Home Buyers E-Book

Sharyn & Victoria Crown619-440-7832 or 619-977-3174

Napolitano GMAC

939 Orange Ave.

Coronado, CA 92118

USA

www.GMAsandiego.com www.OnlineSanDiegoHomes.com

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Table of Contents

The Advantages of Home Ownership 2

The Home Buyer’s Question & Answer Guide 4

The Escrow Process

What Information Will I Have to Provide? 7

What Do I Need to Do Before My Appointment to Sign Loan Documents? 8

A Step-by-Step Guide to the Home Buying Process 9

Life of an Escrow 10

The Loan Process

Loan Calculator/Why Rent? Build Equity. 11

The Loan Process 12

Loan Types 13

General Information

Who Pays for What in the Real Estate Transaction? 16

California Transfer Tax 17

The Property Tax Guide

Guide to Property Tax 18

Property Tax Timeline 19

Supplemental Tax Question & Answer Guide 20

Understanding Mello-Roos 22

The Title Process

Understanding Title Insurance 23

Ways of Holding Title 25

Glossary for the Home Buyer 26

Tools You Can Use 29

Notes 30

HOME BUYER’S GUIDE

© 2004 First American Title Company. All rights reserved.

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If you are planning to buy a home, you prob-ably have good reasons in mind, ranging from the purely personal to the very practical.

A place of your own

‘Your home is your castle,’ as the saying goes. A home is a place you can call your own. Perhaps you are ready to settle down in your community and want the feeling of permanence and involvement that comes with owning your own home. Perhaps you need more space in which to raise a family. Or, maybe you want more freedom than you have in a rental unit to adapt your living space to suit your individual taste and needs.

Financial incentives

For many people, the motivation for home ownership is primarily fi nancial. Owning your own home is a fi rst-rate investment for a number of reasons:

Scheduled savings

When you buy a house, your monthly mort-gage payments serve as a type of scheduled savings plan. Over time, you gradually accu-mulate what lenders call “equity,” an ownership interest in the property that you can often borrow against or convert into cash by selling the house. In contrast, renters must continue paying rent to a landlord for

as long as they rent without the opportunity to build equity.

Stable housing costs

Another advantage of home ownership is that while rents typically increase year after year, the principal and interest portion of most mortgage payments remains unchanged throughout the entire repayment period (typically 30 years). In fact, because of the effect of infl ation, over the years you pay the same amount but with ever “cheaper” dollars.

Increased value

Houses typically increase in value, or “appre-ciate,” over time. It’s not unusual to fi nd a house that sold for $100,000 fi fteen years ago to be valued at much more than that amount today. This increased value is as good as money in the bank to the home-owner.

Tax benefi ts

Homeowners also get signifi cant tax breaks that are not available to renters. Most impor-tantly, interest paid on a home mortgage is usually deductible. This factor alone can save you a substantial amount each year in federal income taxes.

Th e Advantages of Home Ownership


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Once you’ve made up your mind to stop renting, you can start the home buying process. Here’s a step-by-step approach.

Meet, then choose your realtor

Professional realtors know the make-up of individual neighborhoods and communities and can assist you at every turn. So, call several fi rms and meet an expert! Your agent will listen to your needs and help you buy the home that will work for you.

As you whittle down the many choices avail-able, together you’ll fi nd the home and community that works for you.

Leverage and negotiation

As with all big-ticket purchases, there’s As with all big-ticket purchases, there’s always give and take. For example, why is always give and take. For example, why is always give and take. For example, why is the current owner selling? What price did the current owner selling? What price did the current owner selling? What price did the current owner selling? What price did other homes in the neighborhood sell for? other homes in the neighborhood sell for? other homes in the neighborhood sell for? other homes in the neighborhood sell for? other homes in the neighborhood sell for? What types of power do you have in buying? What types of power do you have in buying? What types of power do you have in buying? What types of power do you have in buying? What types of power do you have in buying?

Your realtor will help leverage your power in the process.

Purchase offer

Once you’ve decided on your new home, your realtor will draft a purchase agreement and continue to offer advice and counsel.

At this time, you’ll need to provide an “earnest” deposit. (Your realtor will advise you as to the appropriate amount.) The money will be held until your offer is accepted by the seller or returned if the transaction is not consummated.

Your realtor will present your offer to the seller’s realtor. The seller will then accept, counter or reject your offer.

Seller’s response

After reviewing the seller’s response to your After reviewing the seller’s response to your After reviewing the seller’s response to your After reviewing the seller’s response to your After reviewing the seller’s response to your After reviewing the seller’s response to your After reviewing the seller’s response to your After reviewing the seller’s response to your After reviewing the seller’s response to your After reviewing the seller’s response to your After reviewing the seller’s response to your After reviewing the seller’s response to your After reviewing the seller’s response to your After reviewing the seller’s response to your ‘buy’ offer, you and your realtor may fi nd ‘buy’ offer, you and your realtor may fi nd ‘buy’ offer, you and your realtor may fi nd ‘buy’ offer, you and your realtor may fi nd ‘buy’ offer, you and your realtor may fi nd ‘buy’ offer, you and your realtor may fi nd ‘buy’ offer, you and your realtor may fi nd ‘buy’ offer, you and your realtor may fi nd ‘buy’ offer, you and your realtor may fi nd ‘buy’ offer, you and your realtor may fi nd ‘buy’ offer, you and your realtor may fi nd ‘buy’ offer, you and your realtor may fi nd ‘buy’ offer, you and your realtor may fi nd ‘buy’ offer, you and your realtor may fi nd various compromise solutions. Your realtor’s various compromise solutions. Your realtor’s various compromise solutions. Your realtor’s various compromise solutions. Your realtor’s various compromise solutions. Your realtor’s various compromise solutions. Your realtor’s various compromise solutions. Your realtor’s various compromise solutions. Your realtor’s various compromise solutions. Your realtor’s various compromise solutions. Your realtor’s knowledge of the process and negotiating knowledge of the process and negotiating knowledge of the process and negotiating knowledge of the process and negotiating knowledge of the process and negotiating knowledge of the process and negotiating knowledge of the process and negotiating knowledge of the process and negotiating knowledge of the process and negotiating knowledge of the process and negotiating knowledge of the process and negotiating knowledge of the process and negotiating knowledge of the process and negotiating knowledge of the process and negotiating skills should help you reach a fi nal agree-skills should help you reach a fi nal agree-skills should help you reach a fi nal agree-skills should help you reach a fi nal agree-skills should help you reach a fi nal agree-skills should help you reach a fi nal agree-skills should help you reach a fi nal agree-skills should help you reach a fi nal agree-skills should help you reach a fi nal agree-skills should help you reach a fi nal agree-skills should help you reach a fi nal agree-skills should help you reach a fi nal agree-skills should help you reach a fi nal agree-skills should help you reach a fi nal agree-ment.


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What is an escrow?

When opening an escrow, the buyer and seller of a piece of property establish terms and conditions for the transfer of ownership of that property. These terms and conditions are given to a third party known as the escrow holder. The escrow holder, in turn, has the responsibility of seeing that the terms of the escrow are carried out. The escrow is an independent neutral account and the vehicle by which the mutual instruc-tions of all parties to the transactions are complied with.

How does the escrow process work?

The escrow is a depository for all monies, instructions and documents necessary for instructions and documents necessary for instructions and documents necessary for the purchase of your home, including your the purchase of your home, including your the purchase of your home, including your the purchase of your home, including your the purchase of your home, including your the purchase of your home, including your the purchase of your home, including your funds for down payment and your lender’s funds for down payment and your lender’s funds for down payment and your lender’s funds for down payment and your lender’s funds for down payment and your lender’s funds for down payment and your lender’s funds for down payment and your lender’s funds for down payment and your lender’s funds and documents for the new loan. funds and documents for the new loan. funds and documents for the new loan. funds and documents for the new loan. funds and documents for the new loan. funds and documents for the new loan. funds and documents for the new loan. funds and documents for the new loan. funds and documents for the new loan. funds and documents for the new loan. funds and documents for the new loan. Generally, the buyer deposits a down Generally, the buyer deposits a down Generally, the buyer deposits a down Generally, the buyer deposits a down Generally, the buyer deposits a down Generally, the buyer deposits a down Generally, the buyer deposits a down Generally, the buyer deposits a down Generally, the buyer deposits a down Generally, the buyer deposits a down Generally, the buyer deposits a down payment with the escrow holder and the payment with the escrow holder and the payment with the escrow holder and the payment with the escrow holder and the payment with the escrow holder and the payment with the escrow holder and the payment with the escrow holder and the payment with the escrow holder and the payment with the escrow holder and the payment with the escrow holder and the payment with the escrow holder and the payment with the escrow holder and the seller deposits the deed and any other seller deposits the deed and any other seller deposits the deed and any other seller deposits the deed and any other seller deposits the deed and any other seller deposits the deed and any other seller deposits the deed and any other seller deposits the deed and any other seller deposits the deed and any other seller deposits the deed and any other necessary papers with the escrow holder. necessary papers with the escrow holder. necessary papers with the escrow holder. necessary papers with the escrow holder. necessary papers with the escrow holder. necessary papers with the escrow holder. necessary papers with the escrow holder. Prior to the close of escrow, the buyer deposits the funds required and agreed upon by the parties to the sale with the upon by the parties to the sale with the upon by the parties to the sale with the escrow holder. The buyer instructs the escrow holder. The buyer instructs the escrow holder. The buyer instructs the escrow holder. The buyer instructs the escrow holder. The buyer instructs the escrow holder. The buyer instructs the escrow holder. The buyer instructs the escrow holder to deliver the monies to the escrow holder to deliver the monies to the escrow holder to deliver the monies to the escrow holder to deliver the monies to the escrow holder to deliver the monies to the escrow holder to deliver the monies to the escrow holder to deliver the monies to the escrow holder to deliver the monies to the escrow holder to deliver the monies to the escrow holder to deliver the monies to the escrow holder to deliver the monies to the seller when the escrow holder:seller when the escrow holder:seller when the escrow holder:seller when the escrow holder:seller when the escrow holder:seller when the escrow holder:seller when the escrow holder:seller when the escrow holder:

• records the deed,• delivers to the buyer a policy of title insurance, which shows title to the property, vested in the name of the buyer.

The escrow holder is authorized to deliver the deed to the buyer when the buyer has deposited the agreed-upon purchase price and fulfi lled any other conditions specifi ed in the escrow instructions. The escrow holder handles the prorations and adjustments on any fi re/hazard insurance, real estate taxes, rents, interest, etc., based on the escrow instructions of both parties.

The escrow holder thus acts for both parties and protects the interests of each within the authority of the escrow instructions. Escrow authority of the escrow instructions. Escrow cannot be completed until the instructions cannot be completed until the instructions cannot be completed until the instructions cannot be completed until the instructions cannot be completed until the instructions have been satisfi ed and all parties have have been satisfi ed and all parties have have been satisfi ed and all parties have have been satisfi ed and all parties have have been satisfi ed and all parties have have been satisfi ed and all parties have have been satisfi ed and all parties have have been satisfi ed and all parties have have been satisfi ed and all parties have have been satisfi ed and all parties have have been satisfi ed and all parties have have been satisfi ed and all parties have have been satisfi ed and all parties have have been satisfi ed and all parties have have been satisfi ed and all parties have signed escrow documents. The escrow signed escrow documents. The escrow signed escrow documents. The escrow signed escrow documents. The escrow signed escrow documents. The escrow signed escrow documents. The escrow signed escrow documents. The escrow signed escrow documents. The escrow signed escrow documents. The escrow signed escrow documents. The escrow signed escrow documents. The escrow holder takes instructions based on the terms holder takes instructions based on the terms holder takes instructions based on the terms holder takes instructions based on the terms holder takes instructions based on the terms holder takes instructions based on the terms holder takes instructions based on the terms holder takes instructions based on the terms holder takes instructions based on the terms of the purchase agreement and the lender’s of the purchase agreement and the lender’s of the purchase agreement and the lender’s of the purchase agreement and the lender’s of the purchase agreement and the lender’s of the purchase agreement and the lender’s of the purchase agreement and the lender’s of the purchase agreement and the lender’s requirements.requirements.requirements.requirements.requirements.requirements.requirements.requirements.requirements.

How do I open an escrow?

Your real estate agent will open the escrow Your real estate agent will open the escrow Your real estate agent will open the escrow Your real estate agent will open the escrow Your real estate agent will open the escrow Your real estate agent will open the escrow Your real estate agent will open the escrow Your real estate agent will open the escrow Your real estate agent will open the escrow for you. As soon as you execute your for you. As soon as you execute your for you. As soon as you execute your for you. As soon as you execute your for you. As soon as you execute your for you. As soon as you execute your purchase agreement, your agent will place purchase agreement, your agent will place purchase agreement, your agent will place purchase agreement, your agent will place purchase agreement, your agent will place purchase agreement, your agent will place purchase agreement, your agent will place purchase agreement, your agent will place purchase agreement, your agent will place purchase agreement, your agent will place purchase agreement, your agent will place your initial deposit into an escrow account. your initial deposit into an escrow account. your initial deposit into an escrow account. your initial deposit into an escrow account. your initial deposit into an escrow account. your initial deposit into an escrow account. your initial deposit into an escrow account. your initial deposit into an escrow account. your initial deposit into an escrow account. your initial deposit into an escrow account. your initial deposit into an escrow account. your initial deposit into an escrow account. your initial deposit into an escrow account. your initial deposit into an escrow account. your initial deposit into an escrow account.

Th e Home Buyer’s Question & Answer Guide


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Escrow instructions defi ne all the conditions that must occur before the transaction can be fi nalized. Your escrow instructions repre-sent your written statement to the escrow holder. They also provide title insurance protection for your home.

Do I need down payment funds?

You will need to pay your down payment via cashier’s check or wire transfer prior to the closing date of escrow. (Escrow will advise you of the necessary amount.)

How will I know where my money has gone?

Written evidence of your deposit is generally included in your copy of the purchase agree-ment (sometimes called an Agreement to Purchase and Receipt for Deposit). Your funds will then be deposited in a separate escrow or trust account and processed through a local bank.

What is a contingency period?

During an agreed-upon time determined by your purchase agreement, you’ll be able to get information and perform such duties as:

• Property appraisals

• Securing a lender

• Obtaining loan approval

• Having a physical inspection of the property

• Inspecting for pests

• Approving the seller’s transfer disclosure statement

• Obtaining a preliminary report approval from your title company

• Satisfying purchase contingencies

How long is an escrow?

The length of an escrow is determined by the terms of the purchase agreement and can range from a few days to several months. An escrow averages sixty to ninety days.

How does the loan process work?

Your real estate agent can provide you with current fi nancing information to help you in selecting a lender. The lender might be a bank, savings and loan, or a mortgage company. You will be required to complete a loan application, which will require personal and fi nancial information.


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What happens after I submit the loan application?

The lender will begin the qualifi cation process, including verifi cation of information submitted on the application and appraisal of the value of the property.

The lender will require that you obtain hazard/fi re insurance if you are purchasing a detached home. However, if you are buying a condominium or townhouse, there may already be a master hazard policy. Check with your real estate agent. Also, check with your insurance agent for additional coverage for your personal property. The lender will also require that you obtain title insurance and may have other requirements that will need your attention prior to the close of escrow. Your real estate agent can help you take care of these requirements well in advance.

When the loan is approved, what’s next?

When your loan is approved and the loan documents are sent to the escrow holder handling your transaction, the escrow holder will prepare an estimated closing statement, which specifi es in a debit and credit format, the disposition of your purchase funds.

After you have signed all the necessary instructions and documents, the escrow holder will return them to the lender for a fi nal review. This review usually occurs within a few days. After the review is completed, the lender is ready to fund your loan and inform the escrow holder.

Generally, your escrow instructions will be mailed to you. Your escrow offi cer or real estate agent will contact you to make an appointment for you to sign your fi nal loan papers. At this time, the escrow holder will also tell you the amount of money you will need, in addition to your loan funds, to purchase your new home. Your loan funds will be sent directly to the title or escrow holder by the lender.

What is ‘close of escrow?’

An escrow closing is the culmination of the transaction. It signifi es legal transfer of title from the seller to the buyer. Usually, the grant deed and deed of trust are recorded within one working day of the escrow hold-er’s receipt of loan funds, completing the transaction and signifying the close of escrow. Once all the conditions of the escrow have been satisfi ed, the escrow offi cer informs you of the date escrow will close and takes care of the technical and fi nancial details.


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When will I receive the deed?

The original deed to your home will be mailed directly to you at your new home by the County Recorder’s Offi ce. This service takes several weeks, sometimes longer, depending on the County Recorder’s volume.

Statement of information

You may be asked to complete a statement of information as part of the necessary paperwork. Because many people have the same name, the statement of information is used to identify the specifi c person in the transaction through such information as the date of birth, social security number, etc. date of birth, social security number, etc. This information is kept confi dential.This information is kept confi dential.

Lender information

Provide the escrow holder with the name, Provide the escrow holder with the name, Provide the escrow holder with the name, Provide the escrow holder with the name, Provide the escrow holder with the name, Provide the escrow holder with the name, address and phone number of your lender as address and phone number of your lender as address and phone number of your lender as address and phone number of your lender as address and phone number of your lender as address and phone number of your lender as address and phone number of your lender as address and phone number of your lender as address and phone number of your lender as address and phone number of your lender as soon as possible after opening escrow.soon as possible after opening escrow.soon as possible after opening escrow.soon as possible after opening escrow.soon as possible after opening escrow.soon as possible after opening escrow.soon as possible after opening escrow.

Hazard/fi re insurance

If you are purchasing a single family, detached home, or in some cases a town-detached home, or in some cases a town-detached home, or in some cases a town-detached home, or in some cases a town-house, be sure to order your hazard/fi re house, be sure to order your hazard/fi re house, be sure to order your hazard/fi re house, be sure to order your hazard/fi re house, be sure to order your hazard/fi re house, be sure to order your hazard/fi re house, be sure to order your hazard/fi re insurance once your loan has been insurance once your loan has been insurance once your loan has been insurance once your loan has been insurance once your loan has been approved. You should immediately begin approved. You should immediately begin approved. You should immediately begin approved. You should immediately begin looking for an agent because not all compa-looking for an agent because not all compa-looking for an agent because not all compa-nies write hazard/fi re insurance. Then, call nies write hazard/fi re insurance. Then, call

your escrow holder with the insurance agent’s name and phone number so that he/she can make sure the policy complies with your lender’s requirements. You must have your insurance in place before the lender will fund money to the title company. If you do not have an insurance agent, your real estate agent can help you.

Title to home

Decide how you wish to hold title to your home. The escrow holder will need this information in order to prepare the grant deed. We suggest you consult an attorney, tax consultant, or other qualifi ed profes-sional before you decide. Your lender also needs this data to prepare loan documents.needs this data to prepare loan documents.needs this data to prepare loan documents.

Lender’s requirements

Make sure you are aware of your lender’s Make sure you are aware of your lender’s Make sure you are aware of your lender’s Make sure you are aware of your lender’s Make sure you are aware of your lender’s Make sure you are aware of your lender’s Make sure you are aware of your lender’s Make sure you are aware of your lender’s Make sure you are aware of your lender’s requirements and that you have satisfi ed requirements and that you have satisfi ed requirements and that you have satisfi ed requirements and that you have satisfi ed requirements and that you have satisfi ed requirements and that you have satisfi ed requirements and that you have satisfi ed requirements and that you have satisfi ed requirements and that you have satisfi ed requirements and that you have satisfi ed requirements and that you have satisfi ed those requirements before you come to the those requirements before you come to the those requirements before you come to the those requirements before you come to the those requirements before you come to the those requirements before you come to the those requirements before you come to the those requirements before you come to the those requirements before you come to the those requirements before you come to the those requirements before you come to the escrow company to sign your papers. Your escrow company to sign your papers. Your escrow company to sign your papers. Your escrow company to sign your papers. Your escrow company to sign your papers. Your escrow company to sign your papers. Your escrow company to sign your papers. Your escrow company to sign your papers. Your escrow company to sign your papers. Your escrow company to sign your papers. Your escrow company to sign your papers. Your escrow company to sign your papers. Your loan offi cer or real estate agent can assist loan offi cer or real estate agent can assist loan offi cer or real estate agent can assist loan offi cer or real estate agent can assist loan offi cer or real estate agent can assist loan offi cer or real estate agent can assist loan offi cer or real estate agent can assist loan offi cer or real estate agent can assist loan offi cer or real estate agent can assist loan offi cer or real estate agent can assist loan offi cer or real estate agent can assist loan offi cer or real estate agent can assist you.you.

What Information Will I Have to Provide?

THE ESCROW PROCESS

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Identifi cation

Please bring your valid state identifi cation card, driver’s license or passport with you to the escrow company. These items are needed to verify your identity by a notary public. It is a routine, but necessary, step for your protection.

Cashier’s check

Obtain a cashier’s check made payable to your escrow company in the amount indi-cated to you by your escrow offi cer. A personal check may delay the closing since escrow and title companies are required by escrow and title companies are required by law to have “good funds”– meaning that law to have “good funds”– meaning that law to have “good funds”– meaning that law to have “good funds”– meaning that law to have “good funds”– meaning that the check has cleared before disbursing the check has cleared before disbursing the check has cleared before disbursing the check has cleared before disbursing the check has cleared before disbursing the check has cleared before disbursing the check has cleared before disbursing funds from escrow. Wired funds are another funds from escrow. Wired funds are another funds from escrow. Wired funds are another funds from escrow. Wired funds are another funds from escrow. Wired funds are another funds from escrow. Wired funds are another funds from escrow. Wired funds are another method of expediting your closing.method of expediting your closing.method of expediting your closing.method of expediting your closing.method of expediting your closing.method of expediting your closing.method of expediting your closing.method of expediting your closing.method of expediting your closing.

What Do I Need To Do Before My Appointment To Sign Loan Documents?

THE ESCROW PROCESS

What if we are purchasing from abroad? Then Sharyn and Victoria, along with escrow will help you coordinate the signingof your documents. Escrow will also help you organize the transfer of funds for your downpayment and closing cost

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Home Buying

Realtor loan home purchase terms accepted

Opening Escrow

Choose a Title & Escrow

Company

“Earnest” money

deposited

Seller’s transfer

disclosure statement

Title search preliminary

report

Secure a lender

Start the loan process

Appraise the property

Inspect the property

Buy homeowner’s

insurance Loan approved

Financial contingencies

removed

Closing Escrow

Deposit remainder of

down payment to escrow

Closing & loan papers signed

Fund your loan Formally record

documents Escrow

closed…

Congratulations!

A Step-by-Step Guide to the Home Buying Process

THE ESCROW PROCESS

Meet and Pre-qualify Find your Make an Negotiate Purchase pick your for home dream offer to and agree to agreement

10

Life of an Escrow

Review fi le that all conditions have been met & that all documents are correct & available for signature;

check that termite inspection, contingencies released, fi re insurance ordered,

additional documents, Second Deed of Trust, Bill of Sale, etc...

have been prepared

Figure fi le & request signatures on all remaining documents

Obtain funds from buyer

Request loan funds

Funds

Order recording

Close fi le: Prepare statements & disburse funds

Complete closing, forward fi nal documents to all interested parties—buyer, seller, lender

Prepare escrow instructions & pertinent documents

Obtain signatures

Process fi nancing

Order title search

Receive & review preliminary report

Receive demands (if any), request clarifi cation of other liens (if any)

and review taxes on report

Receive demands & enter into fi le

Request benefi ciary statement

Request benefi ciary statement & enter into fi le...review terms of

transfer & current payment status (is prior approval necessary to

record?)

Request or prepare new loanapplication

Obtain loan approval determine that terms are correct

Request loan documents

Forward documents to title company

Return loan documents

THE ESCROW PROCESS

11

Loan Calculator

Why Rent? Build Equity.

Payments are based on a 30 year, fi xed rate loan, rounded to the nearest dollar. Just fi nd where the row containing your loan amount intersects with the column containing your interest rate.

L O A N 4% 4.5% 5% 5.5% 6% 6.5% 7% 7.5% 8% 8.5% 9% 9.5% 10%

$100,000 $ 478 $ 507 $ 537 $ 568 $ 600 $ 632 $ 665 $ 699 $ 734 $ 770 $ 807 $ 845 $ 883

120,000 573 608 644 682 719 758 798 839 881 924 968 1,013 1,059

140,000 669 710 752 795 839 885 931 979 1,027 1,076 1,126 1,177 1,229

150,000 717 760 805 852 899 948 998 1,049 1,154 1,208 1,263 1,319 1,376

160,000 765 811 859 909 959 1,011 1,054 1,119 1,174 1,230 1,287 1,345 1,404

180,000 860 913 967 1,022 1,079 1,138 1,198 1,259 1,321 1,384 1,448 1,514 1,580

200,000 956 1,014 1,074 1,136 1,199 1,264 1,331 1,398 1,468 1,538 1,609 1,682 1,755

220,000 1,052 1,115 1,181 1,250 1,319 1,391 1,464 1,538 1,614 1,692 1,770 1,850 1,931

240,000 1,147 1,217 1,288 1,363 1,439 1,517 1,597 1,678 1,761 1,845 1,931 2,018 2,106

250,000 1,195 1,268 1,343 1,420 1,499 1,580 1,663 1,748 1,834 1,922 2,012 2,102 2,194

260,000 1,243 1,318 1,396 1,477 1,559 1,643 1,730 1,818 1,908 1,999 2,092 2,186 2,282

280,000 1,338 1,420 1,504 1,590 1,679 1,770 1,863 1,958 2,055 2,153 2,253 2,354 2,457

300,000 1,434 1,521 1,611 1,704 1,799 1,896 1,996 2,098 2,201 2,307 2,414 2,523 2,633

320,000 1,530 1,622 1,718 1,818 1,919 2,023 2,129 2,237 2,348 2,461 2,575 2,691 2,808

340,000 1,625 1,724 1,826 1,931 2,038 2,149 2,262 2,377 2,495 2,614 2,736 2,859 2,984

350,000 1,673 1,775 1,880 1,988 2,098 2,212 2,329 2,447 2,568 2,691 2,816 2,943 3,072

360,000 1,721 1,825 1,933 2,045 2,158 2,275 2,395 2,517 2,642 2,768 2,897 3,027 3,159

380,000 1,816 1,927 2,041 2,158 2,278 2,402 2,528 2,657 2,788 2,922 3,058 3,195 3,335

400,000 1,912 2,028 2,148 2,272 2,398 2,528 2,661 2,797 2,935 3,076 3,218 3,363 3,510

THE LOAN PROCESS

Per Month 10 Years 15 Years 20 Years 25 Years 30 Years

$ 700 $ 143,391 $ 290,129 $ 531,558 $ 928,783 $1,582,341

750 153,634 310,853 569,527 995,125 1,695,366

800 163,876 331,576 607,495 1,061,467 1,808,390

850 174,118 352,280 645,464 1,127,808 1,921,415

900 184,360 373,023 683,432 1,194,150 2,034,439

1,000 194,603 393,369 759,369 1,326,833 2,260,488

1,100 225,329 455,917 835,306 1,459,517 2,486,537

1,200 245,814 497,364 911,242 1,592,200 2,712,585

1,300 266,298 538,811 987,179 1,724,883 2,938,634

1,400 286,783 580,259 1,063,116 1,857,567 3,164,683

1,500 307,267 621,705 1,139,053 1,990,250 3,390,731

1,600 327,752 663,152 1,214,990 2,122,933 3,616,780

1,700 348,236 704,599 1,290,927 2,255,616 3,842.828

Using this chart, fi nd your per month rental payment and you can determine how much money you are “giving away” in rent and interest over 10, 15, 20, or 30 years... money which could be used to build equity in your own real estate.

12

Explaining the concept of FICO

When it comes to buying a home, how you’ll pay for it is perhaps the key indicator. Since this is the biggest investment and expense you’ll have month in and month out, a formula has been created to estimate your credit worthiness in the future based on your payments in the past.

This credit rating score is called FICO and was developed by the Fair Isaac Company. Most lenders base approval on them. You have three FICO scores, one for each of the three national credit bureaus.

FICO looks at your past credit patterns and assesses a score from 300 to 850 points. Your individual interest rate on the owed balance will be directly tied to your past habits and whether the lender thinks they’ll be paid on time. For example, if you have a bankruptcy; derogatories or delinquencies; loan defaults; repossession; or multiple late payments, you are a high risk. As a result, you must pay more to borrow.

Or, if you have high indebtedness; long-term, high-dollar credit use; revolving, rather than installment credit use; derogatories; or, you’re using many credit lines that create a high percentage of debt against your total assets, you may be considered a credit risk.

Finally, if during the loan process you make a large purchase; change jobs; switch banks; move your money around; or pay off existing accounts without your lenders request, you can negatively impact your loan approval.

Luckily, you can solve your credit risks by facing them head-on. Pay down your balances. Consolidate your debts. Pay your bills on time every time. Use installment, rather than revolving credit lines. Use an all-cash offense to chop your charge card debts down to size.

But, here’s the good news: Even if you’ve got a low FICO credit score, you can buy a home! With the emergence of alternative lenders, there are still loan programs you can qualify for. Here are just a few:

Adjustable Rate Loan. Adjustable or vari-able rates refer to the fl uctuating interest rate you’ll pay over the life of the loan. This rate is periodically adjusted to coincide with changes in the index on which the rate is based. The minimum and maximum amounts of adjustment as well as the frequency of adjustment are specifi ed in the loan terms. An adjustable rate mortgage may allow you to qualify for a higher loan amount. However, maximums, caps and time frames should be considered before deciding on this type of loan.

Th e Loan Process

THE LOAN PROCESS

13

Assumable Loan. This loan enables a buyer to pay the seller for the equity in the home and take over the payments without meeting any requirements. You will need income, credit and fund verifi cations by the lender before the loan can be transferred to the buyer.

Balloon Payment Loan. A loan that has level monthly payments of principal and interest that do not fully amortize the loan. This loan can also be extendable or rolled into a different type. Such a move could be employed when refi nancing before the loan is due to if you plan to sell before that time.

Buy-down Loan. You can make an initial lump sum payment to reduce your monthly

payments. This type of loan works well when you have cash to spare.

Conventional Loan. This loan refers to a non-government insured–such as a non-Federal Housing Administration (FHA) or non-Veteran’s Administration (VA)–program that is secured by investors. For example, fi xed rate, adjustable and balloon are conventional loans.

FHA Loan. Benefi cial for buyers who don’t have large down payments, this loan is insured by the Federal Housing Administration (FHA) under Housing and Urban Development (HUD). Also known as a government mortgage. An FHA loan offers easier qualifying with less upfront cash needed. However, the condition of the prop-erty is strictly regulated. The seller pays a portion of the closing costs that would typi-cally be paid by the buyer in a conventional loan program.

VA Loan. If you’ve served in the United States Armed Forces, you can apply for a VA loan which guarantees up to 100% of the purchase price and requires little or no down payment. The seller pays much of the closing costs; however, those fees are added to the sales price of the home.

Loan Types

THE LOAN PROCESS

14

Fees and points

Points are fees paid up front that are used to lower the interest rate. One percent of a new loan amount equals one point. This is the fee you pay a bank or institution for lending you money. So, if your loan amount is $100,000, each point equals $1,000.

Who pays points

Generally, there’s three scenarios.

The buyer usually pays points or fees in FHA or VA loans. The buyer or seller can pay discount fees in FHA loans while the seller pays the discount fee in a VA loan. In conventional loans, points can be paid by either the buyer or the seller or split between the two parties.

Points change

Points or fees are set by individual lenders. They vary and help determine the amount of your mortgage.

Points are not necessarily locked in

In a FHA or conventional loan, points are not usually changed from commitment to settlement.

In a VA loan, points are not locked and changed based on federal government settings.

Points are tax deductible

Points paid on your home loan are deduct-ible in the year it is paid if the points meet specifi c conditions. Those conditions include: occupancy requirements; settlement state-ments on HUD1; and using the home loan to either build or purchase.

A tax specialist is a good friend to have when discussing this topic, and should be consulted.

Private mortgage insurance

To protect lenders against severe fi nancial losses in case a loan is not repaid for any reason, a specifi c type of insurance has been created. Known as private mortgage insur-ance or PMI, you can qualify for a mortgage even if you have a down payment of only three percent.

PMI lets lenders accept lower down pay-ments than normal because you pay a monthly or yearly fee that cuts their risk.

THE LOAN PROCESS

15

If you make a down payment under twenty percent of the total price, you’ll need PMI. Lenders will be protected

from potential loss if you default on your loan.

Length of PMI

When you’ve achieved twenty percent equity in your home, you can usually cancel PMI. You’ll achieve 20% equity when you’ve either paid the principal down or the prop-erty appreciates or a combination of the two. Consult your lender for requirements to two. Consult your lender for requirements to stop paying PMI.

Cost of PMI

Premiums are based on the amount and Premiums are based on the amount and Premiums are based on the amount and Premiums are based on the amount and terms of the mortgage and will vary according to loan-to-value ratio, type of loan and the amount of coverage required by the lender.

Property appraisal

How much is your house worth? To deter-mine its value, an appraisal is needed. Appraisers are an important component in determining what a house should sell for or what its current value is for equity purposes.

Generally, appraisers are both researchers and inspectors. They break down all the numbers in terms of size, rooms, baths, electrical, plumbing, roof, fl oors, ventilation, foundation, fi replaces and the like.

Then, they investigate comparable properties in the neighborhood. How much did other, in the neighborhood. How much did other, similar homes sell for? What, then, is a similar homes sell for? What, then, is a similar homes sell for? What, then, is a similar homes sell for? What, then, is a similar homes sell for? What, then, is a similar homes sell for? What, then, is a conservative valuation of your property?conservative valuation of your property?conservative valuation of your property?conservative valuation of your property?conservative valuation of your property?conservative valuation of your property?conservative valuation of your property?conservative valuation of your property?

Finally, appraisers visit the property and Finally, appraisers visit the property and Finally, appraisers visit the property and Finally, appraisers visit the property and Finally, appraisers visit the property and Finally, appraisers visit the property and Finally, appraisers visit the property and Finally, appraisers visit the property and Finally, appraisers visit the property and Finally, appraisers visit the property and Finally, appraisers visit the property and Finally, appraisers visit the property and detail all the particulars.detail all the particulars.detail all the particulars.detail all the particulars.detail all the particulars.detail all the particulars.detail all the particulars.detail all the particulars.

They take pictures, go inside and out and They take pictures, go inside and out and They take pictures, go inside and out and They take pictures, go inside and out and They take pictures, go inside and out and They take pictures, go inside and out and They take pictures, go inside and out and They take pictures, go inside and out and They take pictures, go inside and out and They take pictures, go inside and out and They take pictures, go inside and out and determine what’s good, and what’s bad. determine what’s good, and what’s bad. determine what’s good, and what’s bad. determine what’s good, and what’s bad. determine what’s good, and what’s bad. determine what’s good, and what’s bad. determine what’s good, and what’s bad. determine what’s good, and what’s bad. determine what’s good, and what’s bad. determine what’s good, and what’s bad. They’ll draw a fl oor plan and estimate its They’ll draw a fl oor plan and estimate its They’ll draw a fl oor plan and estimate its They’ll draw a fl oor plan and estimate its They’ll draw a fl oor plan and estimate its They’ll draw a fl oor plan and estimate its They’ll draw a fl oor plan and estimate its They’ll draw a fl oor plan and estimate its They’ll draw a fl oor plan and estimate its They’ll draw a fl oor plan and estimate its value.

THE LOAN PROCESS

16

Who Pays for What in the Real Estate Transaction?

THE SELLERGenerally Pays for...

Real estate commission

Escrow fee (50%)

Document preparation fee

Documentary transfer tax ($1.10 per $1,000 of sale)

Any city transfer conveyance tax

(according to contract)

Any loan fees required by buyer’s lender

(government loans)

Payoff of all loans in seller’s name

Interest accrued to lender being paid off

Termite inspection (according to contract)

Home warranty (according to contract)

Any judgments, tax liens etal against the seller

Tax proration

Any unpaid homeowner’s dues

Recording charges to clear all documents of

record against seller

Any bonds or assessments (per contract)

Any & all delinquent taxes

Homeowner’s association transfer—doc fees

Homeowner’s title insurance policy premium

Zone disclosure report

THE BUYERGenerally Pays for...

Title insurance premium for lender’s policy

Escrow fee (50%)

Document preparation (if applicable)

Recording charges for all documents in

buyer’s name

All new loan charges, except those paid by

seller (government loans)

Interest on new loan from date of funding to

30 days prior to fi rst payment date

Termite inspection (according to contract)

Assumption/change of records fee for take-

over of existing loan

Inspection fees (house, roof, geological etc.)

Fire insurance premium (fi rst year)

Next month’s HOA fee(s)

GENERAL INFORMATION

17

California Transfer Tax

GENERAL INFORMATION

All taxes are per thousand or part thereof. Rates may change without notice.

County County Tax* Monument Fee City Transfer Tax*Alameda $1.10 Yes-$10 Alameda ......................................$ 5.40 Albany .........................................$ 6.40 Berkeley ......................................$ 15.00 Hayward ......................................$ 4.50 Piedmont* ...................................$ 13.00 Oakland ......................................$ 15.00 San Leandro ................................$ 6.00Contra Costa $1.10 Yes-$10 El Cerrito .....................................$ 7.00 Pinole* ........................................$ 5.50 Richmond ....................................$ 7.00 San Pablo ....................................$ 7.00Fresno $1.10 None NoneLos Angeles $1.10 Yes-$10 Culver City ..................................$ 4.50 Los Angeles .................................$ 4.50 Pomona .......................................$ 2.20 Redondo Beach ...........................$ 2.20 Santa Monica ..............................$ 3.00Orange $1.10 Yes-$20 NonePlacer $1.10 None NoneRiverside $1.10 Yes-$10 Riverside ......................................$ 2.20Sacramento $1.10 None Sacramento .................................$ 2.75San Bernardino $1.10 Yes-$10 NoneSan Diego $1.10 Yes-$10 NoneSan Francisco $1.10 None San Francisco* ............<250K $ 5.00 >250 $ 3.40San Joaquin $1.10 None Stockton ......................................$ 3.00San Mateo $1.10 None San Mateo* ................. .5% of total priceSanta Clara $1.10 Yes-$10 Mountain View ............................$ 3.30 Palo Alto .....................................$ 3.30 San Jose ......................................$ 3.30Solano $1.10 Yes-$10 Vallejo .........................................$ 3.30Sonoma $1.10 Yes-$10 Cotati ..........................................$ 1.90 Cloverdale ...................................$ 1.10 Petaluma .....................................$ 2.00 Rohnert Park ...............................$ 1.10 Santa Rosa ..................................$ 2.00 Sebastopol ..................................$ 2.00Stanislaus $1.10 Yes-$10 NoneVentura $1.10 Yes-$10 NoneYolo $1.10 None Davis ...........................................$ 1.10 West Sacramento ........................$ 1.00 Winters .......................................$ 2.20 Woodland ...................................$ 2.20

* Indicates a change

18

Property Tax Guide

What is property tax?

Property taxes are fees based on predeter-mined percentages of assessed values on individual properties. Paid semi-annually or annually, property taxes are administered by local government and tax rates vary by county.

How and when do I pay property taxes on my newly purchased home?

There’s several ways to pay your fi rst year’s property taxes, depending on when you close escrow.

For example, if you purchased your home between January and October, you must pay your fi rst property tax installment by November 1. Be vigilant! Your property tax bill may be forwarded to the seller’s new address instead of you. If you don’t receive your property tax bill by mid-October, contact the County Tax Collector and get a duplicate bill. If you’re delinquent, you’ll be assessed a ten percent penalty and add-on fees.

If you close escrow near December 10, the seller will need to pay the Tax Collector and forward that check to the escrow holder. The escrow holder will ensure that the title

company forwards the monies to the County.

Finally, if your property is in escrow and the sellers have just paid property taxes, have your agent request proof of purchase. Such proof of payment will allow a successful closing of escrow without a potential tax hold.

What is an impound account?

An impound account makes it easy for borrowers to make sure that their property taxes and insurance payments are always paid on time.

Basically, your lender sets up an account allowing them to collect tax and insurance payments each month. This impound payment is collected with your monthly mortgage principal and interest payment and is amortized over the year with a mandatory two-month payment pad. The lender then directly pays the County Tax Collector in November and February and the insurance company annually when payments are due.

Many homeowners like the idea of paying monthly increments since it fl attens payments over the year.

PROPERTY TAX GUIDE

19

Property Tax Timeline

JanuaryJanuary 1

Happy New Year!Tax assessment date is today

FebruaryFebruary 1

2nd installment due February 10

File your homeowner’s, veteran’s & senior citizens

100% exemption today

MarchMarch 1

Assessment dateTaxes on unsecured roll due today

AprilApril 10

2nd Tax Installment Delinquent If you’re late, pay +10% penalty plus $10 add-on fee; penalty & fee valid

today thru June 30

May JuneJune 8

Publication date for delinquent listJune 30

Properties with delinquent taxes sold to state

JulyJuly 1

First day of new fi scal year!One or both tax installments delin-quent—add 10% penalty plus $10 add-on fee plus $15 redemption

charge plus 1.5% per month; new property values info to home owners

fi rst Monday-assessment appeals July 30

Last day to advise owners of new property values

AugustLate sales numbers assigned for

delinquent taxes

SeptemberMid tax rates set

OctoberLast week

tax bills mailed

NovemberNovember 1

First installment due

DecemberDecember 10

First installment delinquent-add 10% penalty plus $10 add-on fee

PROPERTY TAX GUIDE

20

Supplemental Tax Question & Answer Guide

Often times, supplemental property taxes come as a surprise to new homeowners. Th ese tips should help you understand what they are for and how they aff ect a new home-owner.

How do supplemental taxes affect you?

Supplemental property taxes only affect indi-viduals who are buying new property or initi-ating new construction. After the purchase or new construction is complete, the new owner will receive a bill for supplemental property taxes which will become a lien against the property as of the date of ownership change or the date of completion of new construction.

When and how are the bills generated?

It’s not easy to predict when the new prop-erty owner will be billed. It may be as soon as three weeks after escrow closes or the new construction is complete. It also might take six months or more, depending on what county the property is located in and the workloads of the County Assessor, County Controller/Auditor and the County Tax Collector.

The assessor will appraise the property and advise the owner of the new supplemental assessment amount. The property owner will

then have the opportunity to discuss the valuation, apply for a Homeowner’s Exemption and be informed of their right to fi le an Assessment Appeal. The assessor then calculates the amount of the supplemental tax and the tax collector mails a supple-mental tax bill to the property owner. The bill will identify the amount of the supple-mental tax and the date the taxes will become delinquent.

How will the amount of the bill be determined?

A formula is used to determine the tax bill. The total supplemental assessment will be prorated based on the number of months remaining until June 30, the end of the tax year.

The proration factor works like this: The supplemental tax becomes effective on the fi rst day of the month following the month in which the change of ownership or completion of new construction actually occurred.

If the effective date is July 1, then there will be no supplemental assessment on the current tax roll and the entire supplemental assessment will be made to the tax roll being prepared which will then refl ect the full cash value. If the effective date is not on July 1,

PROPERTY TAX GUIDE

21

the factors represented in the table below are used to compute the supplemental assessment on the current tax roll.

If effectivedate is:

Proration factor is:

If effective date is:

Proration factor is:

August 1 .92 February 1 .42

September 1 .83 March 1 .33

October 1 .75 April 1 .25

November 1 .67 May 1 .17

December 1 .58 June 1 .08

January 1 .50

Example: The County Auditor fi nds that the supplemental property taxes on the new home would be $1,000 for a full year. The change of ownership took place on September 15 with the effective date being October 10. The supplemental property taxes would be subject to a proration factor of .75 and the supplemental tax would be $750.

Can the supplemental tax bill be paid in installments?

All supplemental taxes are payable in two equal installments. The taxes are due on the date the bill is mailed and are delinquent on specifi ed dates depending on the month the bill is mailed as follows:

(1) If the bill is mailed within the months of July through October, the fi rst installment will become delinquent on December 10 of

the same year. The second installment will become delin-quent on April 10 of the next year.

(2) If the bill is mailed within the months of November through June, the fi rst install-ment will become

delinquent on the last day of the month following the month in which the bill is mailed. The second installment shall become delinquent on the last day of the fourth calendar month following the date the fi rst installment is delinquent.

Will supplemental property taxes be prorated in escrow?

No. Unlike ordinary annual taxes, the supple-mental tax is a one-time tax due for the period from the date of new ownership or completion of new construction, until the end of the tax year on June 30. The obliga-tion for this tax is entirely that of the property owner.

PROPERTY TAX GUIDE

22

Understanding Mello-RoosUnderstanding Mello-RoosUnderstanding Mello-RoosUnderstanding Mello-RoosUnderstanding Mello-RoosUnderstanding Mello-RoosUnderstanding Mello-RoosUnderstanding Mello-RoosUnderstanding Mello-RoosUnderstanding Mello-RoosUnderstanding Mello-RoosUnderstanding Mello-RoosUnderstanding Mello-RoosUnderstanding Mello-RoosUnderstanding Mello-RoosUnderstanding Mello-RoosUnderstanding Mello-Roos

PROPERTY TAX GUIDE

The Mello-Roos Community Facilities Act of 1982 provides a versatile method of fi nancing public facilities, infrastructure and services associated with new development. It is more fl exible than either assessment district or general obligation bond fi nancing and can fi nance a wide range of facilities and services at interest rates that are typically several percent below conventional fi nancing rates.

In the fi rst years after passage of the Mello-Roos Act, many developers viewed it suspi-ciously as another vehicle by which public agencies could impose additional burdens on their projects. Today, however, developers view it as an important tool in the develop-ment process that can often mean the differ-ence between a project’s success and failure.

What is a Mello-Roos District?

A Mello-Roos District, or “Community Facilities District,” is a fi nancing district formed under this Community Facilities District Act of 1982. (Code section 5311, et seq.).

It provides designated local agencies, including cities, counties, school districts and all other municipal corporations and districts with authority to form Mello-Roos Districts to fi nance a broad array of public facilities and services through imposition of special taxes approved by a two-thirds vote of the qualifi ed electorate of the District. This vote is conducted by either registered voters, or, if there are fewer than twelve registered voters within the proposed District, by landowners. The facilities or services may be funded either through bonded indebtedness secured by the special taxes or directly from the special tax proceeds on a ‘pay-as-you-go’ basis.

Ask your realtor if the property is in a Mello-Roos district. Your realtor will be happy to provide that information.

23

Understanding Title Insurance

What Is title insurance?

Title insurance provides coverage for certain losses due to defects in the title that occurred prior to your ownership. The seller can give only those rights that previously have been received with “good title.” Title insurance protects against defects such as prior fraud or forgery that might go unde-tected until after closing and possibly jeopar-dize your ownership and investment.

The title industry in brief

Prior to the development of the title industry in the late 1800’s, a homebuyer received a grantor’s warranty, attorney’s title opinion, or abstractor’s certifi cate as assurance of home ownership. The buyer relied on the fi nancial integrity of the grantor, attorney, or abstractor for protection. Today, title insur-ance companies are regulated by state statute. They are required to post fi nancial guarantees to ensure that any claims will be paid in a timely fashion. They also must maintain their own “title plants” which house duplicates of recorded deeds, mort-gages, plats, and other pertinent county property records.

THE T ITLE PROCESS

24

Why title insurance is needed

Title insurance assures the new buyers that they are acquiring marketable title from the seller. It is designed to eliminate risk or loss caused by defects in title from the past. Title insurance protects the interest of the mort-gage lender as well as the equity of the buyer for as long as they or their heirs have any interest in the property.

When is the premium due?

It is a one-time premium which is paid at the close of escrow. It is customary for the seller to pay for the owner’s policy. If there is a new loan, the buyer pays for the lender’s new loan, the buyer pays for the lender’s policy. The policy has a perpetual term and policy. The policy has a perpetual term and policy. The policy has a perpetual term and policy. The policy has a perpetual term and policy. The policy has a perpetual term and policy. The policy has a perpetual term and provides coverage for as long as you are in a provides coverage for as long as you are in a provides coverage for as long as you are in a provides coverage for as long as you are in a provides coverage for as long as you are in a provides coverage for as long as you are in a provides coverage for as long as you are in a provides coverage for as long as you are in a position to suffer a loss.position to suffer a loss.position to suffer a loss.position to suffer a loss.position to suffer a loss.position to suffer a loss.

Do all title companies offer the same protection?

Any standard American Land Title Association (ALTA) policy covers the same basic items. However, First American Title’s EAGLE Policy (our ALTA Homeowner’s Policy of Title Insurance) combines the easy-to-understand Plain Language Policy with addi-tional coverages, including coverage for events happening after the policy date.

THE T ITLE PROCESS

25

Ways of Holding Title

As a general guide, here is a breakdown of ways to hold title. Since how you hold title has tax implications, please consult with your real estate professional, attorney or tax advisor before making any specifi c title decisions.

Tenancy in Common Joint Tenancy Community Property Community Property With Right of Survivorship

(effective July 1, 2001)

Parties Any number of persons (can be husband & wife).

Any number of persons (can be husband & wife).

Only husband & wife. Only husband & wife.

Division Ownership can be divided into any number

of interests equal or unequal.

Ownership interests must be equal.

Ownership & managerial interests equal except

control of businessis solely with managing

spouse.

Ownership & managerial interests equal except

control of business is solely with

managing spouse.

Title Each co-owner has a separate legal to his undivided interest.

There is only one title to the whole property.

Title is in the ‘community.’ Each

interest is separate but management is unifi ed.

Title is in the ‘community.’ Each

interest is separate but management is unifi ed.

Possession Equal right of possession.

Equal right of possession.

Both co-owners have equal management

& control.

Both co-owners have equal management &

control.

Conveyance Each co-owner’s interest may be conveyed

separately by its owner.

Conveyance by one co-owner without the other breaks the joint

tenancy.

Personal properties (except ‘necessaries’) may be conveyed for

valuable consideration without consent of other spouse. Real

property requires written consent of other spouse

& separate interest cannot be conveyed except upon death.

Conveyance by one co-owner without the

other breaks the community interest with

right of survivorship.

Death On co-owner’s death, his interest passes by will to his devisees or his heirs. No survivorship rights.

On co-owner’s death, his interest ends & cannot be disposed of by will.

Survivor owns the property by survivorship.

On co-owner’s death, half belongs to survivor in severalty. Half goes by

will to decedents devisees or by

succession to survivor.

On co-owner’s death, his interest ends & cannot be disposed of by will.

Survivor owns the property by survivorship.

Successors Status Devisees or heirs become tenants in

common.

Last survivor owns property in severalty.

If passing by will, tenancy in common between devisee property in &

survivor results.

Last survivor owns property in severalty.

THE T ITLE PROCESS

26

Glossary for the Home Buyer

Adjustable Rate Mortgage (ARM): A mortgage with an interest rate that changes over time in line with movements in the index.

Adjustment Periods: The length of time between interest rate changes on an ARM. For example: A loan with an adjustment period of one year is called a one year ARM, which means that the interest rate can change once a year.

Amendment: A change that alters, adds or corrects a part of an agreement without changing the key idea or content.

Amortization: Gradual repayment of a loan in equal installments of principal and interest, rather than interest only payments.

Annual Percentage Rate (APR): The total fi nance charge (interest, loan fees, points expressed as percentage of the loan amount) stated as a yearly rate.

Appraisal: A written analysis of the estimated value of a property prepared by a qualifi ed appraiser.

Assumption Of Mortgage: A buyer’s agreement to assume the liability under an existing note that is secured by a mortgage or Deed of Trust. The lender must approve the buyer in order to assume the loan.

Balloon Mortgage: A mortgage that has level monthly payments of principal and interest that do not fully amortize the loan. The balance is due in a lump sum payment at a specifi ed date, usually at the end of the term.

Bankruptcy: A proceeding in a federal court in which a debtor who has greater debts than assets can get debt relief by transferring those assets to a trustee or agreeing to reorganization of assets and liabilities.

Benefi ciary: The recipient of benefi ts, usually a lender, and often from a deed of trust.

Broker: A person who brings parties together and assists in negotiating contracts between them for a commission or fee.

Buy-down Mortgage: A mortgage in which an initial lump sum payment is made to reduce a borrower’s monthly payments during the early years in a loan.

Cap: The limit of how much an interest rate or monthly payment can change, either at each adjustment or over the life of the mortgage.

Cash-out Refi nance: A refi nance transaction in which the borrower receives additional cash for any purpose.

CC&R’s: Covenants, Conditions, and Restrictions: A document controlling the use, requirements and restric-tions of a property.

Certifi cate Of Reasonable Value (CRV): A document that establishes the maximum value and loan amount for a VA guaranteed loan.

Close Of Escrow: The date the documents are recorded and title passes from seller to buyer. On this date, the buyer becomes the legal owner and title insur-ance becomes effective.

Closing Statement: The fi nancial disclosure statement that accounts for all of the funds received and expected at the closing including deposits for taxes, hazard insur-ance, and mortgage insurance.

Cloud On Title: A claim, encumbrance or condition that impairs the title to real property until disproved or eliminated through such means as a quitclaim deed or a quiet title legal action.

Comparable Sales: Sales with similar characteristics as the subject property, used for appraisal analysis. Commonly known as “comps.”

Contingency Clause: The condition or dependence upon a stated event which must occur before a contract is binding. For example: The sale of a house, contingent upon the buyer obtaining fi nancing.


27

Conversion Provision: A provision in some ARM’s to convert the loan to a fi xed rate loan, usually after the fi rst adjustment period. The new fi xed rate is generally set at the prevailing interest rate for fi xed rate mort-gage. This conversion feature may be an extra cost.

Conveyance: Commonly a deed or trust deed that is used to transfer (convey) title to property from one person to another.

Credit Bureau: An organization that gathers, records and keeps fi nancial and public records data about the payment records of persons being considered for credit.

Creditor: A person to whom money is owed.

Deed: The legal document transferring or conveying

title to a property from one party to another.

Deed Of Trust: An instrument used in many states in place of a mortgage.

Deed Restrictions: Limitations in a deed to a property that dictates certain uses that may or may not be made of the property.

Delinquency: Failure to make payments when payments are due.

Down Payment: The part of the purchase price that a buyer pays in cash and does not fi nance with a mort-gage.

Due On Sale Clause: An acceleration clause that requires full payment of a mortgage or Deed of Trust when the secured property changes ownership.

Earnest Money: The portion of the down payment delivered to the seller or escrow agent by the buyer with a written offer as evidence of good faith.

Easement: A right, privilege or interest limited to a specifi c purpose that one party has in the land of another.

Escrow: An impartial third-party stakeholder for both buyer and seller who is responsible for completing paperwork and distributing funds.

Equity: The difference between the value of a property and the amount still owed on its mortgage.

Fair Market Value: The price at which a property will sell from a willing buyer to a willing seller.

Federal National Mortgage Association (FNMA):Popularly known as Fannie Mae. A privately owned corporation created by Congress to support the secondary mortgage market. It purchases and sells resi-dential mortgages insured by the FHA or guaranteed by VA, as well as conventional home mortgages.

Fee Simple: An estate in which the owner has unre-stricted power to dispose of the property as he/she wishes including leaving by will or inheritance. It is the greatest interest a person can have in real estate.

Finance Charge: The total cost a borrower must pay, directly or indirectly, to obtain credit according to Regulation Z.

Fixed Rate Mortgage: A mortgage in which the payments and interest rate do not change during the term of the loan.

Foreclosure: A legal action allowing a lender to sell a borrower’s property in order to satisfy the debt.

Government Mortgage: A mortgage insured by the Federal Housing Administration (FHA) or guaranteed by the Veteran’s Administration (VA) or the Rural Housing Service (RHS).

Graduated Payment Mortgage: A residential mort-gage with monthly payments that start at a low level and increase at a predetermined rate.

Grant Deed: A deed used to transfer real property, containing warranties against prior conveyances or encumbrances.

Hazard Insurance: Insurance that compensates for fi re, wind, vandalism or hazardous physical damage to a property. Buyer may add liability insurance and extended coverage for personal property.

Home Inspection Report: A qualifi ed inspector’s report on a property’s overall condition, usually including an evaluation of the structure and internal mechanical systems.

Home Owner’s Association (HOA): A nonprofi t, formal group of condominium owners who desire to manage, maintain and improve the development’s common areas.

Home Warranty Plan: Type of insurance that covers against failure of mechanical systems on a property, such as plumbing, electrical, heating systems and installed appliances.


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Impounds: A trust type of account established by lenders for the accumulation of borrower’s funds to meet periodic payments of taxes, mortgage insurance premiums and/or future insurance policy premiums required to protect their security.

Index: A published rate plus a margin that determines interest rates on an adjustable-rate mortgage.

Insurance: An agreement covering home owners for specifi c losses in exchange for a periodic payment.

Joint Tenancy: An equal undivided ownership of prop-erty by two or more persons, including the right of survivorship.

Legal Description: A highly specifi c description recog-nized by law, based on government surveys, that thor-oughly identifi es the exact boundaries of an entire piece of land.

Lien: A legal hold or claim on property as security for a debt or charge that must be repaid when that property is sold.

Loan: An amount of borrowed money (principal) that is usually repaid with interest.

Loan Commitment: A written promise to make a loan for a specifi ed amount on specifi c terms.

Loan To Value (LTV) Ratio: The relationship between the amount of the appraised value of the property and the amount of the loan, expressed as a percentage.

Margin: The number of percentage points the lender adds to the index rate to calculate the adjustable rate mortgage (ARM) interest rate at each adjustment date.

Mortgage: A legal document that pledges a property to a lender as security for debt payment.

Negative Amortization: Increase in mortgage debt that occurs when monthly payments are too low to cover the full amount of interest due. When this short-fall is added to the remaining balance, it creates “nega-tive” amortization.

Origination Fee: A fee or charge paid for establishing a loan.

PITI: A payment combining principal, interest, taxes & insurance.

Point: A fee collected by a lender that is equal to 1% of the principal amount of an investment or note.

Power Of Attorney: A written instrument whereby a principal gives authority to an agent, who may also be called an “Attorney-in-Fact.”

Preliminary Title Report: A report showing the condi-tion of title before a sale or loan transaction.

Prepayment Penalty: A fee charged to a mortgagor who pays a loan before it is due.

Private Mortgage Insurance (PMI): Insurance written by a private company protecting the lender against loss if the borrower defaults on the mortgage.

Purchase Agreement: Written document stating terms and conditions between a property buyer and seller.

Quitclaim Deed: A deed operating as a release, intending to pass any title, interest or claim which the grantor may have in the property, but not containing any warranty of a valid interest or title by the grantor.

Realtor: A real estate broker or associate active in a local real estate board affi liate with the National Association of Realtors.

Recording: Filing documents affecting real property with the County Recorder as a matter of public record.

Tenancy In Common: A type of joint ownership in a property with no right of survivorship.

Title: A legal document that confi rms a person’s right to own or ownership of a property.

Title Insurance Policy: A policy that protects the purchaser, mortgagee, or other party against losses.

VA Loan: A loan that is guaranteed by the Veterans Administration and made by a private lender.

Warranty Deed: A real estate oriented document used to convey fee title to real property from the grantor to the grantee (usually the seller to the buyer).


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Tools You Can Use

Ask your real estate professional to provide you with more in-depth information on these important topics:

Brochures

Life of a Title

Life of an Escrow

Loan Payment Calculator

Rent vs. Buy Comparison Chart

Understanding Mello-Roos

Ways of Holding Title

Why Title Insurance? (Claim Stories) Why Title Insurance? (Claim Stories) Why Title Insurance? (Claim Stories) Why Title Insurance? (Claim Stories) Why Title Insurance? (Claim Stories)

Who Pays for What in a Real Estate Transaction? Who Pays for What in a Real Estate Transaction? Who Pays for What in a Real Estate Transaction? Who Pays for What in a Real Estate Transaction? Who Pays for What in a Real Estate Transaction? Who Pays for What in a Real Estate Transaction? Who Pays for What in a Real Estate Transaction? Who Pays for What in a Real Estate Transaction? Who Pays for What in a Real Estate Transaction? Who Pays for What in a Real Estate Transaction? Who Pays for What in a Real Estate Transaction? Who Pays for What in a Real Estate Transaction? Who Pays for What in a Real Estate Transaction? Who Pays for What in a Real Estate Transaction? Who Pays for What in a Real Estate Transaction?

Golf Directory Golf Directory Golf Directory Golf Directory Golf Directory Golf Directory Golf Directory

Home Owner’s Records Folder Home Owner’s Records Folder Home Owner’s Records Folder Home Owner’s Records Folder Home Owner’s Records Folder Home Owner’s Records Folder Home Owner’s Records Folder Home Owner’s Records Folder Home Owner’s Records Folder Home Owner’s Records Folder Home Owner’s Records Folder Home Owner’s Records Folder Home Owner’s Records Folder

Maps—Streets and Subdivision maps available for certain areas Maps—Streets and Subdivision maps available for certain areas Maps—Streets and Subdivision maps available for certain areas Maps—Streets and Subdivision maps available for certain areas Maps—Streets and Subdivision maps available for certain areas Maps—Streets and Subdivision maps available for certain areas Maps—Streets and Subdivision maps available for certain areas Maps—Streets and Subdivision maps available for certain areas Maps—Streets and Subdivision maps available for certain areas Maps—Streets and Subdivision maps available for certain areas Maps—Streets and Subdivision maps available for certain areas Maps—Streets and Subdivision maps available for certain areas

School Information

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Notes


In California, we have "Agency Representation" That means that we can show you every property that

is available for sale and we can represent you instead

of the seller. The best part about this is that the sellerpays us at the close of escrow and we represent you.

The Best of All Worlds!

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Imperial CountyEl Centro Offi ce1425 Main Street

El Centro, CA 92243(760) 337-6590

Los Angeles County520 North Central Avenue

Glendale, CA 91203(800) 668-4853

Orange County2 First American WaySanta Ana, CA 92707

(800) 854-3643

Riverside County3625 14th Street

Riverside, CA 92501(800) 499-0945

San Bernardino County323 Court Street

San Bernardino, CA 92401(800) 962-2369

San Diego CountyMain Offi ce

411 Ivy StreetSan Diego, C A 92101

(800) 451-0454

Ventura County1889 Rice Avenue

Oxnard, CA 93030(800) 983-1500

www.fi rstam.com