Frequently Asked Questions
I want to help you understand the real estate buying and selling process.
Who does Dan Marks represent in a transaction?
Many of you are under the impression that REALTORS always represent the sellers and only imply that they are representing you. That may be true in some states but in Iowa you do have exclusive buyer representation by a REALTOR. There have been numerous national news reports that tell you otherwise, and these reports are true for some states in the US, but thankfully not in Iowa. You can see more about how we can represent only buyers/sellers or in some cases both parties by reading our Agency Disclosure Statement that all clients will eventually need to sign.
What is PITI?
This is the total amount of the payment you make to your lender every month.
P= Principal
I= Interest
T= Taxes
I= Insurance
Some lenders will allow you to pay the taxes or insurance on your own. If this is something that is important to you, speak with your lender.
What is PMI?
PMI stands for Private Mortgage Insurance. It is something most buyers try to avoid if possible.
When a conventional loan exceeds 80% loan-to-value (LTV)—meaning the buyer puts down less than 20%—the lender is taking on additional risk. If the loan goes into default, the lender could lose money on the portion of the loan above that 80% threshold. PMI protects the lender, not the borrower, against part of that risk.
The cost of PMI depends primarily on the size of the down payment and the loan amount. The smaller the down payment, the higher the PMI cost. In some cases, PMI can be a significant monthly expense and may even exceed the cost of homeowners insurance.
Because of this, a 20% down payment is ideal when it’s financially feasible, as it allows buyers to avoid PMI altogether. In some situations, buyers who put down slightly less than 20% may qualify for lender-paid PMI or special loan programs that reduce or eliminate the monthly PMI cost.
How much down payment do I need?
Iowa City has a competitive market. Many local lenders need as little as 5% down, and some have programs that require only 3% down for first time buyers. There are even some programs with 100% financing for qualified applicants. They actually give you two loans. One for 80% of the sale price, and a second loan for the final 20%. It may sound complicated, but it is better than PMI.
If you qualify for a VA loan, you may be able to get a loan for 103% of the purchase price of your home. If you are buying your first home and plan to live there for several years, this may be a great option for you.
Title Insurance vs. Iowa’s Abstract System
In most states, title insurance is the standard method used to ensure clear title to a property. It is essentially a risk-transfer system that relies on a one-time insurance policy rather than a full review of the property’s ownership history. The cost to the buyer for a title insurance policy can be $1,000–$1,400 or more, depending on the purchase price and loan amount.
Lenders require assurance that no liens, judgments, or other claims are attached to the property before they will fund a loan. They want to be certain that no third party has a legal claim to the title. In most states, lenders satisfy this requirement by requiring the buyer to purchase a title insurance policy, which protects the lender (and sometimes the buyer) against undiscovered title defects.
Iowa’s Abstract and Title Opinion System
Iowa typically uses a different and more traditional approach. Instead of title insurance, the normal procedure is to review and update the abstract, which traces the complete history of ownership and recorded documents affecting the property.
A buyer’s attorney examines the abstract and issues a title opinion identifying any defects or requirements that must be resolved before closing. The attorney then notifies the lender of the items that must be satisfied by the seller. Common requirements include:
- mortgage releases
- judgment or lien satisfactions
- municipal items such as sidewalk assessments
- proof of satisfaction of alimony or other recorded obligations
Once these items are cleared, the lender will usually accept the title as marketable.
Cost and Practical Considerations
Iowa’s system is generally less expensive than title insurance and, when properly handled, provides substantial protection for both the buyer and the lender. This is one reason Iowa Realtors often recommend using a local Iowa lender, who is familiar with and comfortable accepting an abstract and title opinion.
Many out-of-state lenders default to requiring title insurance because it is their standard operating procedure. Some may be willing to accept an Iowa title opinion and required releases, but many will not, which can result in unnecessary additional cost for the buyer.