconceptions we would like to correct:  

Misconception # 1 Title insurance provides insurance coverage to protect you from financial loss related to a defect in the status of title to the property. 

If it is later discovered, that you do not own what you thought you purchased, or if someone else is claiming an interest in your property, title insurance may make you whole. Your title insurer may file a lawsuit on your behalf, take steps to remove the defect, or pay you money for your losses associated with the defect in title. 

Misconception # 2 The title search will protect me from title defects

Before signing the real estate transaction and early in the real estate purchasing process, a title search will reveal the property's history to uncover any issues that could limit your right to purchase. There may be hidden title defects, even after a detailed search of public records. Title defects include a disagreement in the record regarding the property's boundaries, easement/tax liens/easements on the land, forged signatures, claims by ex-spouses, and recording errors. These title defects may remain undiscovered for months or even years after you purchase the home. The title search reveals the problems. However, title insurance protects your rights of ownership against these defects.  If you think you don't need title insurance, think again. In 2018, title insurance policyholders filed over 730,600 claims with the American Land Title Association. The title industry spent over $615 million defending policyholders' rights and compensating their losses due to covered title defects. 

Misconception # 3 There is only one type of title insurance

 The two types of title insurance policies are the owner's policy and loan policy. An owner's policy protects you, the property owner, against loss or damage if there is a covered title defect in your right of ownership to the property. If you obtain a mortgage loan to purchase your home, your mortgage lender may require that you purchase a loan policy, also known as a lender's policy. This policy protects the lender's interest in the property until the mortgage loan is paid off in full. The loan policy provides no coverage to the property owner.  You can opt for more enhanced coverage within your owner's policy. Standard coverage protects you against financial loss and related legal expenses for common title defects that existed before you purchased a title insurance policy. Enhanced coverage includes the standard coverage and additional protection to cover matters that may transpire after the policy's date. 

Misconception # 4 Cash Sales Do Not Require Title Insurance  

 An all-cash purchase eliminates the requirement of a mortgage loan and reduces the need for lender's title insurance. However, an all-cash transaction does not eliminate the risk posed by unknown title defects. An owner's policy protects you against possible loss or damage from a covered title defect. 

Misconception # 5 Title insurance is too expensive

 The one-time premium for an owner's title policy is based on your home's purchase price and accounts for only a small percentage of your closing costs. Coverage will be in place for as long as you and your heirs own the property. When you add up the benefits compared to the costs, an owner's title insurance policy is quite reasonable. Unlike most insurance policies, there is no monthly or annual premium. Title insurance is a one-time cost you pay at closing when you purchase or refinance the real property. 

Misconception # 6 You get the same protection from homeowner's and title insurance  

 Title insurance protects a buyer's right to ownership and a lender's investment. On the other hand, homeowner's insurance is a policy that protects you against potential losses or damage you can experience to the structure of your home or its contents during an insurable incident. 

Misconception # 7 Homebuyers are not able to choose their title company

 Under the terms of the Real Estate Settlement Procedures Act (RESPA), the buyer has the right to choose the title company. Generally, the property seller will not require the buyer to purchase title insurance from any specific title company unless it has been instructed that the seller will pay for the owners' and lenders' policies associated with the real estate transaction. 

With so many misconceptions about title insurance, finding a team of professionals that you can trust is imperative. At Homestead Title, we are committed to providing quality service and being there for you if your property rights are threatened. To learn more about title insurance, contact us today.               

Homestead Exemptions In Orleans Parish - What You Need to Know

As of January 1, 2012, if you reside in Orleans Parish, the Homestead Exemption you receive on your property will be permanent for as long as you own your property and declare it as your domicile. Once you have successfully applied for a Homestead Exemption, you will no longer need to reapply annually.

For every home, there can only be one homestead exemption. As of August 2016, it is a punishable crime according to state law to claim more than one homestead exemption.

Every homeowner in Orleans Parish can claim an exemption from property taxes for the first $75,000 of the value of their "domicile" or the home they occupy as their primary residence, guaranteed by the State

Constitution. As of 2017, for those declared 100 percent disabled by the U.S. Department of Veterans Affairs or the surviving spouse of a veteran, policeman, fireman, or state trooper killed in the line of duty, the exemption is for the first $150,000 of a home's value. 

AGE, DISABILITY, VETERANS

Homeowners 65 years of age or older, may qualify for a Special Assessment Level (SAL) if they meet certain conditions. You must be on permanent disability, be the documented surviving spouse of a member of the Armed Forces or Louisiana National Guard who was killed in action, is missing in action, or is a prisoner of war. The SAL places a "freeze" on the property's assessed value, even though the appraised value may fluctuate with the market.

HOW TO FILE FOR A HOMESTEAD EXEMPTION:

To claim a Homestead Exemption, all owners who occupy the property must appear in person at the Assessor's Office and present the following documentation:  

1. Proof of ownership (either an Act of Sale or Warranty Deed);

2. A valid Louisiana Driver's License or Louisiana State I.D. (address must match the property's address on your application);

3. A current unpaid Entergy bill for the property, (service location and mailing address must match) showing a standard residential usage; OR

4. A landline telephone bill or cable bill (Direct, Dish, or Cox).

Note that your Sewerage and Water Board bill will not count towards proof of residency.

100 PERCENT DISABLED VETERANS EXEMPTIONS

To claim a Homestead Exemption for a 100 percent Disabled Veteran,

you must show the following: 

1. Proof of ownership (either an Act of Sale or Warranty Deed); 

2. Proof that the owner qualified for the current year's Homestead Exemption; 

3. 3. A valid Louisiana Driver's License or Louisiana State I.D. (address must match the property's address on your application);

4. 4. A current unpaid Entergy bill for the property, with service location and mailing address being the same, showing standard residential usage; OR 

5. 5. A letter from the Veterans Administration (V.A.) which states the veteran owner is 100 percent disabled. 

WHAT IS AN AGE FREEZE AND HOW TO QUALIFY 

An Age-related abatement or "age freeze." 

To qualify for an age-freeze, the homeowner must be at least 65 by August 1 in the year preceding your tax year. You must also meet certain income restrictions. Note that the maximum qualifying income for an age freeze changes annually—Call 504.658-1300 to verify the current maximum. Once successfully gained, the age freeze will be permanent, and you will not have to reapply for it on an annual basis.

Age-related abatements or "freezes" must be documented by:

1. A valid Louisiana Driver's License or Louisiana State I.D. (address must match the property's address on the application);

2. Proof of annual income: 1040 adjusted gross income of the prior year's income tax return or Social Security award letter for individuals with no income or job.

 At Homestead Title, we handle the coordination of all parties of interest so that your refinancing runs efficiently. We also take the time to ensure that all documents are in order, so that you will experience a “smooth road” to refinancing. Call us today at (504) 581-6427 if you have any questions or would like further information on how we can help you. 

Why You Need Title Insurance!

Title insurance is one of the very best investments you will ever make for your residential or commercial purchase. When a title defect occurs, it can involve the loss of money to defend against an adverse claim or to hire a lawyer to fix the problem. Potentially, it can lead to the loss of the property. Title insurance provides a way of covering those risks, and it doesn't just protect you directly, but lives on to protect your investment and loved ones in the future.

COMMON TITLE PROBLEMS

• Money judgments

• Bankruptcy

• Open mortgages in the Chain of Title

• Minors mortgage

• Interdiction

• Deceased on title

• Absentees on title

• Tax sales

• IRS and State Tax Liens

WHAT IS TITLE INSURANCE?

• A title insurance policy is an insured statement of the condition of title, or ownership, of real property.

• Title insurance is unlike any of the traditional forms of insurance: it is concerned with risk elimination.

• Title insurance does not insure against the possible happening of a known and designated future event such as a fire, accident or death.

• Title insurance is a contract of indemnity and the issuer must provide reimbursement to its beneficiary in the event of the occurrence of certain conditions specified in the policy.

• Title insurance protects you from anyone who shows up out of the blue demanding money or even the right to use your property.

The best part of title insurance is that it is usually purchased at closing as a one-time cost. That cost is regulated by the state — meaning service is paramount when choosing a title company. With our history and experience, we are one of the best service-providers in the state, and we strive to give our clients the most up-to-date information regarding their individual transaction. We’re here to offer guidance or even a listening ear should any issues arise in the closing process.

REMEMBER, TITLE INSURANCE

• is available for residential and commercial transactions

• protects you from loss of property and money

• can be included as a one-time cost during closing