Home equity law in Texas
1.1 - 1.2 HOME EQUITY LAW IN TEXAS
1.1 What is a Texas home equity loan?
On November 4, 1997, Texas voters approved an amendment to the Texas Constitution allowing home equity lending. This amendment is long and complicated, but creates the complete framework for home equity lending in Texas. A home equity loan allows the homeowner to borrow money using the homestead as collateral for the loan. These loans were prohibited before the amendment passed. The amendment is effective January 1, 1998.
1.2 What’s special about Texas home equity loans?
The amendment has many special features. Some are as follows:
Total debt, including the home equity loan, cannot exceed 80% of the agreed fair market value of the property.
- Total debt, including the home equity loan, cannot exceed 80% of the agreed fair market value of the property.
- Maximum fees and costs cannot exceed 3% of the loan. Such fees include lender costs, tax reports, title insurance premiums and surveys.
- 12 days must pass between the loan application and closing.
- The loan cannot be funded until a 3 day rescission period passes.
- Borrowers have no personal liability; the property is the only security for the loan.
- The loan can only be foreclosed judicially. Other loans in Texas can be foreclosed non-judicially, by sale at the courthouse steps, without lawsuit or court order.
1.3 - 1.8 HOME EQUITY LAW IN TEXAS
1.3 How often can I take out a home equity loan?
Only one home equity loan can be taken out in any 12 month period.
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1.4 Can I have more than one home equity loan at a time?
No. Only one home equity loan can be placed on homestead property.
1.5 If I refinance other loans (purchase money, home improvements and the like) can I get home equity money?
Yes. But, beware — any portion of home equity money makes the entire loan a home equity loan. Then, you are limited to only one open home equity loan at a time and only one every 12 months.
1.6 Can the lender require other security for a home equity loan?
No. Only the home can be security for a home equity loan.
1.7 Can agricultural land be used as security for a home equity loan?
No. Any land used for agricultural purposes cannot be used for a home equity loan. Agricultural use is any land that receives an agricultural or open space exemption for ad valorem property taxes.
1.8 What about dairy farms?
Dairy farms may be used as collateral for a home equity loan.
1.8 - 1.13 HOME EQUITY LAW IN TEXAS
1.9 Where can the home equity loan be closed?
Home equity loans must be closed only at the lender’s office, a title company or an attorney’s office. Such loans may not be closed at your home or office.
1.10 Must the loan have regularly scheduled payment?
1.11 What kind of lender can make a home equity loan?
Banks, savings and loan associations, saving banks, credit unions, other federally chartered instrumentalities or persons approved by the U.S. Government can make home equity loans.
1.12 Can a private person make a home equity loan?
Yes. The seller in a seller financed loan can make a home equity loan, so can some family members.
1.13 Can the lender require me to pay off unsecured consumer debts with my home equity loan?
No. Of course, you can choose to pay off those debts with the loan proceeds, if you want. But if you are experiencing financial difficulties, you should consult with an attorney before borrowing against your homestead to pay debt that would otherwise be unsecured.
1.14 - 1.16 HOME EQUITY LAW IN TEXAS
1.14 Are there other things the lender must do?
Yes. The lender cannot require an assignment of wages, or confessions of judgments, or powers of attorney to the lender. The lender cannot accept or give you any documents with blanks not filled in when you sign. The lender must give you a copy of every document that you sign.
1.15 Are there disclosures the lender must give me?
Yes. Click here to view the notice.
1.16 What types of title policies are available for home equity loans?
The Texas Land Title Association presented to the Texas Department of Insurance for approval an endorsement to the standard mortgagee policy form for use with home equity loans.
This endorsement has been approved and will modify and define certain words and phrases of the standard Texas mortgagee policy to conform with the new Texas home equity loan law. It provides specific additional coverage as to certain requirements of the Texas law.
1.17 - 1.18 HOME EQUITY LAW IN TEXAS
1.17 Can I use my home equity money for any use I choose?
Yes. Unlike previous failed versions of home equity lending, home equity loans can be used for any purpose.
1.18 Why should I contact Security Title for my home equity loan closing?
Security Title is an established, locally owned company. We work with only financially sound, nationally prominent underwriters, who have been insuring title to Texas properties for more than 75 years. We are responsive and available to answer questions posed by our customers and their real estate agents. Home equity is new to Texas; Security Title’s owners, and underwriters, are not.
2.1 - 2.2 About Title Insurance
2.1 What is Title Insurance?
Title Insurance is a contract between the insured and the title insurance underwriting company. Under the terms of the contract the insured agrees to pay a premium and the title company agrees to defend the title or pay losses the Insured may suffer if the title is challenged or defective.
2.2 Is there only one type of Title Insurance Policy?
No. The most often requested policies are:
Owners Title Policy: Protects the owner of the property while he is the owner and after the property is sold.
Mortgagee Title Policy: Protects lender from loss if it is determined that its lender’s lien is not valid or is inferior to another lien not shown as an exception to coverage on the policy.
Leasehold Title Policy: Insures against losses a tenant may suffer in the event the landlord does not own the property.
2.3 - 2.4 About Title Insurance
2.3 What is the amount of coverage?
Owners Title Policy: The policy will be issued in the amount of the current sales price. If there is no sale, the policy must be issued for the fair market value of the property.
Owners Title Policy: The policy will be issued in an amount equal to the current outstanding loan balance.
Leasehold Title Policy: The policy will be issued in an amount equal to one of the following:
- The total amount of rentals payable under the lease contract, or
- The value of the land and any existing improvements, or
- The value of the land and any existing improvements and the costs of improvements immediately contemplated to be built on the property.
2.4 Is Title Insurance just like other insurance?
No. Title Insurance insures against events that happened in the past that affect title to the property. Other types of insurance protect against events in the future.
2.5 - 2.7 About Title Insurance
2.5 How does a title company determine if it will insure the property?
Before issuing a title policy a search is made of county real property records. This search is done by using the company abstract plant which maintains references to deeds, mortgages, liens, deaths, divorces, etc. which might affect the property.
The results of the examination determine whether the title company will issue a policy and what exceptions to coverage will be taken in the policy. The search and the commitment should not be taken as representations as to title, because they are done solely for title insuring purposes.
2.6 Can one get title insurance on any property?
No. Title insurance is not intended for titles known to be bad or defective.
2.7 Can a defective title be cured?
Sometimes. Depending on the nature of the title defects, they may be corrected with the assistance of an attorney of the seller’s choice.
Correction methods include affidavits, correction deeds and other documents. Court action may be necessary.
Many times the commitment for title insurance will list what items or actions would be necessary to remove the matter in question as an exception to coverage.
The title company does not cure bad titles or write legal papers. Documents required by the title company are not meant or warranted to cure a title defect; they are required to satisfy the title company that the property is insurable.
2.8 HOME EQUITY LAW IN TEXAS
2.8 Why buy a title policy if an attorney has carefully searched the records and title is found to be good?
There are many hidden defects which may affect title to real estate. Some examples are:
- false representation
- lost wills
- mistakes in descriptions
- undisclosed heirs
- clerical errors
- illegal trusts
Defects may not appear in the records and may not be detected by even the most thorough search.
2.9 HOME EQUITY LAW IN TEXAS
2.9 Can I afford title insurance?
Yes. There is a one-time premium for coverage. There are no annual renewals. Compared to the cost of a loss, the expense of the premium can be a real bargain.
Note: Title insurance rates are fixed by the Texas Department of Insurance.
Note: This general information is provided to help you understand title insurance. For exact coverage offered, you must rely on your policy.
About Title Insurance
Why you need Title Insurance
3.1 Why You Need Title Insurance
Many title problems can arise to cause the complete or partial loss of your home or business property.
3.1 Won’t a search of title keep problems from arising?
Even the most careful search of the public records will not find every title problem. Because some problems are hidden, your title may appear to be perfect, but in fact there may be a problem that is a virtual “land mine” waiting to explode.
3.2 Why You Need Title Insurance
3.2 Are all my possible losses covered by an owner policy of title insurance?
No, owner’s title insurance protects you against financial loss caused by covered title risks. The title insurer, without expense to you, will defend you against an attack on the title to your property as insured. If the attack is successful, the title insurer will indemnify you against the defined financial loss up to the policy limit.
3.3 Why You Need Title Insurance
3.3 Do I pay annual premiums?
A small, one-time premium provides you with this valuable protection.
3.4 Why You Need Title Insurance
3.4 Where can I get a Security Title insurance policy?
Before buying real estate, contact us! Ask how simple it is to insure yourself against title loss.
3.5 Why You Need Title Insurance
3.5 What are some examples of problems title insurance protects against?
To give you an idea of the types of title problems that may occur, we have compiled this list of “Land Mines” that could result in partial or complete loss of your property or an expensive lawsuit.
- Documents executed under duress
- Defective acknowledgments
- Deeds by minors
- Inadequate legal descriptions
- Easements established through continued use but not discovered by a survey or in the public record
- Mistakes in recording legal documents
- Mistaken reports furnished from taxing authorities
- Misinterpretation of wills
- Deed of community property recited to be separate property
- Errors in tax records (for example, listing payment against the wrong property account)
- Birth or adoption of children after date of will
- Falsification of records
- Undisclosed or missing heirs
- Errors in indexing of legal documents by the County
- Surviving children omitted from a will
- Deeds to or from defunct corporations
- Marital rights of spouse allegedly, but not legally, divorced
- Instruments executed under fabricated or expired powers of attorney
- Forged deeds, releases, etc.
- Deeds by persons supposedly single but secretly married
- Deeds from persons not competent to handle their
Note: A title insurance policy is a contract between you and the title insurance underwriter insuring you against loss up to the policy amount in the event a title defect occurs resulting from a covered risk.
4.1 - 4.2 Tenants and lenders insurance
4.1 What kind of title insurance protection is available for tenants and their lenders?
Leasehold endorsements. An available but often overlooked title insurance coverage — protection for tenants and their lenders. This coverage is available through special endorsements to both the Owner Policy of Title Insurance and the Mortgagee Policy of Title Insurance.
4.2 But my landlord has an Owner Title Policy of Title Insurance…
This may be true, but the title insurance protection applies to the named insured – the owner – not to his tenants. In the case of a covered title defect serious enough to cause you to be evicted from all or part of the leased premises, your only remedies would be a lawsuit under the lease or expensive business interruption insurance. Also, a lender to a tenant for the tenant’s improvements would have a lien on property to which title may have been lost.
4.3 Tenants and lenders insurance
4.3 What coverage do I have under a leasehold policy?
The leasehold policy is a standard owner or lender policy to which an endorsement covering items of loss not covered by the standard policy is added. Subject to policy provisions, losses covered up to the policy limit may include the following:
- The reasonable cost of removing and relocating personal property that you have the right to remove under the terms of your lease, the cost to move the personal property an initial 25 miles, and the cost of repairing any property damage in the move
- Personal property means inventory and fixtures
- Rent payable to the person having title superior to the landlord
- Rent which the tenant is liable to pay to the landlord after the eviction
- The fair market value of any sublease
- Damages the insured tenant is obligated to pay a sublessee
4.4 Tenants and lenders insurance
4.4 How is the value of my lease and interest determined?
The value of a leasehold interest is the difference between the remaining rent to be paid and the present worth of the excess of the fair market rental, without regard for the title defect, for the remainder of the lease term, and all valid renewal options.
4.5 Tenants and lenders insurance
4.5 Who pays for the leasehold title insurance policy?
Customarily the insured pays for owner policy coverage; however, the payment of the premium is a negotiable matter. A borrower is usually required to provide the mortgagee policy to the lender as a part of the loan agreement.
Remember, your lease is only as good as your landlord’s ownership of the property. The landlord’s title policy does not protect you, your property, or your lender. In the case of a title defect serious enough to cause you to be evicted from all or part of the leased premises, a leasehold policy will help move you to a new location, help pay your rent at a new location, and protect you if you have subleased the property.
Note: A title insurance policy is a contract between you and the title insurance underwriter insuring you against loss in the event a title defect occurs resulting from a covered risk.
4.6 Tenants and lenders insurance
4.6 What is the price for leasehold coverage?
In Texas, only the basic premium rate set by the Texas Department of Insurance is charged. There is no extra charge for the leasehold endorsement. A leasehold mortgagee policy can be issued simultaneously with the leasehold owner policy for a nominal charge. If an owner policy of title insurance and a leasehold owner policy are issued simultaneously, then the leasehold policy is issued at 70% of the premium for the owner policy.
Tenants and lenders insurance
Getting the most money for your home
5. 1 Getting the most money for your home
5.1 First impressions sell homes.
Other than the price, the first impression your home makes is the most important attribute of a sale. When you place your home on the market, you will make more money if it looks its best.
Look at your house as though seeing it for the first time, and review the following Seller Checklist for ways to prepare your home for selling.
5. 2.1 Getting the most money for your home
5.2 Seller checklist: preparing your home to sell
Note: Before you spend any significant amount of money, consult your broker. The broker can tell you whether the expense will pay off in an increased sales price or a decreased selling time.
- Mow the lawn
- Trim trees and shrubs
- Weed flower beds and yard
- Clean or repair walks, driveway, steps and porches
- Paint trim and front of house
- Clean and repair roof, gutters, and downspouts
- Paint front door, mailbox, and back door
- Repair or replace storm doors
- Clean and repair screens and storm windows
- Clean, paint, and repair garage. Throw away anything you don’t need.
- Paint, if necessary
- Clean windows
- Clean and polish floors
- Make sure all light bulbs are working
- Make sure all doors and windows are working properly
- Make sure light switches work
- Repair and paint cracked walls and ceilings
- Fix dripping faucets
- Clear clogged drains
- Clean fireplace
- Straighten all closets
- Use potpourri or other pleasant scents
- Vacuum or shampoo rugs as needed
- Clean heating and air conditioning system, furnace, boiler, etc.
- Throw or give away everything you’re not going to move
5. 2.2 Getting the most money for your home
- Paint or polish cabinets
- Clean ventilating hood and fan
- Repair, clean and wax floor
- Clear off counter tops
- Make sure drawers work properly
- Put appliances out of sight, and stack items neatly in cabinets
- Make beds
- Vacuum floor
- Play “middle of the road” music in the background
- Stack newspapers/magazines
- Clean and dust shelves and appliances, TV, and stereo
- Polish furniture
Remember: Don’t take it personally.
If you are home when a prospect arrives, relax, stay out of the way, and let your broker show your home.
Answer questions truthfully, and disclose to potential buyers everything you would want to know if you were in their shoes. If you have helped your home make a good first impression by carefully going over this list, your home will sell itself.
5. 3 Getting the most money for your home
5.3 Selling this home and buying another
If you’re selling this home, you’re probably buying another one.
In order to protect your investment in your new home, you should protect yourself with an Owner Policy of Title Insurance. Claims against previous owners can be filed against the property and the current owner. That means you, the new buyer.
Title problems such as fraud, forgery, missing heirs, old liens and errors in the records can endanger your investment or even cause you to lose your home.
An Owner Policy of Title Insurance Policy can insure you against covered risks.
For only a small, one-time premium, the insurance coverage lasts as long as you or your heirs have an interest in the property or you have liability under warranties you may give.
So when you buy a home or other real estate, be sure to protect your investment with an Owner Policy of Title Insurance from Security Title. Our underwriters have been insuring titles for more than 75 years.
6.1 How real estate agents help sellers make money
Many times, people try to save money by selling their homes without the aid of a real estate broker. “For Sale by Owner” often appears to be a good way to save money, but selling your home yourself could cost you time and money.
Real estate brokers can save you valuable time by selling your home faster and can help you get the most money for your property.
They can also help you attend to some of the many details you might not have considered.
A homeowner is usually not the best judge of the value of his or her home. There are too many emotional ties to the home for the owner to be unbiased. Also the owner knows the amount he needs or wants from the sale and may not be objective.
Real estate brokers have the most current information about the marketplace. This information allows them to know what properties similar to yours are selling for.
If your estimate of value is too high, some prospective buyers will consider it out of their reach. Also, frequent price reductions may cause buyers to wonder if something is wrong with the home.
If your estimate of value is too low, you will lose money you could have had.
Real estate brokers will aid you in pricing your home by pointing out that the home is in a favorable location, convenient to transportation and shopping, or has a popular design or builder.
6.2 How real estate agents help sellers make money
6.2 Finding a buyer
A “For Sale by Owner” sign in your yard can have implications you may not have considered. Your doorbell may ring at any time of the day or night. You may lose a sale if you’re not home. Strangers – some just simply curious – will want to look at your home. People may ask you many personal questions about financing, settlement, reasons for selling and so forth.
A real estate broker will screen prospective buyers, endeavoring to show your home to interested buyers with the ability to buy. Your home will be shown with advance notice to you. Plus, brokers have clients who are looking for homes like yours.
Advertising your home is an art. Brokers know where to advertise, how often to advertise and how to word advertisements for effect. This knowledge can sell your home more quickly.
Real estate brokers can continue selling your home, even if you are at work or out of town, by using lock boxes and other proven techniques.
6.3 How real estate agents help sellers make money
6.3 Making the deal
Buyers usually offer less than your asking price. Can you objectively evaluate the offer? Unless you have bought and sold several homes, you may need help in dealing with contracts.
Your broker knows how to handle counter-offers, prices, cash down payments, settlement dates, financing, and other important details.
Brokers have done it before, so they know what to do. Your broker will either have an answer or know where to find it.
When it comes to real estate commissions, it is important to remember this: the more money your broker earned, the more money you made on the sale.
6.4 How real estate agents help sellers make money
6.4 Title insurance
When buying or selling real estate, brokers will probably recommend the purchase of an owner policy of title insurance, a contract that protects you against covered title risks, including liens, defects or encumbrances of the past and insures that your home is yours. An owner’s title insurance policy may protect you against actual financial loss up to the policy limit.
About Title Insurance
Making settlements (closings) easier
7.1 Making settlements (closings) easier
7.1 What does a settlement do?
A settlement (that is, an escrow closing of real estate transaction):
- Protects the parties to the transaction by having a neutral party help them to implement their agreement.
- Allows the seller to use part of the purchase money to pay his liens and to pass title to the purchaser subject only to the liens agreed to in the sales agreement.
- Aids in the settlement of multiple property transactions.
- Aids in a transaction involving a sale and simultaneous release.
- Enables the real estate broker to devote more time to selling other properties by turning over to the escrow agent the time-consuming details of closing.
- Inspires confidence in buyers of real estate that the appropriate documents have been signed and recorded and that taxes and prior liens against the property have been paid.
- Assures lenders that the disbursement of their loan proceeds has been properly handled.
7.2 Making settlements (closings) easier
7.2 What does the escrow agent need from the seller before closing?
After discussing the requirements of the commitment for title insurance with the escrow agent, the seller or his attorney should make the following items available to the escrow agent:
- Deed, other required title documents and curative documents. Please note that title companies do not prepare legal documents that are used for the parties’ benefit (such as deeds, releases, or mortgage instruments), nor are title insurance agents required to cure title defects
- Hazard insurance policies with proper endorsements and assignments attached (when existing policies are to be assigned) as required by the lender
- Payoff statements from the holder of existing liens
- All unrecorded releases of liens or discharges of mortgages in his possession
- The most current paid real estate tax statements and receipts
- A statement showing the amount of real estate commissions to be paid out of the settlement and to whom payable
- An agreed division of charges for title premiums, recording fees and settlement charges
- A copy of the earnest money contract, fully executed and dated; also, any bill of sale covering personal property or required property condition disclosures
7.3 Making settlements (closings) easier
7.3 What does the escrow agent need from the buyer before closing?
The Purchaser and his attorney should make the following available to the escrow agent to expedite closing:
- Required funds in the form of a certified check, cashier’s check or wire transfer
- Required hazard insurance policies (when not taking over existing policies)
- Other documents required by the earnest money contract
7.4 Making settlements (closings) easier
7.4 What does the escrow agent need from the lender before closing?
The Lender should provide to the settlement agent written closing instructions describing the lender’s requirements for insurance in connection with the closing and funding, including:
- Hazard insurance requirements
- Special provisions required to be in mortgagee policies
- Payment of service charges and mortgage costs
- Any other matters relating to the settlement
7.5 - 7.6 Making settlements (closings) easier
7.5 What is the duty of the escrow agent’s role to the parties?
A settlement or escrow agent is a neutral third party who disburses funds in accordance with the agreement of the parties.
7.6 Why are Security Title’s escrow officers your best choice?
Many attorneys, lenders, developers, home builders and real estate brokers close their real estate transactions through our title insurance agents. The simple reason for their decision: They are experienced, well-trained, accessible, and friendly.
8.1 - 8.2 Ad Valorem property taxes
8.1 What are Ad Valorem property taxes?
Ad Valorem taxes are property taxes.
8.2 Are Ad Valorem tax liens priority liens over all voluntary liens in Texas?
Yes. Property taxes (based on the value of the property) are required by law to be assessed and available on the tax rolls by October 1 of each year.
Realistically the tax rolls are usually not available on October 1, but are available in the months of October and November.
8. 3 Ad Valorem property taxes
8.3 What tax exemptions are available?
There are several exemptions available to property owners in the State of Texas:
- Over 65
Check with each taxing authority regarding your exemptions.
8. 4 Ad Valorem property taxes
8.4 When are taxes payable?
Taxes become a lien on January 1 of each year. However, they are not assessed and payable until October 1. Some taxing authorities give a varied percentage discount if paid early (between October and January). Taxes become delinquent after January 31 of the next year.
8. 5 Ad Valorem property taxes
8.5 When is the tax lien imposed?
Even though the taxes for the year are not assessed and payable until near the end of the year, the law automatically imposes a superior lien against all real property on January 1 of every year to secure payment of the taxes for that year.
The superior lien being applied January of each year requires the prorating or apportioning of taxes between seller and buyer, if a sale takes place between January and October.
8. 6 Ad Valorem property taxes
8.6 How are taxes prorated at closing?
Prorations at the time of closing allow the seller to give the buyer that portion of the taxes that the seller is liable for (typically, from the first of the year through the closing date).
Ad Valorem property taxes
Homestead property and other property facts
9.1 Homestead property and other property facts
9.1 What is the significance of a Texas Homestead?
“Homestead” essentially means a protection afforded the owner of a primary urban residence, business or lived-on rural property, which prevents the forced sale of the property to satisfy debts of the owner.
9.2 Homestead property and other property facts
9.2 How much of my property is considered Homestead?
The homestead protection is limited to ten acres in an urban area and 200 acres (for a family) in a rural area (100 acres if single). You cannot have an urban and a rural homestead simultaneously.
9.3 Homestead property and other property facts
9.3 Can I borrow against my Homestead?
You can only borrow against your homestead, and create a valid lien which can be foreclosed against the homestead, for non-payment of:
- Purchase money
- Home improvements loan
- Payment of taxes
- Owelty liens
- Federal tax liens
- Lawful home equity loan
9.4 Homestead property and other property facts
9.4 What documents are required to improve my Homestead?
If you wish to borrow money to improve, repair, or add-on to your homestead, you must execute (both husband and wife) a Builder’s and Mechanic’s Lien Contract with the contractor who will provide the work and supplies prior to any work being performed and the instrument must be recorded at the County Clerk’s office.
9.5 - 9.6 Homestead property and other property facts
9.5 What is community property?
Generally, community property means property acquired during marriage that is not separate property. Property acquired during marriage will be presumed to be community (jointly owned by you and your spouse) property. However, there are ways separate property can be acquired during marriage.
9.6 What is separate property?
Generally speaking, separate property is property acquired before marriage, or acquired during marriage by gift or inheritance.
Copperfield, TX 5702
Christi, TX 78411
Christi, TX 78410
Christi, TX 78418