Buying a Home in California.

What is Title Insurance?

The purchase of a home is often the single largest investment people make in a lifetime; title insurance is protection that assures the rights and interests to the property are as expected, that the transfer of ownership is smoothly completed, and that the new owner receives protection from future claims against the property. It is the most effective, most accepted, and least expensive way to protect property ownership rights.

Because land endures over generations, many people may develop rights and claims to a particular property. The current owner’s rights — which often involve family and heirs — may be obscure. There may be other parties (such as government agencies, public utilities, lenders, or private contractors) who also have “rights” to the property. These interests limit the “title” of any buyer.

Why Do You Need a Title Insurance Policy?

The title to the property could be seriously threatened or lost completely by hazards which are considered hidden risks — “those matters, rights or claims that are not shown by the public records and, therefore, are not discoverable by a search and examination of those public records.” Matters such as forgery, incompetency or incapacity of the parties, fraudulent impersonation, and unknown errors in the records are examples of “hidden risks” which could provide a basis for a claim after the property has been purchased.

Why Does the Lender Need a Policy on My Property?

For the lender, a title policy is a guarantee that it has a valid and enforceable lien (loan or deed of trust) secured by the property, that no one else other than those listed on the policy has a prior claim, and that the party to whom they are making the loan does own the property being used as security for the loan. This protection remains in effect as long as the loan remains unpaid.

What is a Title Search?

Before issuing a policy of title insurance, the title company must review the numerous public records concerning the property being sold or financed. The purpose is to identify and clear all problems before the new owner takes title or the lender loans money. These recorded defects, liens, and encumbrances are reported in a “preliminary report” to applicable parties.

What Types of Policies Are There?

Two types of policies are routinely issued: an “owner’s policy” which covers the home buyer for the full amount paid for the property, and a “lender’s policy” which covers the lending institution over the life of the loan. When purchased at the same time, a substantial discount is given. Unlike other forms of insurance, the title insurance policy requires only one moderate premium for a policy to protect you or your heirs for as long as you own the property.

How Is Title Insurance Different Than Other Types of Insurance?

With other types of casualty insurance (auto, home, health, life), a person thinks of insurance in terms of future loss due to some future event. Title insurance is unique — it provides coverage for future claims or losses due to title defects which are created by some past event (i.e. events prior to the acquisition of the property). Most other types of insurance charge ongoing premiums for continued coverage. With title insurance, the original premium is the only cost as long as the owner or heirs own the property.

How Does a Title Insurance Policy Protect Against Claims?

If a claim is made against the owner or lender, the title insurance company protects the insured by: (1) defending the title in court if necessary, at no cost to owner/lender, and (2) bearing the cost of settling the case if it proves valid, in order to protect your title and maintain possession of the property.

The Preliminary Report is an offer to issue a policy of title insurance covering a particular estate or interest in land, subject to stated exceptions. Since these exceptions may point to potential problems with an intended purchase, it is important for all parties to review the report once it is received.

The report contains a list of matters which will be shown as exceptions to coverage in a designated policy of title insurance. After a title order has been placed, matters relative to the title policy coverage on the subject property are assembled in a title search package and examined by skilled technicians. The Preliminary Report is then prepared and sent to the customer so that the parties to the transaction will become aware of matters which will not be insured against by the title company.

What is a Statement of Information?

A Statement of Information is a form routinely requested from the buyer, seller, and borrower in a transaction where title insurance is sought. The completed form provides the title company with information needed to adequately examine documents so as to disregard matters which do not affect the property to be insured, matters which actually apply to some other person.

What Does a Statement of Information Do?

Every day documents affecting real property — liens, court decrees, bankruptcies — are recorded. Whenever a title company uncovers a recorded document in which the name is the same or similar to that of the buyer, seller, or borrower in a title transaction, the title company must ask, “Does this document affect the parties we are insuring?”

A properly completed Statement of Information will allow the title company to differentiate between parties with the same or similar names when searching documents recorded by name. This protects all parties involved and allows the title company to competently carry out its duties without unnecessary delay.

This chart is for reference purposes only. How title is vested has important legal consequences. Consult an attorney to determine the most advantageous form of ownership for your situation.

What is an Escrow?

Buyers and sellers establish terms and conditions for the transfer of ownership. These terms are given to a third party known as the escrow holder. The escrow holder has the responsibility of seeing that terms of the escrow are carried out. The escrow is an independent neutral account and the vehicle by which the mutual instructions of all parties to the transaction are complied with.

Why is Escrow Needed?

Whether you are the buyer or the seller, you want assurance that no funds or property will change hands until all instructions have been followed. With the increasing complexity of business, law, and tax structures, it takes a trained professional to supervise the transaction.

How Long is an Escrow?

The length of an escrow is determined by the terms of the purchase agreement and can range from a few days to several months. (In California, 30 days is typical for cash deals; 30–45 days for financed deals.)

Who Chooses the Escrow?

The selection of the escrow holder is normally done by agreement between the principals. If a real estate agent is involved, they may recommend an escrow holder.

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

The buyer instructs the escrow holder to deliver the monies to the seller when the escrow holder:

• Forwards the deed to the title company for recording
• Is notified by the title company that a policy of title insurance can be issued showing title to the property is vested in the name of the buyer

Escrow Officer’s Duties Include:

1. 01Receive signed Purchase Agreement; prepare escrow instructions
2. 02Receive and deposit buyer's earnest money into an escrow account
3. 03Serve as the neutral agent and liaison/communication link to all parties
4. 04Order Preliminary Report to determine status of title
5. 05Request beneficiary's statement or pay-off demand related to existing financing
6. 06Comply with lender's requirements as specified in closing instructions
7. 07Secure releases of all escrow contingencies or other conditions
8. 08Prorate taxes, interest, insurance, and rents
9. 09Prepare or secure the transfer deed or other documents
10. 10Arrange appointments for buyer/seller to sign documents
11. 11Request and receive purchase funds from buyer and loan funds from new lender
12. 12Close escrow per instructions
13. 13Arrange for recording of deeds and any other documents
14. 14Request issuance of title insurance policies
15. 15Disburse funds as authorized
16. 16Disposition of all funds held in escrow
17. 17Prepare final accounting statements

The selection of the escrow holder is normally done by agreement between the parties. Typically, the escrow is opened by the real estate agent. Which agent (the “seller side” or the “buyer side”) will open the escrow is generally determined by local practice.

The escrow officer will need some basic information to open and proceed:

• Correct street address, and parcel number if available
• Sales price
• Full names of all parties involved and marital status
• Contact information for all parties
• Existing lender name, loan number, contact information, and approximate unpaid balance
• HOA (Homeowner's Association) information, address, and dues
• HOA management company information (if any)
• Commission amount and additional conditions

In general, the first item to enter the escrow is the buyer’s initial deposit. The escrow file will grow, item by item, until all of the conditions have been met and the escrow is ready to close.

A “red flag” is a signal to pay attention. Below are items which may cause delays or other problems within a transaction and must be addressed well before closing:

• Bankruptcies
• Business trusts
• Clearing liens and judgments, including child or spousal support liens
• Encroachment or off-record easements
• Establishing fact of death — joint tenancy / Family trusts
• Foreclosures
• Physical inspection results — encroachment, off-record easements
• Probates
• Power of Attorney — use of, proper execution
• Proper execution of documents
• Proper jurats, notary seals
• Recent construction
• Transfers or loans involving corporations or partnerships
• Last-minute change in buyers
• Last-minute change in type of title insurance coverage

Red Flag Examples

• Taxes: Unpaid property taxes, supplemental taxes, or special assessments due at close.
• CC&Rs: Recorded covenants, conditions and restrictions that may limit use, alterations, or rental.
• Easements: Recorded or prescriptive rights for utilities, neighbors, or shared access.
• Agreements: Recorded use, road maintenance, party-wall, or boundary-line agreements affecting the property.
• Trust Deeds: Existing or unknown deeds of trust securing loans against the property.
• Encroachments: Improvements crossing a property line — fences, sheds, decks.
• Notice of Violation: Recorded municipal code or zoning violations requiring cure.
• Court Orders / Judgments: Money judgments or family-law orders attaching to the seller.
• Bankruptcy: Pending or recent bankruptcies of the seller — can require court approval.
• Notice of Pending Action (lis pendens): Litigation affecting title.
• Statement of Information: Required to differentiate parties with the same/similar names.

In addition to the buyer, seller, lender, and real estate agent(s), escrow may involve several other parties. For example: Appraisal, Home Warranty, Home Inspection, Termite/Pest Inspection, and Disclosure Report.

Appraisal

If the buyer is securing a new loan, an appraisal will be required by the lender. An appraiser will: research the subject property, compare data of recent sales in the subject’s neighborhood (typically within a 1-mile radius — at least three comparable properties), and conduct field inspection in two parts (subject property + exterior of comps). The subject property inspection includes photos of the front and rear, photos of the street scene, and an interior inspection for features and conditions which may detract from or add to the value. A floor plan is drawn during the inspection.

Home Warranty

Home warranties offer advantages to both buyer and seller. The policy protects the buyer by paying for certain repairs and costs of major mechanical systems and major appliances in the home (heating, A/C, etc.). Most home warranty plans can be paid for at the close of escrow.

• Benefits to the seller: Home may sell faster and at a higher price; optional coverage during listing period; protection from legal disputes after the sale.
• Benefits to the buyer: Warranty coverage for major systems and built-in appliances; protects cash flow; network of qualified service technicians; low deductible.

Home Inspections

A physical examination to identify material defects in systems, structure, and components — foundations, basements, under-floor areas, exteriors, roof coverings, attic areas and roof framing, plumbing, electrical, heating and cooling systems, fireplaces, chimneys, and building exteriors.

How the Seller Should Prepare

Have the property fully accessible, including elimination of stored objects that may prevent the inspector from accessing key components. Areas of special concern: attics, crawlspaces, electric panels, closets, garages, gates/yards, furnaces, water heaters. All utilities should be on with functioning pilots lit.

Inspector’s Responsibility

Respect the property. Leave the property as found. Answer questions about the report after the inspection is completed. Provide a copy of the report on site.

Termite / Pest Inspection

Conducted by a State Certified Inspector as evidence of the existence or absence of wood destroying organisms or pests visible and accessible on the date of inspection. Looks for subterranean termites and signs of activity from other wood organisms (carpenter ants, carpenter bees, wood destroying fungus, dry wood termites). California uses Section 1 (active infestation, requires correction) and Section 2 (conditions likely to lead to infestation).

These are traditional distributions of expenses. Many items can be negotiated by both parties at the time of the offer.

Real estate is the #1 target for wire fraud in the US. Hundreds of millions of dollars are lost each year. Most losses are unrecoverable.

The scam (typical pattern)

1. 01Cybercriminals monitor escrow email threads — often by hacking a low-security party (a pest inspector, an HOA manager, a free email account)
2. 02They learn the closing date and your wire amount
3. 03The day before wiring, they email you fake "updated wire instructions" that look exactly like your escrow officer’s
4. 04You wire to the wrong account. Money is gone within hours.

How to protect yourself

• ALWAYS call your escrow officer at the phone number on their official website (NOT a number from any email) to verbally confirm wire instructions before sending any money
• NEVER trust wire instructions sent via email, even if they appear to come from your escrow officer
• Do not wire on the day a sender requests “urgent” rerouting — that’s a red flag
• Use bank-provided wire forms, not email-attached PDFs
• Confirm the recipient bank name, account number, AND the recipient name match exactly what your escrow officer told you on the phone
• After wiring, call escrow within 1 hour to confirm receipt

Since August 17, 2024, every buyer in the US must sign a written buyer-broker representation agreement BEFORE their agent can show them a single property.

What this means for you

• You and your agent will sign a short agreement up front. It defines: the agent’s compensation (negotiated separately from the seller), the duration of the relationship, and the services your agent will provide.
• The seller may or may not pay your agent’s commission (in California, sellers commonly still do — but it’s now negotiated case-by-case, not assumed).
• Buyer agent compensation can no longer be advertised in the MLS.
• Newmarket Edge agents handle this in the app — sign on your phone in 90 seconds before your first showing.

Scheduled Savings

When you buy a house, your monthly mortgage payments serve as a type of scheduled savings plan. Over time you accumulate “equity,” an ownership interest in the property that you can borrow against or convert to cash by selling. Renters never build equity.

Stable Housing Costs

Rent typically increases year after year. Mortgage payments (on fixed-rate loans) stay the same throughout the entire repayment period. Because of inflation, you pay the same nominal amount in devalued dollars over time — what feels like a substantial payment today becomes very affordable after a decade of cost-of-living increases.

Increased Value

Houses typically appreciate over time. A house that sold for $500K ten years ago is often worth substantially more today. This appreciation is real wealth-building.

Tax Benefits

Homeowners get significant tax breaks not available to renters. Mortgage interest is generally deductible (subject to current IRS caps — currently $750K for loans originated after 2017). Property taxes are also deductible (subject to the $10K SALT cap). Consult your tax advisor for specifics.

From pre-qualification to keys in your hand:

1. 01Pre-qualify for a home loan with a lender (and get pre-approval letter)
2. 02Sign buyer representation agreement with your Newmarket Edge agent
3. 03Find the perfect home with your agent
4. 04Make an offer and negotiate terms
5. 05Offer accepted — purchase agreement signed by both parties
6. 06Open escrow and deposit earnest money
7. 07Choose escrow & title company
8. 08Seller’s transfer disclosure statement is delivered
9. 09Title search & preliminary report
10. 10Property inspections (general, pest, specialty if needed)
11. 11Property appraisal (lender orders)
12. 12Purchase homeowner’s insurance policy
13. 13Loan approval from lender
14. 14Remove financial contingencies
15. 15Sign closing & loan papers
16. 16Loan funding — lender wires money to escrow
17. 17Record documents with the County Recorder
18. 18Escrow closes — keys are yours

Choose & Meet Your Realtor

Building a solid relationship with a realtor matters. They’ll work closely with you to find the perfect home.

Finding the Perfect Home

Your realtor shows homes based on your criteria. The more specific you are, the more successful the search.

Determine the Seller’s Motivation

Once you find a property, your realtor researches why the seller is selling — this helps you negotiate.

Offer to Purchase

Your realtor drafts a purchase agreement, advising you on customary practices, local regulations, and protective contingencies. You’ll provide an “earnest money” deposit, usually 1–3% of purchase price (not cashed until your offer is accepted).

Seller’s Response

The seller will accept, counter, or reject. Your realtor’s negotiating skills help you reach an agreement.

Open Escrow

Once accepted, your earnest money deposits. All funds for your transaction will be held by the escrow or title company.

Contingency Period

Used to obtain and perform: physical inspection, pest inspection, appraisal, secure lender, obtain loan approval, approval of seller’s TDS, preliminary title approval, satisfy purchase contingencies.

Homeowner’s Insurance

Your realtor works with your escrow officer and insurance agent to ensure your policy is in effect by close.

Down Payment Funds

Prior to closing, you’ll need a cashier’s check or wire transfer.

Close Escrow

Sign all loan and closing papers. After your down payment + closing costs are deposited, your lender funds the loan. The County Recorder records the deed. You take ownership.

Step 1: Application

Complete your loan application thoroughly and provide all necessary documentation to your loan consultant at the time of application.

Step 2: Ordering Documentation

Your loan consultant orders the necessary documentation. Verifications are mailed; credit report and appraisal are ordered. You’ll also receive a Loan Estimate (CFPB-required) within 3 business days of application showing your costs.

Step 3: Awaiting Documentation

Within ~2 weeks, all necessary documents should be received. Each item is reviewed in case additional items are needed.

Step 4: Loan Submission

Submitting your loan is critical. All documentation is sent to the lender, along with your credit report and appraisal.

Step 5: Loan Approval

May be obtained in stages. Within 1–3 days, your loan consultant should have pre-approval. Final approval can take longer if mortgage insurance or investor review is required.

Step 6: Lender Preparation of Documents

Once approved, loan documents are prepared and sent to the escrow officer. You’ll be asked to sign. Your lender may require an impound account for tax installment payments.

Step 7: Funding

Once you’ve signed and returned documents, the lender reviews and “funds” your loan (gives the title company the money via wire).

Step 8: Recordation

When the loan is funded, the title company records the Deed of Trust with the county (usually next day). Title or escrow disburses monies to all parties. Your loan is complete.

Two documents the federal government (CFPB) requires every lender to give you on every closed-end mortgage:

Loan Estimate (LE)

• You receive this within 3 business days of submitting a loan application
• Shows: estimated interest rate, monthly payment, total closing costs, projected payments over the loan term
• Compare LEs from multiple lenders before locking your rate — this is the single best way to save money

Closing Disclosure (CD)

• You receive this at least 3 business days BEFORE closing
• Shows the FINAL terms of your loan, costs, and cash to close
• Compare every line to your Loan Estimate. If the lender raises a fee or surprises you, you can delay closing
• The 3-day rule cannot be waived (with rare exceptions)

When do I sign loan documents?

Your escrow instructions will be mailed to you. Your escrow officer or agent will set an appointment for you to sign final loan papers. The escrow holder will tell you the amount of money you’ll need (in addition to your loan funds).

What do I bring to my loan signing?

A cashier’s check (or wire) made payable to the escrow company. ALSO bring your valid state ID, driver’s license, or passport — needed by the Notary Public.

What’s the next step after I’ve signed?

The escrow holder returns documents to the lender for final review. Once reviewed, the lender funds your loan and informs the escrow holder.

When will I receive the deed?

The original deed will be mailed directly to your new home by the County Recorder’s office, several weeks after closing.

What Is PMI?

Buying a home is easier than ever thanks to private mortgage insurance, which made it possible to obtain mortgages with as little as 3% down. PMI is required by the lender to protect against losses due to foreclosure when down payment is < 20%.

When Do I Need PMI?

If your down payment is less than 20% of the home’s purchase price.

How Long Am I Required to Carry PMI?

• Under the Homeowners Protection Act (HPA), your lender must AUTOMATICALLY cancel PMI when the loan reaches 78% LTV based on the original payment schedule
• You can REQUEST cancellation when the loan reaches 80% LTV (this is faster — based on appreciation or extra principal paid)
• For FHA loans, MIP rules differ — most FHA loans require MIP for the life of the loan unless refinanced

How Much?

Typically $30–$200/month depending on loan size, credit score, and LTV. Average annual cost: $300–$900. Premiums vary with loan-to-value ratio, type of loan, and coverage required.

Payment Options

Annual, monthly, or single premium plan.

If you’re inheriting a home from a parent, or you’re 55+ and selling and buying again, California’s Prop 19 (effective Feb 16, 2021) changed two big things:

Parent-to-child / grandparent transfers

• Before Prop 19: Parents could pass any property to children with the original property tax basis preserved (huge savings)
• After Prop 19: Only principal residences receive the tax break — and ONLY if the child uses it as their primary residence within 1 year of transfer
• Investment properties, rentals, vacation homes inherited from a parent: no longer get the tax basis preserved. They are reassessed at market value.

Age 55+ “transfer your tax base” rule

• Sellers age 55+ (or severely disabled) can transfer their property tax basis to a new home anywhere in California, up to 3 times in a lifetime
• The new home can be more or less expensive than the old one (with adjustments)
• Massively useful for downsizing in expensive markets

A countdown of 9 things that can sabotage your loan approval. Critical — many buyers lose deals doing one of these between offer-accepted and close.

1. 9Do NOT apply for new credit cards or lines of credit. Don't increase balances on existing cards more than usual.
2. 8Do NOT buy a car or shop for one. Even browsing dealer websites can trigger a credit pull.
3. 7Do NOT open a new bank account, make a large deposit, or deposit ANY cash. Lenders need to "source" all deposits — cash is unsourceable.
4. 6Do NOT transfer money between bank accounts unless your lender approves first.
5. 5Do NOT sell major assets like a car (changes your asset profile).
6. 4Do NOT get married, divorced, or go on leave at work.
7. 3Do NOT travel for an extended period. If you have travel plans, alert your agent and lender.
8. 2Do NOT borrow money from any source.
9. 1Do NOT change jobs or quit your current job.

What you CAN do: Continue using your credit card for normal purchases (groceries, gas). The bottom line: don’t give your lender anything out of the ordinary to question.

A clean, phase-by-phase checklist you can print and tick off as you go.