| Q 1. |
What
is title insurance? |
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Title insurance is the application
of insurance principles to hazards inherent in real estate
titles. |
| Q 2. |
What is "title"? |
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"Title" is the foundation of ownership of property. It means that you have a legal right to possess that property and to use it within the restrictions imposed by authorities or limitations on its use-superimposed on the basic right to possession by previous owners. |
| Q 3. |
Why does buying a Los Angeles Home differ from all other purchases? |
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A: No other property has a useful life that compares with the life of land. Owners die, new ones succeed, but land goes on forever. Owners of goods may change their locations at will, but land is immovable. Being both permanent and immovable, it lends itself to the absorption of innumerable rights. Over the ages, this so impressed lawyers and jurists that they formed a separate body of laws for land. These laws, creating many types of rights in land, are so numerous and so complex it is impossible for there to be a mathematical certainty of ownership. |
| Q 4. |
What are some of the limitations and restrictions commonly imposed on land? |
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A: There are many common encumbrances placed on land. The most common is a mortgage. As long as the mortgage or any portion of it is outstanding, only a limited title can be passed. Other common limitations are the granting of the right to cross the property with electric and telephone lines, an underground cable or sewer line. A family burial plot establishes a sanctified spot for all time. An ordinance may restrict land to residential use, or it may prohibit construction of a building closer than a specified number of feet from the street line. These are just a few of the many limitations that are placed on the uses of land. |
| Q 5. |
What is meant by a title defect? |
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A: Boiled down, a title defect is anything in the entire history of ownership of a piece of real estate which may encumber the owner's right to the "peaceful enjoyment" of the property or which may cause the owner to lose any portion of the property. |
| Q 6. |
Is title insurance always used in property transfers? |
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A: No. Sometimes an abstract of title is considered sufficient by the purchaser. Sometimes only a deed (usually a General Warranty Deed) is required. And in other cases an attorney will offer an opinion or certificate of title which a purchaser might accept as sufficient protection. |
| Q 7. |
Why won't a General Warranty Deed fully protect me? |
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A: With a General Warranty Deed the grantor can pass on to the grantee only such title as he or she holds. It is true that if title fails, the purchaser may have, under some circumstances, a cause of action against the grantor, but the chance of recovery is dependent entirely upon the financial ability of the grantor to pay at the time that judgment is acquired-often after a long and expensive court action. Title insurance is a corporate guarantee of a company operating under the rules and regulations of the insurance commission or other state agency. The security afforded by any policy is controlled by the integrity and financial structure of the company issuing the policy. |
| Q 8. |
Does title insurance protect the safety of my investment and the security of my Los Angeles Home? |
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A: Yes, although title insurance cannot eliminate title defects any more than fire insurance can eliminate fire. However, title insurance (1) assures you of the best possible legal defense if your title is attacked and (2) reimburses you up to the face amount of the policy if the title, or any part of it, should fail. |
| Q 9. |
When I buy a Los Angeles Home and protect it with title insurance, what happens in the event someone should challenge my ownership of the property five or ten years after the purchase? |
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A: You notify the title insurance company which, in accordance with the terms of the policy, undertakes, at its expense, defense of the title. If the claim reaches the courts, the title company retains attorneys and bears the expense of defending the suit. This is true whether your period of ownership is a day or a generation or more. |
| Q 10. |
If the person I am buying from has title insurance, why do I also need it? |
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A: The first and most obvious reason is that the previous owner could, in a very short time, do all sorts of things to encumber the title. Among other things, he or she could grant easements or construct improvements and encroach on adjacent property. The deed into the new purchaser could be fatally defective because of forgery or incompetence or any number of other circumstances.
In addition, if a title defect arises antedating the date of acquisition of the property by the grantor to you, you would have to take action against the grantor under the terms of the deed to you. In that case, as an insured, the title insurance company would represent the defendant in your action. |
| Q 11. |
Do many people actually lose their Los Angeles Home because of title defects? |
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A: Not if they have title insurance! Title companies realize how important it is to Los Angeles Homeowners to keep their Los Angeles Home. Therefore, when an insured title is found to be defective, the title company does everything possible to perfect the title. Often it is necessary to purchase a claimant's rights in the property and transfer them to the insured. This is practically always possible when only a partial interest is outstanding. |
| Q 12. |
Credit Scoring - How doest it Work? |
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A: Credit scoring is a statistical method that lenders use to quickly and objectively assess the credit risk of a loan applicant. The score is a number that rates the likelihood you will pay back a loan. Scores range from 350 (high risk) to 950 (low risk). There are a few types of credit scores; the most widely used are FICO scores, which were developed by Fair Isaac & Company, Inc. for each of the credit reporting agencies Credit scores only consider the information contained in your credit profile. They do not consider your income, savings, down payment amount, or demographic factors like gender, race, nationality or marital status. Past delinquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and number of inquiries are all considered in credit scores. Your score considers both positive and negative information in your credit report. Late payments will lower your score, but establishing or reestablishing a good track record of making payments on time will raise your score.
Different portions of your credit file are given different weights. They are:
35% - Previous credit performance (specific to your payment history)
30% - Current level of indebtedness (current balance compared to high credit)
15% - Time credit has been in use (opening date)
15% - Types of credit available (installment loans, revolving and debit accounts)
5% - Pursuit of new credit (number of inquiries)
The most important factor for a good credit score is paying your bills on time. Even if the debt you owe is a small amount, it is crucial that you make payments on time. In addition, you may want to: keep balances low on credit cards and other "revolving credit;" apply for and open new credit accounts only as needed; and pay off debt rather than moving it around. Also don't close unused cards as a short term strategy to raise your score. Owing the same amount but having fewer open accounts may lower your score.
Recent changes minimize the negative effects that rate shopping can have on a mortgage applicant. If there is a consumer originated inquiry within the past 365 days from mortgage or auto related industries, these inquiries are ignored for scoring purposes for the first 30 calendar days; then, multiple inquiries within the next 14 days are counted as one. Each inquiry will still appear on the credit report.
Every score is accompanied by a maximum of four reason codes. Reason codes identify the most significant reason that you did not score higher. The reason codes can help a lender describe the reasons for higher than expected rates or loan denial. Scores are not part of the credit profile and are not covered by the Fair Credit Reporting Act.
Your credit report must contain at least one account which has been open for six months or greater, and at least one account that has been updated in the past six months for you to get a credit score. This ensures that there is enough information in your report to generate an accurate score. If you do not meet the minimum criteria for getting a score, you may need to establish a credit history prior to applying for a mortgage.
If you think you need help with your credit, please contact us by calling 818 785 9698 and make an appointment with a Credit Specialist for a Free analysis and advice.
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| Q 13. |
How can I contact the credit Reporting Agencies? |
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Credit Reporting Agencies collect information about you and your credit history from public records, your creditors and other reliable sources. These agencies make your credit history available to your current and prospective creditors and employers as allowed by law. Credit agencies do not grant or deny credit.
The credit reporting agencies are:
Equifax
PO Box 105873
Atlanta, GA 30348
800-685-1111
Experian
PO Box 2002
Allen, TX 75013
Consumer Credit Questions
888-EXPERIAN (888-397-3742)
TransUnion
Post Office Box 2000
Chester, PA 19022
(800) 888-4213
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| Q 14. |
What are the benefits of Owning Your Own Los Angeles Home? |
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A: The Best Investment
As a fairly general rule, Los Angeles Home appreciate about five percent a year. Some years will be more, some less. The figure will vary from neighborhood to neighborhood, and region to region.
Five percent may not seem like that much at first. Stocks (at times) appreciate much more, and you could earn over six percent with the safest investment of all, treasury bonds.
But take a second look…
Presumably, if you bought a $200,000 California House, you did not pay cash for the Los Angeles Home. You got a mortgage, too. Suppose you put as much as twenty percent down - that would be an investment of $40,000.
At an appreciation rate of 5% annually, a $200,000 Los Angeles Home would increase in value $10,000 during the first year. That means you earned $10,000 with an investment of $40,000. Your annual "return on investment" would be a whopping twenty-five percent.
Of course, you are making mortgage payments and paying property taxes, along with a couple of other costs. However, since the interest on your mortgage and your property taxes are both tax deductible, the government is essentially subsidizing your Los Angeles Home purchase.
Your rate of return when buying a Los Angeles Home is higher than most any other investment you could make.
If you are moving to a Los Angeles Home for the first time, you are going to be very pleased with all the new space you have available. You may have to even buy more "stuff."
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| Q 15. |
What are the Income Tax Savings if I were to buy a California House? |
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A: Because of income tax deductions, the government is basically subsidizing your purchase of a Los Angeles Home. All of the interest and property taxes you pay in a given year can be deducted from your gross income to reduce your taxable income.
For example, assume your initial loan balance is $150,000 with an interest rate of eight percent. During the first year you would pay $9969.27 in interest. If your first payment is January 1st, your taxable income would be almost $10,000 less - due to the IRS interest rate deduction.
Property taxes are deductible, too. Whatever property taxes you pay in a given year may also be deducted from your gross income, lowering your tax obligation.
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| Q 16. |
What are the inspections I should require? |
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A: Besides appraisal and the inspection, you should also have a professional go through the California House and seek out potential problems. Of course, you will have inspected the Los Angeles Home, but you are not used to looking at some things that a professional will find. Even if they are not things the seller is expected to repair, at least you will have foreknowledge of any potential problems.
The seller will want this inspection performed quickly, so that you can approve the results and move forward with the purchase. Once you receive the inspection, you will want to allow yourself sufficient time to review and approve the report. If you do not approve the report, you may negotiate with the sellers on which repairs should be performed and who should pay for those repairs. Otherwise, you can cancel the purchase without penalty, provided you have included timetables in your offer.
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| Q 17. |
What about the final inspection? |
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A: Before closing, you will want to revisit the property to ensure it is in the condition you have required in your offer, and to inspect that any required repairs have been performed. You should do this no sooner than 1-3 days before you intend to close. Make sure this right to do a final inspection is included in your offer to purchase the Los Angeles Home. |
| Q 18. |
Should I sell my California House? |
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A: When conversing with real estate California Real Estate Agents, you will often find that when they talk to you about buying real estate, they will refer to your purchase as a "Los Angeles Home." Yet if you are selling property, they will often refer to it as a "California House." There is a reason for this. Buying real estate is often an emotional decision, but when selling real estate you need to remove emotion from the equation.
You need to think of your California House as a marketable commodity. Property. Real estate. Your goal is to get others to see it as their potential Los Angeles Home, not yours. If you do not consciously make this decision, you can inadvertently create a situation where it takes longer to sell your property.
The first step in getting your Los Angeles Home ready to sell is to "de-personalize" it.
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| Q 19. |
Which Realtor do you choose? |
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A: If you're like many people, you pick Realtor number three. This is a California Real Estate Agent who seems willing to listen to your input and work with you. This is a California Real Estate Agent that cares about putting the most money in your pocket. This is a California Real Estate Agent that is willing to start out at your price and if you need to drop the price later, you can do that easily, right? After all, everyone else does it!
The truth is that you may have just met a California Real Estate Agent engaging in a questionable sales practice called "buying a listing." He "bought" the listing by suggesting you might be able to get a higher sales price than the other California Real Estate Agents recommended. Most likely, he is quite doubtful that your Los Angeles Home will actually sell at that price. The intention from the beginning is to eventually talk you into lowering the price.
Why do California Real Estate Agents "buy" listings? There are basically two reasons. A well-meaning and hard working California Real Estate Agent can feel pressure from a Los Angeles Homeowner who has an inflated perception of his Los Angeles Home's value. On the other hand, there are some California Real Estate Agents who engage in this sales practice routinely. |
| Q 20. |
What is the difference between pre-approval and pre-qualification? |
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A: The pre-approval process is much more complete than pre-qualification. For pre-qualification, the loan officer asks you a few questions and provides you with a pre-qual letter. Pre-approval includes all the steps of a full approval, except for the appraisal and title search. |
| Q 21. |
When does it make sense to refinance? |
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A: Usually people refinance to save money, either by obtaining a lower interest rate or by reducing the term of the loan. Refinancing is also a way to convert an adjustable loan to a fixed loan. [Delete - or to consolidate debts.] The decision to refinance can be difficult, since there are several reasons to refinance. However, a starting point for deciding if it is a good time to refinance is to calculate when you will recoup the cost of refinancing ("break even" point) and begin saving money. To make this calculation, do the following:
Calculate the total cost of the refinance
Calculate the monthly savings
Divide the total cost of the refinance (#1) by the monthly savings (#2). This is the "break even" point. If you own the California House longer than this, you will save money by refinancing. Note that the above calculation does not take into consideration income tax deductions on interest. Other issues, including the loan program involved, may be a factor to consider. In general, deciding when refinancing will save you money or be a wise decision can be a complex topic and you may want to consult a mortgage professional. |
| Q 22. |
What is a rate lock? |
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A: A rate lock is a contractual agreement between the lender and buyer or borrower. There are four components to a rate lock: loan program, interest rate, points, and the length of the lock. |
| Q 23. |
What's the difference between a mortgage broker and a lender? |
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A: A mortgage lender only offers you the interest rates and programs available through that lender. A mortgage broker counsels you on the loans and interest rates available from different wholesaler lenders. After this initial consultation process, a mortgage brokered loan and a lender loan may be about the same with varying degrees of service levels. For this stage of the process, a mortgage broker will act in much the same way as a loan officer and process at a lender's office. The mortgage broker takes your application, and usually processes the loan, which involves putting together the complete file of information about your transaction. The complete file includes the credit report, appraisal, verification of your employment and assets, and so on. When the file is complete, but sometimes sooner, the wholesale lender "underwrites" the loan which means deciding whether or not you are an acceptable risk. |
| Q 24. |
Will I save more money using a mortgage broker or going directly to a mortgage lender? |
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A: The only way that you can know whether you are saving money is to compare interest rates and fees between various mortgage brokers and lenders available to you.
Using a mortgage broker you can trust may help you save money. First, mortgage brokers have the ability to shop for you based on your criteria. (This is not to say that they will, but only that they have that ability.) Second, mortgage brokers are legally required to disclose payments that they receive from wholesale lenders for delivering an above par loan to the wholesale lender whereas mortgage lenders are not required to disclose when they are making you a loan at a higher interest rate than what they could have given you. Therefore, mortgage brokers are the only ones between the two that you can legally find out whether you are getting the best interest rate available to you. (This does not mean that mortgage brokers will disclose it correctly or tell you upfront that they are not giving you the best rate and getting paid from the wholesale lender for delivering a higher interest rate loan.)
On the other hand, many mortgage brokers charge a higher interest rate on loans and get money paid to them from the wholesale lender without ever making this clear to the borrowers. Mortgage brokers may also charge more junk fees than lenders. So, if you are using a mortgage broker, ask them if you are getting the best interest rate they can give you (another way to ask this is if they will earn any "yield spread premium" or similarly named fee on the loan), compare fees with other lenders, and beware of them changing fees or adding fees between the Good Faith Estimate disclosure and the time of closing.
In short, if you don't know or understand, ask. If you don't trust them, find someone that you can trust. |
| Q 25. |
What is a full documented loan? |
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A: Both income and assets are disclosed and verified, and income is used in determining the applicant's ability to repay the mortgage. Formal verification requires the borrower's employer to verify employment and the borrower's bank to verify deposits. Alternative documentation, designed to save time, accepts copies of the borrower's original bank statements, W-2s, and paycheck stubs. |
| Q 26. |
What are the other types of loans? |
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A: Stated income/verified assets: Income is disclosed and the source of the income is verified, but the amount is not verified. Assets are verified, and must meet an adequacy standard such as, for example, 6 months of stated income and 2 months of expected monthly housing expense.
Stated income/stated assets: Both income and assets are disclosed but not verified. However, the source of the borrower's income is verified.
No ratio: Income is disclosed and verified but not used in qualifying the borrower. The standard rule that the borrower's housing expense cannot exceed some specified percent of income, is ignored. Assets are disclosed and verified.
No income: Income is not disclosed, but assets are disclosed and verified, and must meet an adequacy standard.
Stated Assets or No asset verification: Assets are disclosed but not verified, income is disclosed, verified and used to qualify the applicant.
No asset: Assets are not disclosed, but income is disclosed, verified and used to qualify the applicant.
No income/no assets: Neither income nor assets are disclosed.
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| Q 27. |
What is a good faith estimate? |
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A: It is the list of settlement charges that the mortgage broker or lender is required to provide the borrower within three business days of receiving the loan application. |
| Q 28. |
What is a conforming loan? |
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A: A loan eligible for purchase by the two major Federal agencies that buy mortgages, Fannie Mae and Freddie Mac. The loan limit is currently $333,700 for a single family California House. |
| Q 29. |
What is a jumbo mortgage? |
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A: A mortgage larger than the maximum eligible for purchase by the two Federal agencies, Fannie Mae and Freddie Mac, currently $333,700. |
| Q 30. |
What are origination points and discount points? |
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A: It is an upfront cash payment required by the lender as part of the charge for the loan, expressed as a percent of the loan amount; e.g., "2 points" means a charge equal to 2% of the loan balance. An origination point is a charge for originating the loan and can be charged by either a mortgage broker or a lender. A discount point is a charge for lowering the interest rate and can only be legitimately paid to the lender since the lender is the one that will be effected by the lower interest rate, not the mortgage broker. |
| Q 31. |
What is a pre-qualification? |
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A: This is the process of determining whether a customer has enough cash and sufficient income to meet the qualification requirements set by the lender on a requested loan. A pre-qualification is subject to verification of the information provided by the applicant. A pre-qualification is short of approval because it does not take account of the credit history of the borrower. |
| Q 32. |
What is APR? |
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A: A term in the truth-in-lending act to represent the percentage relationship of the total finance charge to the amount of the loan. The APR reflects the cost of your mortgage loan as yearly rate. It will be higher than the interest rate stated on the note because it includes, in addition to the interest rate, loan discount points, fees and mortgage insurance. |
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