Durango Real Estate Definitions: Covenants
Durango real estate has a multitude of definitions that you’ll want to know when you get into the real estate market. Today I would like to go over what a covenant is in regards to real estate.
Ever wonder what is stopping your neighbor from starting a junk yard in their front yard? While it is most likely due to common decency it’s guaranteed by covenants. Covenants in a general sense is a promise to engage or refrain from an action. So a covenant stating that lawns in a subdivision will not have grass exceeding 4” in height means all homeowners in that subdivision are obligated to have their lawns mowed to keep in compliance.
“In property law, land-related covenants are called “real covenants” and are a major form of covenant, typically imposing restrictions on how the land may be used (negative covenants) or requiring a certain continuing action (affirmative covenant). These may also “run with the land” (called a covenant appurtenant), meaning that any future owners of the land must abide by the terms, or may apply to a particular person (called acovenant in gross).[5] … in the United States such covenants are examined more closely, but with exceptions affirmative covenants have been permitted to run with the land.[6]”
Covenants come in two flavors, affirmative and negative. An affirmative covenant is one where a property owner must actively perform an activity, like maintaining their lawn, keeping sidewalks cleared of snow, and paying homeowner association (HOA) dues. A negative covenant prevents a property owner from doing an activity, such as leaving a hoard of items on the lawn, blocking a neighbor’s view, and possibly construction of an exterior building.
You’ll find the vast majority of covenants are written into the deed of a property, and can be obtained from the HOA that the property belongs to or if a HOA is absent a local title company will be able to pull it so long as it is recorded. Some properties do not have covenants attached to them and can be a desirable choice for those who like to live without restrictions, while properties with covenants may attract those who like a sense of order and uniformity in a neighborhood. Both types of properties have their merits and detriments and it is up to the potential owner to decide which is best for them
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PMI, what is it?
The real estate market in Durango is going strong and now is a great time to get involved! Real estate isn’t as simple as most people imagine though, with all types of confusing and bewildering terms and acronyms being thrown around. If you can take just a moment I would like to tell you about acronym- in particular, PMI.
Private Mortgage Insurance
PMI is one of many acronyms that you’ll hear thrown around in conversations involving real estate, but what exactly is it? PMI, or P.rivate M.ortgage I.nsurance (also known simply as mortgage insurance) is a special type of insurance that is required on real estate loans if the down payment is less than 20% of the total loan amount.
While fees vary depending on the size of the loan and your credit score they typically range from 0.3% to 1.5% of the original loan amount per year. More often than not PMI premiums are tax deductible (depending on Congress’s mood that year). The good news is that you aren’t stuck with PMI for the entire duration of your home loan, only while the balance of your home loan is over 80% of the value of the home when purchased. Lenders are required to automatically terminate PMI once your outstanding loan balance drops to 78% of the home’s original value. Because of the 2% discrepancy between the eligible drop off amount and the automatic drop off date you can save some of your hard earned money by keeping track of your loan amount and sending in a request to have PMI removed from your loan once your loan balance is at 80% of the original home value.
It is important to note that mortgage insurance is different for FHA (F.ederal H.ousing A.dministration) loans as FHA loans require mortgage insurance for the life of the loan. FHA loans aren’t actually from the FHA but instead are insured by the FHA.
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Give me a call at 970.335.8225 or send me an email at sam@thegallantnetwork.com