When you are finalizing your home purchase a neutral third party called an escrow holder or agent will be used to help the transaction close properly and on time. The escrow agent guarantees that all the terms and conditions of the agreement between buyer and seller are met before the sale is finalized. They also ensure homeowners’ property taxes, fire and hazard insurance premiums, mortgage insurance premiums and other escrow items are paid in a timely fashion. This helps prevent lapsed insurance coverage or delinquent taxes by a homeowner.

Escrows help buyers do a number of things. They make sure that bills are paid on time for things like taxes and insurance over the course of a year. They relieve the homeowner’s worry about unexpected increases in taxes or insurance as the lender includes the possibility of these increases in their budget. They allow for lower rates and down payments on a mortgage because they make a loan more secure. Finally, escrows help local government save money because they provide a more efficient way to collect taxes.

Once the escrow has finished, closing on your home can take place. The title of the home is transferred and both the lender and seller have been protected.

First, it is important to understand that there are different types of mortgage insurance; some of them can prevent foreclosures, others cannot. The different types include Private Mortgage Insurance, Lender Paid Mortgage Insurance, Mortgage Disability Ins., and Mortgage Life Ins.

Mortgage disability ins. can prevent foreclosures when homeowners become disabled. According to the web site of State Farm Insurance, their policy of this type will make the monthly payments (for as long as three years) if this happens to the homeowner. The length varies with different insurers.

Another option, mortgage life insurance, pays off the loan if the homeowner passes away. Wikipedia.org indicates that some policies of this type will also pay if the homeowner is found to have an illness which will cause his or her death within the next year.

A variation on this type of life ins. is VLMI, or Veteran’s Mortgage Life Insurance. The VA.gov web site states that it is only available to disabled veterans who have obtained a Specially Adapted Housing Grant; this type of insurance repays the loan if the disabled veteran homeowner dies.

However, there are other types of ins. which are for the protection of the lending institution, and do not prevent foreclosures. According to HUD.gov, private mortg. insurance (PMI) is paid for by the borrower, and is most commonly needed for mortgages with relatively small down+payments (because the lender faces greater risk in this situation).

Lender paid mortgage ins. (LPMI) is similar, but is paid for by the bank or other lending institution. HUD.gov indicates that the interest rate on mortgages with LPMI is made higher so that the lender can pay for it. As with PMI, LPMI does not prevent foreclosures or protect the homeowner from losing his or her home, but helps prevent the lender from losing money if they have to foreclose upon the home.

A number of factors should be taken into consideration before any optional (life, disability) ins. on mortgages is purchased. These include the number of income earners and their ages, how many years it will take for the loan to be paid off normally, and the effect of saving an amount of money equivalent to the premiums.

Overall, some types of mortgage insurance can indeed prevent foreclosures, but only in particular situations. Homeowners and potential buyers should research and fully understand any type of insurance prior to making the decision to buy it.

As with almost any type of financial transaction, there are some scams involving home loans which people should be careful to avoid. Here are details on a couple of common home loan scams and some tips on how you can successfully avoid them.

HOME IMPROVEMENT: One common home loan scam involves both a contractor and a lender. According to the Federal Trade Commission website, such scams usually begin with a contractor contacting the homeowner and offering to make improvements to the home. If the homeowner doesn’t have enough money to pay for the improvements, the contractor will offer to obtain a loan to pay for it. After the contractor starts working, the homeowner will be requested to sign papers which are blank, or be pressured to sign papers without reading them. With these scams, the loan (which is entered into by signing these papers) is actually a home equity loan, usually with unfavorable terms. The FTC also indicates that, in some cases, the contractor’s work will be of poor quality or left incomplete. To avoid this, it recommends not signing any papers under pressure or which are blank, not accepting a loan through a contractor without comparison shopping for them first, and obtaining a detailed contract describing the work a contractor is to complete.

FORECLOSURE PREVENTION: Another common type of scams claim to help people who are facing foreclosure on their homes. According to the U.S. Department of Justice website, scams of this type might offer to refinance the loan or otherwise provide a solution, then request that mortgage payments be made to them (instead of the lender), and may require the home’s deed to be signed over. The scam businesses keep all the money paid to them, and file for bankruptcy under the homeowner’s name. Overall, such scams harm the homeowner’s credit, cause them to lose money, and will only delay foreclosure upon the home. To avoid them, the DOJ recommends being careful if a business or person refers to themself as a “foreclosure service” or “mortgage consultant”, requires that a fee be paid before any services are provided, promotes their service to those with homes listed to be foreclosed upon, requires the deed to be transferred, or requests that loan payments be made directly to them.

Basically, to avoid home loan scams, home owners should always read and understand contracts or agreements before signing them, avoid allowing themselves to be pressured, and become informed about a particular type of loan transaction before taking part in it.