Home Buyer’s -...

Home Buyer’s Handbook

Stay a step ahead. Be sure to specify Advantage Title.

About

1Home Buyer’s Handbook

TABLE OF CONTENTS

The Buying Process

Title Insurance

What Is Covered

Mortgage Affordability

Where Does Your Dollar Go?

Common Forms Of Ownership

Joint Tenancy

Community Property

Common Property With Right Of Survivorship

Common Ways Of Holding Title

Common Form Of Ownership Chart

What Is Escrow?

The Life Of A Purchase And Sale Transaction

The Inspection Process

Home Protection Plans

Who Pays What?

Understanding Supplemental Property Taxes

Tax Prorations

Tax Calendar

County & City Transfer Tax

Buyers Needs

Buyer Needs Prequalification

Buyer’s Worksheet

Getting Pre-Qualified

The Loan Process

Closing Costs

Glossary

Checklist For Moving

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ADVANTAGE TITLE

Advantage Title, powered by Title365™, is a new regionalprovider of real estate transaction services with offices thatserve six counties within the state of California, including LosAngeles, Orange, San Bernardino, Riverside, San Diego andVentura. Advantage Title serves residential real estatebrokers, mortgage and financial institutions, asset managersand commercial and independent escrows with traditionaltitle insurance, escrow and closing services, and diversetechnology Buyers, Brokers and Sellers solutions.

Our unique methodologies and nimble, centralized productfulfillment model deliver superior value and fasterturnaround while measurably improving our client’s businessperformance. Strong relationships with three of thecountry’s largest underwriters, Old Republic, Westcor andFirst American Title Insurance Company, give our clientsevery advantage.

Advantage Title has amassed a seasoned group ofemployees with widely admired customer-centricapproaches, detailed knowledge of real estate and anintimate understanding of the local markets and customs intheir communities. These true professionals have long-standing relationships with the real estate, mortgagelending, legal and building industries, which have dependedupon them to diligently deliver quality title and escrowservices for their customers throughout the years.

At Advantage Title, it is more than professionalism andconsistently outstanding service. It’s a level of passion abouttitle, melded with technology, which is unmatched in theindustry. The technologists behind Title365 introduced thetransaction management standard several years ago bywhich all others were judged. And, with the launch ofTitle365, Advantage Title elevates the bar even higher withindustry-changing, benefits-delivering solutions.

Regardless of the solutions your transaction demands, youare assured one thing: the streamlined operations andtechnical innovation of Advantage Title will make your realestate experience a positive one.

THE BUYING PROCESS

1 Get Pre-Qualified by Lender• Obtain pre-qualification letter.

2 Property Tours• Show you available homes that suit your needs • and preferences.• Listen to you carefully to fine-tune your "ideal • home."• Educate you about the current market.

3 Target a home that is "ideal" and write the Offer• This procedure will take 1-3 hours.• Deliver your earnest money deposit (this check • will be held until there is a ratified contract).

4 Present the Offer• Your Realtor will prepare for a presentation of • your offer by highlighting the strengths of the offer• and your strength as a buyer.• Your realtor will present the offer to the sellers • and the sellers' agent.• The sellers will either accept the offer, counter • your offer, or reject it.

5 Counter Offer• Your Realtor will discuss the counter offer and • how it relates to your goals and prepare a response.

6 Escrow• When the offer has been accepted and signed by • all parties, Your Realtor will open escrow with • United Title Company.• Your earnest money will be deposited at this time.• The escrow officer will order a Preliminary Report • and send copies to your agent and lender.

7 Loan Application• Submit a completed loan application to the • lender of your choice and provide the lender with all• the necessary documents.

8 Contingency Period• Buyer's approval of Seller's Real Estate Transfer • Disclosure Statement.• Buyer's approval of Preliminary Report.• Physical inspections / pest inspections.• Property appraisal and loan approval.

9 Homeowners Insurance Coverage• Select an insurance company and discuss • coverage.Give insurance agent information to escrow; Escrow will need to order a copy of the policy for the new lender prior to escrow closing.

10 Signing documents at Title Company• Your lender will send the loan documents directly • to United Title Company.• You will receive copies of title documents and • lender documents.• You will need Current Photo Identification.

11 Down Payment and Closing Funds• Bring a cashier's check to the Title Company • several days prior to closing.• The escrow officer will provide a Buyer's • Estimated Closing Statement which will itemize your• costs and credits with an estimate of total monies• due.

12 Funding• The lender will send funds to the Title Company.

13 Close of Escrow• The deed will be recorded at the County • Recorder's office by the Title Company (you will • receive the original back from the County • Recorder in approximately 6 weeks).• Your Realtor will coordinate with you the • transfer of the keys and delivery of possessions.

14 MOVE IN!!

Stay a step ahead. Be sure to specify Advantage Title.2 Advantage Title • www.title365.com

TITLE INSURANCE

In California most real estate transactions are closed with theissuance of a title insurance policy in favor of the owner, thelender or both. Many home buyers erroneously assume thatwhen they purchase a piece of real property, possession of thedeed to the property is all they need to prove ownership. Notso, because hidden hazards may attach to real estate. Forgeries,faulty surveys, hidden liens, the false representation of ownershipof a married person as being single are just a few examples offactors which may cloud the title to real property ownership. Aproperty owner's greatest protection is a policy of title insurance.

WHAT IS TITLE INSURANCE?Title insurance insures property owners that they are acquiringmarketable title. Unlike casualty insurance (policies which insureagainst future events), title insurance is designed to eliminate riskor loss caused by defects in title from past events. Title insuranceprovides coverage only for title problems.

A title insurance policy is a contract of indemnity which insuresagainst loss if the title is not as reported; and if it is not and theowner is damaged, the title policy covers the insured for his/herloss up to the face amount of the policy.

THE TITLE SEARCHIssuing a title policy is an extensive and exacting process. Titlecompanies work to eliminate risks by performing a painstakingsearch of the public records or the title company's own "plant,"where public records pertaining to the property and the partiesto the escrow are maintained, to determine the current recordedownership, any record liens, or encumbrances, or other mattersof record which could affect the title to the property. Once atitle search is complete, the title company issues a preliminaryreport detailing the current status of title.

THE PRELIMINARY REPORTThe preliminary report contains vital information which mayaffect the willingness and the ability of the parties to close theescrow: ownership of the subject property, the manner in whichthe current owners hold title, matters of record which specificallyaffect the subject property or the owners of the property, as wellas a legal description of the property and an informational platmap.

The preliminary report indicates the type of title insurance offeredby the title company and the exclusions and exceptions fromcoverage which the policy will be subject to when issued, suchas recorded deeds of trust, easements, agreements, andcovenants, conditions and restrictions (CC&R's).

WHAT TO LOOK FORThe buyer and Realtor should: Review the preliminary reportas soon as it arrives, with particular attention to certain areas:

Verify the ownership vesting. Be certain the names on thereport are the same as the names on the purchase contract.Sometimes the name of an unexpected owner will appear (e.g.a previous spouse or relative who died), and correctivedocuments may be required.

Verify the property address. The plat map and legaldescription should match the address. An owner could own twoproperties adjacent to or across the street from each other,causing confusion in identifying the correct property.

Read the informational notes for pertinent items about theproperty, e.g., transfer taxes, monument fees, homeowners'association fees, etc.

Carefully review the exceptions. Common exceptions includecurrent taxes, bonds, deeds of trust, Mello-Roos assessmentdistrict items, CC&R's and easements. Be sure the CC&R's orexisting easements do not interfere with the buyer's future plans.For example, an easement across the backyard could have aprofound effect on the buyer's ability to add a swimming poollater.

ALWAYS look for surprises. If you cannot locate an easement;if an unexpected deed of trust shows up; if you see an item youwere unaware of before, immediately call the escrow officer ortitle company to discuss the matter. The title company shouldbe a problem solver, and top notch escrow officers and titleofficers go out of their way to resolve quickly the majority of "redflag" areas. However, the responsibility for early detection andresolution of problems falls on the entire escrow team: theRealtors, the escrow and title companies and the buyers andsellers as well.


WHAT IS COVERED

Not all risks can be eliminated by a title search, since certain"hidden defects" like forgeries, identity of persons, incapacity,incompetence and failure to comply with the law, cannot bedisclosed by an examination of the public records. Where thepreliminary report is an offer to insure under certain circumstances,the title policy is a contract, providing coverage against such"hidden defects."

Just a few of the many title risks covered in the California Land TitleAssociation (CLTA) standard coverage policy in the event of a lossinclude a lack of a right of access to and from the land and anumber of recorded defects:

• A forged signature on a deed.• Impersonation of the real owner.• Mistakes in interpretation of wills or other legal • documents.• Deeds delivered without the consent of the owner.• Undisclosed or missing heirs.• Deeds and mortgages signed by persons of • unsound mind, by minors, or by persons • supposedly single but actually married.• Recording mistakes and missed recorded • documents.• Falsification of records.• Errors in copying or indexing.

In addition to indemnifying the insured against losses which resultfrom a covered claim, the policy also provides for legal fees anddefense cost incurred in handling claims against the property.

Extended owner's and lender's policies provide broader coverageand are available in the American Land Title Association (ALTA)policy. Coverage is extended to certain matters that are off-recordbut which are generally discoverable by an inspection or survey ofthe property, or by questioning the parties in possession, such as:

• Unrecorded liens and encumbrances.• Unrecorded easements.• Unrecorded rights of parties in possession.• Encroachments, discrepancies or conflicts in the • boundary lines.

ALTA policies are available for lenders or owners, and a "plainlanguage" ALTA residential policy is also available for owneroccupied residential property of one to four units.

Realtors, buyers and sellers should not assume that all title policiesand title companies are the same. They're not, and it is importantto ask questions of your title company to determine the type andcost of coverage available.

Also available is the Company's Nustar Policy, which is the CLTAHomeowners Policy affording 29 additional coverages over theALTA Residential Policy for an extra charge of ten percent of theBasic Rate over and above the applicable rate. A comparison inprotection coverages among the various policies is shown on thenext page.

This Nustar Policy is so much more extensive in its coverage, andfor such a small increase in premium, that when underwritingcriteria is met, the Nustar is issued routinely. Of course, should aBuyer or Seller choose not to seek the extra protection provided, asimple instruction to that effect to escrow or title officer, preferablyin writing, will move United Title Company to issue the ALTAResidential Policy instead, without the extra ten percent Basic Ratecharge.


WHERE DOES YOUR DOLLAR GO?

Title Insurers, unlike property or casualty insurance companies,operate under the theory of risk elimination. Title companies spenda high percentage of their operating income each year in thecollecting, storing, maintaining and analyzing official records forinformation that affects title to real property. Their technical expertsare trained to identify the rights of others in your property, such asrecorded liens, legal actions, disputed interests, rights of way orother encumbrances on your title. Before closing your transaction,the title company will attempt to "clear" those encumbranceswhich you do not wish to assume.

This theory is different from that of most other insurance where,for example, rates of anticipated losses are based on actuarialstudies and premiums are pooled on the assumption that a certainnumber of claims will be made. The distinction is important: titleinsurance premiums are paid to identify and eliminate potentialrisks and claims before they happen. Medical and casualtyinsurance premiums, for example, are paid to insure against anunpredictable future event, knowing that risks exist and claims willoccur. Furthermore, title insurance involves a one-time premium,paid when you close the real estate transaction, while property,casualty and medical insurance require regular renewal premiums.

The goal of title companies is to conduct such a thorough searchand evaluation of public records that no claims will ever arise. Ofcourse, this is impossible - we live in an imperfect world, wherehuman error and changing legal interpretations make 100 percentrisk elimination impossible. When claims arise, professional claimspersonnel are assigned to handle them according to the terms ofthe title insurance policy.

Title companies' rates are filed with the California Department ofInsurance, and each company is required to publicly post itsschedule of fees. As in all competitive business environments, ratesvary from company to company, so you should make comparisonsbefore deciding on a particular title company. Your real estateprofessional can help you do this. In addition, there are manyhelpful customer services provided by title companies which youand your real estate professional may find helpful to yourtransaction.

The issuance of a title insurance policy is highly labor intensive. It isbased on the maintenance of a title "plant", or library of titlerecords, in many cases dating back over a hundred years. Each dayrecorded documents affecting real property and property ownersare posted to these title plants so that when a title search on aparticular parcel is requested, the information is already organizedfor rapid and accurate retrieval. In California, most of the largecounties have been converted to computer based title plant systemswhich provide retrieval from remote locations, further speeding theprocess of delivering the title search to the customer. Thisinvestment in skilled personnel and advanced data processingrepresents a major part of the title insurance premium dollar.

Proper title plant maintenance, research, evaluation, and legalinterpretation, are the foundations upon which a title policy rests.That is where most of your dollar goes, and that is the source ofprotection and the peace of mind to the homeowner it provides.

COMMON FORMS OFOWNERSHIP

OWNERSHIP OF REAL PROPERTYReal property may be owned by a sole owner, or it may be ownedjointly by two or more persons. A person who is the sole owner ofa parcel of real property is said to be the owner thereof in severalty.Concurrent ownership or co-ownership, on the other hand, meanssimultaneous ownership of a given piece of property by two ormore persons. The several types of concurrent ownership are: (1)tenancy in common; (2) joint tenancy; (3) community property; (4)community property with right of survivorship.

TENANCY IN COMMONA tenancy in common is characterized by only one unity, that ofpossession. It is created whenever an instrument conveys aninterest in real property to two or more persons, and either states“as tenants in common” or does not specify that the interest isacquired by them in joint tenancy or in partnership or as communityproperty. Interest may be any fraction of the whole, thus one partymay own one-tenth, another three-tenths, and a third party mayown the remaining three-fifths. There is no right of survivorship;each tenant owns an interest which on his death vests in his heirsor devisees.


JOINT TENANCYJoint tenancy exists when two or more persons are joint and equalowners of the same undivided interest in specified property. Themain characteristic of a joint tenancy is the right of survivorship.When a joint tenant dies, his interest in the property is terminated,and the estate continues in the survivor or survivors.

The usual method of creation of a joint tenancy is by a deeddescribing the grantee as follows: "to A and B, as joint tenants."The words "with right of survivorship" are often added, but arenot a requisite, since this right is an incident of a joint tenancy,whether expressly recited or not. Problems have frequently arisenregarding the true character of the ownership of property byhusband and wife as joint tenants. Frequently such property,despite the status of joint tenancy ownership, has been treated ascommunity property for purposes of succession, transfer,dispositionin divorce, or seizure by creditors. It may be shown that propertytaken in joint tenancy was thereafter converted into communityproperty by either an oral or written agreement.

The contention that joint tenancy property is in fact communityproperty is often raised in divorce cases. The court does not havethe power to make an award of separate property, but if it isestablished that joint tenancy property is in fact communityproperty, the court may award such property to one spouse.

Although upon the death of one joint tenant, the title automaticallypasses to the survivor, title insurance companies will require someformal procedure before recognizing the new owner. Twomethods are followed: (1) filing an Affidavit Death of Joint Tenant;or (2) obtaining a court decree of death of joint tenant.

COMMUNITY PROPERTYCommunity property is a creation of the Civil Law of Rome andcame to California via Mexico. When the Treaty of GuadalupeHidalgo provided that the property rights of Mexican subjectswould be kept inviolate, the early Californians felt compelled tocontinue the community property system and it becameincorporated into the California constitution. In general,community property represents the earnings and accumulations ofthe marriage.

Persons who are not married to each other cannot hold communityproperty together.

All property of married persons which is not their communityproperty is the separate property of one or the other. Separateproperty consists of: 1 Property owned before marriage; 2proceeds of separate property, such as dividends, rents, profits orproperty received in exchange for separate property; 3 gifts andinheritances received after marriage; 4 property agreed betweenthe spouses to be separate property; 5 earnings of the wife whenshe is living separate and apart from the husband; and 6 earningsof the husband when he is living separate and apart from the wife.

All deeds conveying community property must be signed by bothspouses. This is true, even though the property stands in the nameof the husband or the wife.

COMMON PROPERTY WITHRIGHT OF SURVIVORSHIP

Section 682.1 has been added to the Civil Code to provide that,starting July 1, 2001, married couples in California will be able tovest real and personal property in a new form of holding title:COMMUNITY PROPERTY WITH RIGHT OF SURVIVORSHIP. The actalso provides that the community property of a husband and wife,when expressly declared in the transfer document to be communityproperty with right of survivorship shall pass to the surviving spousewithout having to first pass through the administration of the estate(probate).

The act further permits the right of survivorship to be terminatedprior to death of either spouse the same way a joint tenancy maybe severed.

This form of ownership provides, in the opinion of tax counsel, thebest tax treatment of property in the event of death of a marriedperson and is the primary reason the statute was enacted.

Note: This form of ownership applies to documents prepared on orafter the operative date of July 1, 2001.


COMMON WAYS OFHOLDING TITLE

How Should I take ownership of theproperty I am buying?This important question is one California real property purchasersask their real estate, escrow and title professionals every day.Unfortunately, though these professionals may identify the manymethods of owning property, they may not recommend a specificform of ownership, as doing so would constitute practicing law.

Because real property has become increasingly more valuable, thequestion of how parties take ownership of their property hasgained greater importance. The form of ownership taken—thevesting of title—will determine who may sign various documentsinvolving the property and future rights of the parties to thetransaction. These rights involve such matters as: real propertytaxes, income taxes, inheritance and gift taxes, transferability oftitle and exposure to creditor’s claims. Also, how title is vested canhave significant probate implications in the event of death.

The California Land Title Association (CLTA) advises thosepurchasing real property to give careful consideration to themanner in which title will be held. Buyers may wish to consult legalcounsel to determine the most advantageous form of ownershipfor their particular situation, especially in cases of multiple ownersof a single property.

The CLTA has provided the following definitions of commonvestings as an informational overview only. Consumers should notrely on these as legal definitions. The Association urges realproperty purchasers to carefully consider their titling decision priorto closing, and to seek counsel should they be unfamiliar with themost suitable ownership choice for their particular situation.

Common Methods of Holding TitleSole Ownership Sole ownership may be described as ownership by an individual orother entity capable of acquiring title. Examples of commonvesting cases of sole ownership are:

1. A Single Man or Woman: A man or woman who is not legally married or in a registereddomestic partnership. For example: Bruce Buyer, a single man.

2. A Married Man or Woman as His or Her Soleand Separate Property: A married man or woman who wishes to acquire title in his or hername alone.

The title company insuring title will require the spouse of themarried man or woman acquiring title to specifically disclaim orrelinquish his or her right, title and interest to the property. Thisestablishes that both spouses want title to the property to begranted to one spouse as that spouse’s sole and separate property.For example: Bruce Buyer, a married man, as his sole and separateproperty.

3. A Registered Domestic Partner as His or Her Soleand Separate Property: A registered domestic partner who wishes to acquire title in his orher name alone.

The title company insuring title will require the domestic partner ofthe person acquiring title to specifically disclaim or relinquish his orher right, title and interest to the property. This establishes thatboth registered domestic partners want title to the property to begranted to one partner as that person’s sole and separate property.For example: Bruce Buyer, a registered domestic partner, as his soleand separate property.

Co-OwnershipTitle to property owned by two or more persons may be vested inthe following forms:

1. Community Property: A form of vesting title to property owned together by husband andwife or by registered domestic partners. Community property isdistinguished from separate property, which is property acquiredbefore marriage or before a registered domestic partnership, byseparate gift or bequest, after legal separation, or which is agreedin writing to be owned by one spouse or registered domesticpartner.

In California, real property conveyed to a married person, or to aregistered domestic partner, is presumed to be communityproperty, unless otherwise stated. Since all such property is ownedequally, both parties must sign all agreements and documentstransferring the property or using it as security for a loan. Eachowner has the right to dispose of his/her one half of the communityproperty, by will. For example: Bruce Buyer and Barbara Buyer,husband and wife, as community property.

2. Community Property with Right of Survivorship:A form of vesting title to property owned together by husband andwife or by registered domestic partners. This form of holding titleshares many of the characteristics of community property but addsthe benefit of the right of survivorship similar to title held in jointtenancy. There may be tax benefits for holding title in this manner.On the death of an owner, the decedent’s interest ends and thesurvivor owns the property. For example: Bruce Buyer and BarbaraBuyer, husband and wife, as community property with right ofsurvivorship.

3. Joint Tenancy:A form of vesting title to property owned by two or more persons,who may or may not be married or registered domestic partners,in equal interests, subject to the right of survivorship in the survivingjoint tenant(s). Title must have been acquired at the same time, bythe same conveyance, and the document must expressly declarethe intention to create a joint tenancy estate. When a joint tenantdies, title to the property is automatically conveyed by operation oflaw to the surviving joint tenant(s). Therefore, joint tenancyproperty is not subject to disposition by will. For example: BruceBuyer, George Buyer, as joint tenants.


4. Tenancy in Common:A form of vesting title to property owned by any two or moreindividuals in undivided fractional interests. These fractionalinterests may be unequal in quantity or duration and may arise atdifferent times. Each tenant in common owns a share of theproperty, is entitled to a comparable portion of the income fromthe property and must bear an equivalent share of expenses. Eachco-tenant may sell, lease or will to his/her heir that share of theproperty belonging to him/her. For example: Bruce Buyer, a singleman, as to an undivided 3/4 interest and Penny Purchaser, a singlewoman, as to an undivided 1/4 interest, as tenants in common.

Other ways of vesting title include as:1. A Corporation*:A corporation is a legal entity, created under state law, consistingof one or more shareholders but regarded under law as having anexistence and personality separate from such shareholders.

2. A Partnership*:A partnership is an association of two or more persons who cancarry on business for profit as co-owners, as governed by theUniform Partnership Act. A partnership may hold title to realproperty in the name of the partnership.

3. Trustees of a Trust*:A Trust is an arrangement whereby legal title to property istransferred by the grantor to a person called a trustee, to be heldand managed by that person for the benefit of the people specifiedin the trust agreement, called the beneficiaries.

4. Limited Liability Companies (LLC)*:This form of ownership is a legal entity and is similar to both thecorporation and the partnership. The operating agreement willdetermine how the LLC functions and is taxed. Like the corporationits existence is separate from its owners.

*In cases of corporate, partnership, LLC or trust ownership - requireddocuments may include corporate articles and bylaws, partnershipagreements, LLCoperating agreements and trust agreements and/orcertificates.

RememberHow title is vested has important legal consequences. You maywish to consult an attorney to determine the most advantageousform of ownership for your particular situation.

Information gathered from the California Land Title Association.


WHAT IS ESCROW?

Escrow is the depositing of funds and documents by the partieswith an impartial third party for delivery upon completion of theterms of the escrow instruction. The word escrow is derived fromthe French word 'escroue' meaning a scroll or roll of writing.

When the parties deliver documents and money to the impartialEscrow Officer to be held for further delivery until certain conditionshave been met, we say the documents are held "in escrow". Wemay also say the parties have "opened an escrow". Each of theprincipals of the escrow (seller, buyer, lender) will give to the escrowholder written instructions setting out the conditions under whichthe further delivery is to be made. These instructions are usuallytyped by the Escrow Officer or the Escrow Secretary from oralinformation supplied by the principals or from a contract signedbefore they arrived at the escrow office.

THE PURPOSE OF AN ESCROWThe common use of an escrow is to enable the parties in a realestate transaction to deal with each other with less risk, since theescrow holder acts as:

1 Custodian for funds and documents.2 A clearing house for payment of all demands.3 An agency to perform the clerical details for the

settlement of the accounts between the parties.

TYPICAL ESCROW TRANSACTIONTypically, an escrow begins with the customer "opening the orderfor title work". In other words, giving United Title Company thenecessary information regarding the transaction and requestingthat it prepares a preliminary report or a commitment. Preliminaryreport provides the customer with an analysis of the present statusof title to the property as revealed by the public records filed orrecorded in the county in which the property is located. Acommitment (issued in some jurisdictions) additionally specifies therequirements which must be met in order to issue the requestedinsurance.

Upon receipt of the preliminary report, an analysis is made todetermine the necessary action and documents required tocomplete the transaction: demands for satisfaction of liens notacceptable to buyer and/or lender; documents for recording;instructions and requirements of the new lender. In most areas,buyers and sellers instructions are prepared for signature from theinformation gathered. When all the title and financial requirementsare met, and instructions from all parties can be fully complied with,the escrow is said to be "in perfection" and can close. Then thefinancial settlement takes place, the documents are recorded andthe title insurance policies are issued.

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THE LIFE OF A PURCHASE ANDSALE TRANSACTION

It all begins with the offer and acceptance skillfully negotiated bythe Realtors representing Buyer and Seller.

The Buyer(s)Submits a written offer to purchase (or accepts the Seller's counter-offer) accompanied by a good faith deposit amount.

Applies for a new loan by submitting all required forms and oftenpays certain fees such as credit report and application costs.

Approves the preliminary report and any property, disclosure orinspection reports called for by the purchase and sale agreement,(Deposit Receipt).

Approves and signs the escrow instructions, new loan documentsand other related instruments required to complete the transaction.

Fulfills any remaining conditions contained in the contract, lender'sinstructions and/or the escrow instructions.

Approves any final changes by signing amendments in the escrowinstructions or contract.

Deposits sufficient funds in the escrow to pay the remaining downpayment and closing costs.

The Lender (when applicable)Accepts the new loan application and other related documentsfrom the Buyer(s) and begins the qualification process.

Orders and reviews the property appraisal, credit report, verificationof employment, verification of deposit(s), preliminary report andother related information.

Submits the entire package to the loan committee and/orunderwriters for approval.

When approved, loan conditions and title insurance requirementsare established. Informs Buyer(s) of loan approval terms, commitment expirationdate, and provides a good faith estimate of the closing costs.

Deposits the new loan documents and instructions with the escrowholder for Buyer's approval and signature.

Reviews and approves the executed loan package and coordinatesthe loan funding with the escrow officer.

The Escrow OfficerReceives an order for the title and escrow services for United TitleCompany.

Accepts buyers earnest money deposit.

Orders the title search and examination on the subject propertyfrom United Title’s title officer.

Acts as the impartial "stakeholder" or depository, in a fiduciarycapacity, for all documents and monies required to complete thetransaction per written instructions of the principals. With the authorization from the real estate agent or principal,

orders demands on existing deeds of trust and liens or judgments,if any. For assumption of loan by Buyers, orders the beneficiary'sstatement or formal assumption package.

Reviews documents received in the escrow: preliminary report,payoff or assumption statements, new loan package and otherrelated instruments. Reviews the conditions in the lender'sinstructions including the hazard and title insurance requirements.

Prepares the escrow instructions and required documents togetherwith a preliminary estimate of settlement charges, for the Buyerand Seller, in accordance with the terms of the purchase and saleagreement.

Presents the instructions, documents, statements, loan package(s),estimated closing statements and other related documents to theprincipal(s) for approval and signature.

Reviews the signed instructions and documents, returns the loanpackage, and requests the lender's funds.

Determines when the transaction will be in the position to closeand advises the parties.

Assisted by title personnel, records the deed, deed of trust andother documents required to complete the transaction with theCounty Recorder and orders the title insurance policies.

Closes the escrow by preparing the final settlement statements,disbursing the proceeds to the Seller, paying off the existingencumbrances and other obligations. Delivers the appropriatestatements, funds and remaining documents to the principals,agents and/or lenders.

The Seller(s)Submits documents and information to escrow holder, such as:addresses of lien holders, tax receipts, equipment warranties, homewarranty contracts, any leases and/or rental agreements.

Orders inspections, receives clearances and approves final reportsand/or repairs to the property as required by the terms of thepurchase and sale agreement (Deposit Receipt).

Approves and signs the escrow instructions, payoff demands, grantdeed and other related documents required to complete thetransactions.

Approves any final changes by signing amendments to the escrowinstructions or contract.

The Title OfficerExamines the title to the real property and issues a preliminaryreport.

Determines the requirements and documents needed to completethe transaction and advises the escrow officer and/or agents.

Reviews and approves the signed documents, releases the order fortitle insurance, prior to the closing date.

When authorized by the escrow officer, the title officer records thesigned documents with the County Recorder's office and issues thetitle insurance policies.


THE INSPECTION PROCESS

During the contingency period, the Buyer or Seller will orderphysical inspections as specified in the Purchase Agreement.Legislation mandates, under Civil Code 1102, that the sellerhas the responsibility to reveal the true condition of theproperty on a Transfer Disclosure Statement. This may helpdetermine what kind of property inspections are desired ornecessary.

Who Pays?Your Purchase Sale Agreement will specify who isresponsible for the costs of inspections and for making anyneeded corrections or repairs. It is negotiable between theparties and should be considered carefully. Your agent willadvise you what is customary and prudent.

Structural Pest Control InspectionA licensed inspector will examine the property for any activeinfestation by wood destroying organisms. Most termitereports classify conditions as Section I or Section II. Theinspection and the ensuing Section I repair work is usuallypaid for by the seller. Section II preventative measures aregenerally negotiated, and not necessarily completed.

Section I ConditionsSection I conditions are those currently causing damage tothe property. These conditions generally need to becorrected before a lender will make a loan on a home.

Section II ConditionsSection II conditions are those not currently causing damagebut which are likely to, if left unattended.

Home InspectionThis inspection may encompass roof, plumbing, electrical,heating, appliances, water heater, furnace, exterior siding,and other visible features of the property. A detailed reportwill be written with recommendations, often times therecommendation is to consult a specialist (such as astructural engineer). The inspection fee is usually paid by thebuyer.

Geological InspectionIf requested, a soils engineer will perform an inspection ofthe soil conditions and the stability of the ground beneaththe structure, as well as research past geological activity inthe area. Typically, the buyer pays for this inspection. Youmay also elect to go to the city and research the propertyand its proximity to known earthquake fault lines.

HOME PROTECTION PLANS

Home Protection Plans protect the Buyer's major investmentbeginning immediately upon close of escrow. The planscover major mechanical systems in the home as well ascertain major appliances. Realtors are familiar with some ofthe various plans available and will be happy to gather aselection of programs for you to study.


Often times supplemental property taxes come as a surpriseto a new homeowner. This Title Tip should help youunderstand what they are for and how they affect newhomeowners.

When was the supplemental real property tax law enacted?Governor George Deukmejian signed the Supplemental RealProperty tax into law in July 1983.

How do supplemental taxes affect you?Supplemental property taxes only arise upon a transfer ofproperty or completion of construction. After the purchaseor new construction is complete, the new owner will receivea bill for supplemental property taxes which will become alien against the property as of the date of ownership changeor the date of completion of new construction.

When and how are the bills generated?It's not easy to predict when the new property owner will bebilled. It may be as soon as three weeks after escrow closesor the new construction is complete. It also might take sixmonths or more, depending on what county the property islocated 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 ownerof the new supplemental assessment amount. The propertyowner will then have the opportunity to discuss thevaluation, apply for a Homeowner's Exemption and beinformed of their right to file an Assessment Appeal. TheAssessor then calculates the amount of the supplemental taxand the Tax Collector mails a supplemental tax bill to theproperty owner. The bill will identify the amount of thesupplemental tax and the date the taxes will becomedelinquent.

How will the amount of the bill be determined?}A formula is used to determine the tax bill. The totalsupplemental assessment will be prorated based on thenumber of months remaining until June 30, the end of thetax year.

The proration factor works like this: The supplemental taxbecomes effective on the first day of the month followingthe month in which the change of ownership or completionof new construction actually occurred. If the effective dateis July 1, then there will be no supplemental assessment onthe current tax roll and the entire supplemental assessmentwill be made to the tax roll being prepared which will thenreflect the full cash value. If the effective date is not on July1, the factors represented in the table below are used tocompute the supplemental assessment on the current taxroll.

If effective date is: Proration factor is:August 1 .92September 1 .83October 1 .75November 1 .64December 1 .58January 1 .50February .42March 1 .33April 1 .25May 1 .17June 1 .08

Example: The county Auditor finds that the supplementalproperty taxes on the new home would be $1,000 for a fullyear. The change of ownership takes place on September 15with the effective date being October 1: the supplementalproperty taxes would be subject to a proration factor of .75and 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 aredelinquent on specified dates depending on the monththe bill is mailed as follows:

If the bill is mailed within the months of Julythrough October, the first installment will become delinquent on December 10 of the same year. The second installment will become delinquent on April 10 of the next year.

If the bill is mailed within the months of November through June, the first installment 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 first installment is delinquent.

Will supplemental property taxes be prorated in escrow?No. Unlike ordinary annual taxes, the supplemental tax is aone-time tax due for the period from the date of newownership or completion of new construction, until the endof the tax year. It is payable entirely by the new propertyowner.


1

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UNDERSTANDING SUPPLEMENTAL PROPERTY TAXES


COUNTY & CITY TRANSFER TAX


Name:________________________________________________________

Address:_______________________________________________________

____________________________________________________________________________________________________________________

Price range desired:___________________________________________________________________________________________________

Where do you want to live? ____________________________________________________________________________________________

Number of children, if any? ____________________________________________________________________________________________

Are public/private schools an issue? ____________________________________________________________________________________

___________________________________________________________________________________________________________________

What style and age of house would you be interested in?___________________________________________________________________

___________________________________________________________________________________________________________________

___________________________________________________________________________________________________________________

How many bedrooms and baths?______________________________________________________________________________________

Is yard space important?______________________________________________________________________________________________

Is deck availability important?__________________________________________________________________________________________

How many levels would be preferred?___________________________________________________________________________________

Upslope?________________Downslope?________________View?____________________________________________________________

Are kitchen size and equipment important?______________________________________________________________________________

Family room? _____________ Square feet ____________________ Level yard? ________________________________________________

How long have you been looking?______________________________________________________________________________________

Did you see anything you liked?________________________________________________________________________________________

If so, why didn't you buy it?___________________________________________________________________________________________

What type of parking do you prefer (off street, garage, attached)?___________________________________________________________

___________________________________________________________________________________________________________________

___________________________________________________________________________________________________________________

Is access to public transportation important?_____________________________________________________________________________

___________________________________________________________________________________________________________________

Home Phone:_______________________________________

Work Phone:________________________________________

BUYER NEEDS


Date:_______________________ Requesting Agent: ____________________________________________________________________

Borrowers: _______________________________________________________________________________________________________

Address: _________________________________________________________________________________________________________

Social Security No(s). ___________________________________________________________________________

Gross Monthly Income Borrower: ___________________________________________

Co-Borrower: ___________________________________________

Other: ___________________________________________

TOTAL INCOME: ___________________________________________

Monthly Debt: Car Payments: ___________________________________________

Credit Cards: ___________________________________________

Alimony: ___________________________________________

Child Support: ___________________________________________

Other: ___________________________________________

TOTAL DEBT: ___________________________________________

Down Payment: Amount: ________________________ Source: ________________________

Credit: Bankruptcy: _____________________ Judgements: ____________________

Sales/Purchase Price: _______________________________________________________________________________________________

Down Payment: ___________________________________________________________________________________________________

Loan Amount: ____________________________________________________________________________________________________

Loan Program: ___________________________________________ LTV: _____________________________________________

Interest Rate: _____________________________________________ P&I: ____________________________________________

Margin: ________________ Index: ___________________________ Insurance: _______________________________________

Caps: ___________________________________________________ PITI: _____________________________________________

Housing Ratio: ___________________________________________ Total Debt Ratio: __________________________________

Comments:

____________________________________________________________________________________________________________________

____________________________________________________________________________________________________________________

____________________________________________________________________________________________________________________

____________________________________________________________________________________________________________________

Homeowner's Association: _________________________________ Dues: ______________________________________________

Private Mortgage Insurance: ___________________________________________________________________________________________

BUYER NEEDS PREQUALIFICATION


Prepared for:____________________________Property:_____________________________Date:________

$_______________Contract Price

$_______________1st Loan Amt.__________%__________years

$_______________2nd Loan Amt.__________%__________years

$_______________Total Loans

$_______________Cash Down Payment

$_______________Closing Costs

$_______________Total Cash Required to Close

CLOSING COSTS

$_______________1st Loan or assumption fee __________points plus ($__________)

$_______________2nd Loan or assumption fee __________points plus ($__________)

$_______________Appraisal fee ($300 up front with mortgage brokers)

$_______________Credit report ($40-45)

$_______________Tax service ($54-75)

$_______________CLTA policy (Fee Schedule - Sales Price)

$_______________ALTA policy (Fee Schedule - Loan Amount)

$_______________Escrow fee (Fee Schedule)

$_______________Document preparation ($400-500)

$_______________Notary and recording ($30 each - average)

$_______________Title drawing ($75 average)

$_______________City Transfer Tax (Oak $15.00 - Pied $13.00 - Berk $15 - 50/50 split)

$_______________Termite inspection ($100-160)

$_______________Home inspection ($285-350)

$_______________Home warranty ($275-$350)

$_______________Interim interest - new loan (15 days average)

$_______________Homeowners insurance ($3.55K - range $3.10K-3.85K)

$_______________Insurance impound - if applicable

$_______________PMI impound - if applicable (14 months)

$_______________Tax impound - if applicable

$_______________Tax pro-rate (+/-)

$_______________Courier ($30 average)

$_______________TOTAL Closing Costs

These calculations are approximate and cannot be guaranteed

MONTHLY PAYMENT

$_______________1st Loan

$_______________2nd Loan

$_______________Taxes

$_______________Insurance

$_______________PMI

$_______________Total Mo. Payment

BUYER’S WORKSHEET

GETTING PRE-QUALIFIEDOnce you have an idea of the type and size home you want andthe area you'd like to look in, you should be pre-qualified by alender. By doing this before looking for a home you'll save yourselftime, energy and frustration because pre-qualification can:

Determine How Much Home You Can Afford Pre-qualification helps you avoid buying less home than you canafford or being disappointed if you don't qualify for as much as youhad hoped.

Shows What Your Total Investment Will Be You'll know approximately how much money you'll need for downpayment and closing costs.

Lets You Know What Monthly Payment Will BeYou'll have a close estimate of what your monthly principal,interest, taxes and insurance(PIT) will be.

Identifies the Loan Programs You Can Qualify ForWith the wide variety of loan programs available, it is important toknow which types you qualify for and which will best suit yourneeds.

Strengthens Your OfferSellers are more inclined to accept realistic offers when they knowthat you have taken the time to be interviewed by a lender and canprobably qualify for the loan.

At this point, your lender can also help you determine alternativesand strategies that could help you buy the home of your dreams.Some examples include:

• Special First Time Homebuyer Program• Co-Mortgage Financing• Debt Consolidation Counseling

In order to be pre-qualified, the lender will need to know thefollowing:

• Your Employment History and Income.• Your Monthly Debts and Obligations.• The Amount and Source of Cash Available

for Down Payment and Closing Costs

When you are pre-qualified by a Mortgage Company, you'll receivea FREE Pre-Qualification Certificate to give to your Realtor. TheSeller may be more likely to accept your offer because you havebeen qualified to buy their home.

THE LOAN PROCESSStep 1 The Loan ApplicationThe key to the loan process going smoothly is the initial interview.At this time, the lender obtains all pertinent documentation sounnecessary problems and delays may be avoided. The Realtoropens escrow with the title company at this time as well.

Step 2 Ordering DocumentationWithin 24 hours of application, the lender requests a credit report,an appraisal on the new property, verifications of employment andfunds to close, mortgage or landlord ratings; a preliminary reportand any other necessary supporting documentation.

Step 3 Awaiting Documentation

Within one to two weeks, the lender begins to receive thesupporting documentation. As it comes in, the lender checks forany problems that might arise and requests any additional itemsneeded.

Step 4 Loan SubmissionOnce all the necessary documentation is in, the loan processorassembles the loan package and submits it to the underwriter forapproval.

Step 5 Loan ApprovalLoan approval generally takes anywhere from 24 to 72 hours. Allparties are notified of the approval and any loan conditions whichmust be cleared before the loan can close. The loan approval is thebeginning of the closing process.

Step 6 Documents are DrawnWithin 1 to 3 days after loan approval, the loan documents(including the note and deed of trust) are completed and sent tothe escrow holder. The escrow officer will make an appointmentfor the borrowers to sign the final documents. At this time, theborrowers are told how much money they will need to bring in toclose the loan. Payment must usually be made by a cashier's check.

Step 7 FundingOnce all parties have signed the loan documents, they are returnedto the lender who reviews the package. If all the forms have beenproperly executed, a check is issued to fund the loan.

Step 8 RecordationUpon receipt of the loan funds, the title company will record thelegal documents necessary to transfer the property into the buyer'sname. At the same time, the deed of trust is recorded to show thenew loan on the property. Escrow is now officially closed and younow own your home.

Please consult your Mortgage Consultant for more detailedinformation regarding your loan.

CLOSING COSTSBelow is an overview of the types of closing costs you may incur onyour loan. Some are one-time fees while others recur over the lifeof the loan. When you apply for your loan, you will receive a GoodFaith Estimate of Settlement Charges and a booklet explainingthese costs in detail.

Loan Origination FeeThis fee covers the lender's administrative costs in processing theloan. It is a one-time fee and is generally expressed as a percentageof the loan amount.

Loan DiscountOften called "Points", a loan discount is a one-time charge used toadjust the yield on the loan to what market conditions demand.One point is equal to 1% of the loan amount.

Appraisal FeeThis is a one-time fee that pays for an appraisal, a statement ofproperty value required on most loans. The appraisal is made byan independent appraiser.

Credit Report FeeThis one-time fee covers the cost of the credit report which isprocessed by an independent credit reporting agency.


Title Insurance FeesThere are two title policies, a buyer's title policy (which protects thenew homeowner) and a lender's title policy (which protects thelender against loss due to a defect in the title). These are both one-time fees.

Miscellaneous Title ChargesThe title company may charge fees for a title search, titleexamination, document preparation, notary fees, recording feesand a settlement or closing fee. These are all one time charges.Document Preparation FeeThere may be a separate, one-time fee that covers preparation ofthe final legal papers, including the note and deed of trust.

Prepaid Interest Depending on the day of the month your loan closes, this chargemay vary from a full month interest to just a few days interest. Ifyour loan closes at the beginning of the month, you will probablyhave to pay the maximum amount. If your loan closes near the endof the month, you will only have to pay a few days interest. Yourfirst payment will usually be 30 days after the date pre-paid interestis paid through.

Mortgagee Insurance MI PremiumDepending on the amount of your down payment, you may berequired to pay a fee for mortgage insurance (which protects thelender against loss due to foreclosure). You may also be requiredto put a certain amount for MI into a special reserve account (calledan impound account) held by the lender.

Taxes & Hazard InsuranceBased on the month you close, property taxes will be proratedbetween you and the seller. You will also need to pay an entireyear's hazard insurance premium upfront (Homeowner'sInsurance). In addition, you may be required to put a certainamount for taxes and insurance into a special reserve account(impound account) held by the lender.

GLOSSARYAcknowledgment: A formal declaration made before anauthorized official (usually a notary public), by the person who hasexecuted (signed) a document, that such execution is his/her ownact and deed. In most instances documents must be acknowledged(notarized) before they can be accepted for recording.

Adjustable Rate Mortgage (ARM): A mortgage with an interestrate that changes over time in line with movements in the index.ARMs are also referred to as AMLs (adjustable mortgage loans) orVRMs (variable rate mortgages).

Adjustment Period: The length of time between interest ratechanges on an ARM. For example, a loan with adjustment periodof one year is called a one-year ARM, which means that the interestrate can change once a year.Affidavit: A sworn statement in writing, made before anauthorized official.

A.L.T.A.: Abbreviation for the American Land Title Association.

Amortization: Repayment of a loan in equal installments ofprincipal and interest, rather than interest-only payments.

Annual Percentage Rate (APR): The total finance charges(interest, loan fees, points) expressed as a percentage of the loanamount.Assessments: Specific and special taxes (in addition to normaltaxes) imposed on real property to pay for public improvementswithin a specific geographic area.

Assumption of Mortgage: A buyer's agreement to assume theliability under an existing note that is secured by a mortgage ordeed of trust. The lender must approve the buyer in order torelease the original borrower (usually the seller) from liability.

Attorney-In-Fact: An agent authorized to act for another undera Power of Attorney.

Balloon Payment: A lump sum principal payment due at the endof some mortgages or other long-term loans.

Beneficiary: As used in a trust deed, the Lender is designated asthe Beneficiary, i.e. obtains the benefit of the security.

Cap: The limit on how much the interest rate can be adjusted overthe life of the mortgage.

CC&Rs: Covenants, Conditions and Restrictions. A document thatcontrols the use, requirements and restrictions of a property.


Certificate of Reasonable Value (CRV): A document thatestablishes the maximum value and loan amount for a VAguaranteed mortgage.

Conventional Loan: A mortgage loan which is not insured orguaranteed by a governmental agency.

Closing Statement: The financial disclosure statement thataccounts for all of the funds received and disbursed at the closing,including deposits for taxes, hazard insurance, and mortgageinsurance.

Condominium: A form of real estate ownership. The ownerreceives title to a particular unit and has a proportionate interest incertain common areas. The unit itself is generally a separatelyowned space whose interior surfaces (walls, floors, and ceilings)serve as its boundaries.

Contingency: A condition that must be satisfied before a contractcan be completed. For instance, a sales agreement may becontingent upon the buyer obtaining financing.

Conversion to Clause: A provision in some ARMs that enablesyour to change an ARM to a fixed-rate loan, usually after the firstadjustment period. The new fixed rate is generally set at theprevailing interest rate for fixed-rate mortgages. This conversionfeature may cost extra.

CRB: Certified Residential Broker. To be certified, a broker mustbe a member of the National Association of Realtors, have fiveyears' experience as a licensed broker and have completed fiverequired Residential Division courses.

Deed: Written instrument by which the ownership of land istransferred from one person to another.

Deed of Trust: Written instrument by which title to land istransferred to a trustee as security for a debt or other obligation.Also called Trust Deed. Used in place of mortgages in many states.

Deposit Receipt: Used when accepting "Earnest Money" to bindan offer for property by a prospective purchaser; also includes termsof a contract.

Due-On-Sale Clause: An acceleration clause that requires fullpayment of a mortgage or deed of trust when the secured propertychanges ownership.

Earnest Money: The portion of the down payment delivered tothe seller or escrow agent by the purchaser with written offer asevidence of good faith. It is deposited into escrow upon openingof escrow.

Easement: A right to use the property of another for a specifiedpurpose.

Escrow: A procedure in which a third party acts as a stakeholderfor both the buyer and the seller, carrying out both parties'instructions and assuming responsibility for handling all of thepaperwork and distribution of funds.

FHA (Federal Housing Administration): A federal agency, createdby the National Housing Act of 1934, for the purpose of expandingand strengthening home ownership by making private mortgagefinancing possible on a long-term, low-down payment basis. FHAinclude a mortgage insurance program, with premiums paid by the

homeowner, to protect lenders against loss on these higher-riskloans. Since 1965, FHA has been part of the newly-createdDepartment of Housing and Urban Development (HUD).

Federal National Mortgage Association (FNMA): Popularlyknown as Fannie Mae. A privately owned corporation created byCongress to support the secondary mortgage market. It purchasesand sells residential mortgages insured by FHA or guaranteed bythe VA, as well as conventional home mortgages.

Fee Simple: An estate in which the owner has unrestricted powerto dispose of the property as he wishes, including leaving by will orinheritance. It is the greatest interest a person can have in realestate.

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

Graduated Payment Mortgage: A residential mortgage withmonthly payments that start at a low level and increase at apredetermined rate.

Grant: A transfer of real property.

Grantee: The person to whom a grant is made.

Grantor: The person who makes a grant.

GRI: Graduate Realtors Institute. A professional designationgranted to a member of the National Association of Realtors whohas successfully completed three courses covering Law, Finance andPrinciples of Real Estate.

Home Inspection Report: A qualified inspector's report on aproperty's overall condition. The report usually includes anevaluation of both the structure and mechanical systems.

Home Warranty Plan: Protection against failure of mechanicalsystems within the property. Usually includes plumbing, electrical,heating systems and installed appliances.

Impound Account: Funds retained by a lender to cover such itemsas taxes and hazard insurance premiums.

Index: A source of interest rates, used to determine changes in anARM's interest rate over the term of the loan.


Joint Tenancy: An equal undivided ownership of property by twoor more persons. Upon the death of any owner, the survivors takethe decedent's interest in the property.

Lien: A legal hold or claim on property as security for a debt orcharge.

Loan Commitment: A written promise to make a loan for aspecified amount on specified terms.

Loan-To-Value Ratio: The relationship between the amount ofthe mortgage and the appraised value of the property, expressedas a percentage of the appraised value.

Margin: The number of percentage points the lender adds to theindex rate to calculate the ARM interest rate at each adjustment.

Mortgage Banker: A company or individual engaged in thebusiness of originating mortgage loans with its own funds.Frequently those loans are sold to long-term investors, with themortgage banker servicing the loans for the investor until they arepaid in full.

Mortgage Life Insurance: A type of term life insurance oftenbought by borrowers. The coverage decreases as the mortgagebalance declines. If the borrower dies while the policy is in force,the debt is automatically covered by insurance proceeds.

Negative Amortization: Negative amortization occurs whenmonthly payments fail to cover the interest cost. The interest thatisn't covered is added to the unpaid balance, which means thateven after several payments you could owe more than you did atthe beginning of the loan. Negative amortization can occur whenan ARM has a payment cap that results in monthly payments thataren't high enough to cover the interest.

Origination Fee: A fee or charge for work involved in evaluating,preparing, and submitting a proposed mortgage loan. The fee islimited to 1 percent for FHA and VA loans.

Personal Property: Movable property; all property which is notreal property: e.g., furniture, car, clothing.

PITI: Principal, interest, taxes and insurance.

Planned Unit Development (PUD): A zoning designation forproperty developed at the same or slightly greater overall densitythan conventional development, sometimes with improvementsclustered between open common areas. Uses may be residential,commercial or industrial.

Point: An amount equal to 1 percent of the principal amount ofthe investment or note. The lender assesses loan discount pointsat closing to increase the yield on the mortgage to a positioncompetitive with other types of investments.

Prepayment Penalty: A fee charged to a mortgagor who pays aloan before it is due. Not allowed for FHA or VA loans.Private Mortgage Insurance (PMI): Insurance written by a privatecompany protecting the lender against loss if the borrower defaultson the mortgage.

Purchase Agreement: A written document in which the purchaseragrees to buy certain real estate and seller agrees to sell understated terms and conditions. Also called a sales contract, earnestmoney contract, or agreement for sale.

Real Property: Land and buildings as opposed to personalproperty or chattels.

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

Recordation: Filing for record in the office of the county recorder.

Regulation Z: The set of rules governing consumer lending issuedby the Federal Reserve Board of Governors in accordance with theConsumer Protection Act.

Tenancy in Common: A type of joint ownership of property bytwo or more persons with no right of survivorship.

Title: Evidence of a person's right or the extent of his interest inproperty.

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

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

Veterans Administration (VA): An independent agency of thefederal government created by the Service Men's Readjustment Actof 1944 to administer a variety of benefit programs designated tofacilitate the adjustment of returning veterans to civilian life.Among the benefit programs is the Home Loan Guaranty Programdesignated to encourage mortgage lenders to offer long-term lowdown payment financing to eligible veterans by guaranteeing thelender against loss on these higher-risk loans.



Before You Leave:�� Obtain movers guide from your local post office. �� Update credit card, other accounts. �� Subscriptions: six or eight weeks notice. Notify friends and � relatives.

Bank �� Transfer funds and arrange check cashing in your new city.�� Cancel any automatic payment or direct deposit � arrangements. �� Arrange credit references.

Insurance�� Notify companies of new location for coverage. �� Life, Health, Fire & Auto.

Utility Companies �� Gas, Light, Water, Telephone, Fuel, Garbage and Cable TV.�� Get refunds on any deposits made.

Delivery Service�� Laundry, newspaper, change-over of services.

Children�� Register in school.�� Transfer school records.�� Arrange for day care.

Records �� Ask doctor and dentist for referrals; get prescriptions,� eyeglasses, X-rays if appropriate. �� Get copies of birth certificates, medical records, children's'� school records, etc.

Pets �� Ask about regulations for licenses, vaccinations, tags.�� Consult a veterinarian about moving pet.�� Obtain all records.

Don't Forget To �� Empty and defrost freezer and clean refrigerator; charcoal � inside will control odors.�� Have appliances serviced before moving. �� Clean rugs or clothing before moving; have them moving� Wrapped.�� Clean and /or repair furniture and curtains. �� Plan for special care needs for your infants and pets. �� Make arrangements for moving your plants; moving � companies do not typically assume responsibility for them. �� If you are moving to Arizona, California, Florida, or New � Mexico, ask about bringing your plants into the state. �� Cancel or update address for newspaper. �� Make arrangements for TV and antenna if any. �� Discuss with your moving counselor: insurance � coverage,packing and unpacking labor, arrival day, various � shipping papers, method and time of expected payment.

�� Make sure to have the things with you that you will need � right away when you arrive - alarm clock, phone, lamp, � radio, bowls, utensils, bathroom tissue, napkins, snacks, � cereal, coffee pot, etc. �� Obtain relocation package from Real Estate Agent or � Chamber of Commerce.�� Arrange for storage (if needed).�� Find out about tax deductible moving expenses. �� Obtain all personal records from lawyers and accountants. �� Assemble packing materials. �� Have car serviced and checked for the trip. �� Pack a day or two worth of extra clothing in case of delay. �� Find a legal way to dispose of items moving companies are� not allowed to move - paint, oil, propane tanks, finger nail � polish and remover, matches, batteries, ammunition, and � any other items that would damage your belongings if � pilled.

Moving Day �� Make a list of every item and box loaded onto the truck. �� Carry enough cash or travelers checks to cover cost of � moving services and expenses until you make banking � connections in your new city. �� Take jewelry, family photos, and important documents with� you - or mail them to yourself by registered mail. �� Carry an assortment of toys for the children (if needed). �� Let a close friend or relative know the route and schedule �� you will travel, including overnight stops; ask him or her to� take messages until you get settled. �� Double check closets, drawers, and shelves to be sure they �� are empty. �� Turn off all appliances and lock all doors and windows. �� Leave all old keys needed by new tenant or owner with � realtor or neighbor. �� Let the movers know where you can be reached.

At Your New Home �� Check off all boxes and items as they come off the truck. �� Install new locks.�� Check on telephone, gas, electricity, water, and trash � �� pickup. �� Check pilot light on stove, hot water heater, and furnace. �� Have appliances checked. �� Ask mail carrier for mail that may have been held until your� arrival. �� Apply for driver's license - or just address change. �� Register to vote. �� Register car within five days after arrival in state or a penalty� may have to be paid when getting new license plates. �� Obtain inspection sticker and transfer motor club � membership. �� Register children in school. �� Arrange for medical services: doctor, dentist, � veterinarian, etc.

CHECKLIST FOR MOVING

Stay a step ahead. Be sure to specify Advantage Title.

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