All About Title

Providing Peace Of Mind For The Largest Purchase You’ll Likely To Make

Purchasing a home is probably the single biggest investment you will ever make. Before closing on the house, you’ll want to know that no other individual or entity has a right, lien or claim to the property. Determining that your rights and interests to the property are clear is the business of a title insurance company.

For a modest, one-time title insurance premium, you will receive continuous title insurance protection in an amount equal to the purchase price of the property or its current market value. The policy not only protects you as the buyer, but also your heirs as long as they hold title, and even after the property is sold. It should be noted that coverage continues for your heirs after your death. The title company will not only satisfy any valid claim made against your title, but will pay the costs and legal expenses of defending against a title claim.

When a home is purchased with a mortgage there are two title policies issued, the “owners” policy and the “lenders” policy. The seller of the home will typically pay for the “owner’s” policy which guarantees clear title to the buyer. The “lender’s” policy is paid for by the buyer and guarantees clear title to your mortgage lender. Why two policies? There are different endorsements and different indemnification requirements.

One of the great advantages of title insurance is that prior to a policy being issued, the title insurance company completes extensive research into relevant public records, maps and documents to trace ownership of the property and determine if anyone other than you has an interest. Through its research, the title insurance company can usually identify any title problems that may arise and have these problems resolved prior to closing.

Your title policy will describe the property and outline any recorded limitations on your ownership. It will also set forth the title company’s responsibilities should any claim covered by the policy terms arise. Generally, if someone files a lawsuit to contest your title, the title insurance company will defend the title at no expense to you, or if there is a title defect that cannot be eliminated, the title insurance company will protect you from financial loss – up to the amount of the policy.

Okay, enough of the legal gobbledygook. Let’s consider how title insurance benefits homebuyers in a practical sense. Assume you live in Oceanside, California. Your neighbor is a Captain in the US Marine Corps and she’s currently deployed in Afghanistan. While deployed, her husband puts the home they jointly own on the market. You ask why they’re selling and he explains that when his wife returns she’ll be stationed in Quantico, Virginia, so they’ve decided to sell now and he’ll relocate to Virginia where she’ll meet him when she returns to the states. Although the home needs work it would be a great investment opportunity, and it’s priced accordingly. You make an offer, which your neighbor accepts, signing all paperwork on behalf of his wife with a Power of Attorney.  After the transaction closes you rehab the home and lease it to your daughter and son-in-law.

Eight months later the wife returns from Afghanistan, pulls into the driveway and attempts to open the door with her set of keys. Your daughter hears someone jingling keys at the front door looks through the peephole. She recognizes the prior owner and opens the door. She then informs the prior owner that the house was sold and your daughter’s family now occupies the place as tenants.  The prior owner is shocked —and livid! She knows nothing about this, asserts that she and her husband never discussed selling the home, and she never executed a Power of Attorney giving him authority to do so. Eventually you find out the Power of Attorney was forged (the husband paid another woman to impersonate his wife and appear before the Notary Public with a fake driver’s license).

The prior owner sues to have the sale rescinded because of fraud. Luckily, you have title insurance which protects you when documents are executed under a false Power of Attorney.

Let’s now assume a similar set of facts, but this time your neighbors died in a plane crash and willed the property to their son and daughter. Further assume that the property is in a trust and upon the death of the parents the son and daughter became the surviving trustees with the power to sell. You purchase the property and two years later the daughter sues to rescind the sale on the grounds that her brother was only 17 years old–a minor–at the time he signed the sales contract. Again, luckily you have title insurance that protects you in the event a transfer occurs through a deed signed by a minor.

I could go on, but I’m sure you get the gist. Title insurance protects you and your heirs, even after your demise. It’s typically money well spent. It’s stated best in one of our taglines: “Peace of Mind for your Piece of Property.”

DISCLAIMER: Over 23 years I have witnessed title companies provide the benefits described above to our clients. However, title insurance functions as any other insurance policy, with exclusions, limitations, and failures in eligibility and coverage. We have witnessed these realities as well.

Until the next post … may health and happiness abound!

What Is Escrow And Why Is It Required?

What Is Escrow And Why Is It Required?

In a previous post I indicated there’s an army of people involved in closing a real estate and mortgage transaction (real estate agents, lenders, escrow officers, title officers, inspectors, appraisers, etc.). Of all the different professionals, and services provided, I learned early in my career that one of the most feared encounters, particularly among first time buyers, was interacting with the escrow officer or “going to escrow.”

This was largely because the escrow officer had the unenviable task of informing the buyer of the amount needed to close the transaction, often after an inexperienced or unscrupulous loan officer had given them an estimate that was significantly less. As a result, escrow officers unfairly gained a reputation as being bearers of bad news. And indeed, it is bad news if the loan officer tells you on March 15th you’ll need $4,000 to close the transaction, but on April 28th escrow says no, the amount needed is $5,500.

Thanks to reforms in the mortgage industry, I’m happy to report that most of the bad actors have been purged and the days of misquoting and overcharging unsuspecting borrowers are over. Thank heavens!! (We were all being lumped together and looked upon with scorn).

However, there still seems to be a misunderstanding of what an escrow officer is, what he or she does, and why an escrow is required. With that in mind, let’s take a look at the escrow process. So, what is an escrow company? An escrow company is simply a neutral third party whose task is to make sure everyone gets what they’re contractually entitled to receive. In an effort to make the concept easier to grasp, let’s consider a transaction that’s less technical than real estate (and one that most of us have experienced at least once).

Assume you’re selling a car for $5,000 and you’ve secured a buyer who’ll pay that price. Further assume that you’ve hired an escrow company to handle the transaction and escrow is charging $150 – with the buyer and seller each paying one-half of the escrow fee, or $75.00.

Here’s how the transaction would proceed:

1) As the seller you would sign over the title of the car to the buyer and deliver the executed title, along with the Bill of Sale, and your share of the escrow fee to the escrow officer.

2) The buyer would deliver the $5,000 purchase price by wire or certified funds to the escrow company, along with their share of the escrow fee, appropriate taxes, transfer fees, and Proof of Insurance.

3) The escrow officer would check with DMV to make sure a duplicate title has not been issued (to prevent you, the seller, from selling the car to more than one person).

4) The escrow officer would forward the taxes, transfer fees and transfer forms to the CA DMV – thereby assuring that the vehicle is no longer in your name and that you, the seller, are no longer liable for damages.

5) Escrow would forward you the $5,000 as payment for your car.

6) Escrow would send the buyer the title that the you’ve signed and transferred into the buyer’s name.

7) Escrow would pay themselves $150 as agreed.

Notice that everyone gets what they’re entitled to receive (including the state of California – transfer fees and taxes), everyone is protected (including the citizens of California – proof of insurance), and the transaction is closed in accordance with California Law. 

That’s what an escrow company does and why we’re required to use them.

Granted, the function of an escrow company in a real estate transaction is a bit more complicated, but hopefully you now understand, at least in principle, escrow’s responsibility.

Important Note: The escrow company does not get involved in the condition or the market value of the property being transferred.

Until the next post … may health and happiness abound!

Pre-Qualification & Pre-Approval

Pre-Qualification & Pre-Approval

Once you’ve made the decision to buy a home, you’ll typically speak with a Real Estate Agent or Loan Officer (since financing is the first step, we recommend reaching out to your Sidwell Loan Officer as job one). Regardless of whom you call first, Realtor or Loan Officer, there are a couple of terms you are going to hear: Pre-Qualification and Pre-Approval. They both relate to your ability to qualify for a mortgage loan. Even if you start your search online, you’ll repeatedly see pop-ups that say “Get Pre-Approved” or “Get Pre-Qualified.” Since this may be your first experience in the real estate and mortgage arena, let’s get a step ahead by exploring these terms and their importance.


We should first note that Pre-Qualification is a misleading moniker because it does not qualify one to purchase a home, but establishes eligibility. Pre-Qualification is the process of reviewing your income and debts to determine the amount you have available each month to service a mortgage debt – after you’ve paid your existing obligations. This establishes the maximum price of the home you may be able to buy. PreQualification is NOT a loan approval, but again, simply determines the maximum purchase price of the home you’re eligible to buy.


Pre-Approval means that you have obtained a written lending commitment, subject to certain conditions, prior to searching for a home. Loan approval occurs after your loan application has been underwritten. Underwriting is the formal process of reviewing your present financial status and your financial history (including credit report, pay stubs, tax returns, employment history, etc)., within the context of established lending guidelines and credit scoring models, to determine whether you present an acceptable lending risk.

Pre-Approval differs from Pre-Qualification. As stated before, Pre-Qualification simply establishes the amount you’re eligible to buy. On the other hand, Pre-Approval confirms you meet all requirements and are fully qualified to purchase a home in a certain price range, as evidenced by a written conditional lending commitment. Pre-Approval also means you’re essentially a cash buyer with the accompanying gravitas and bargaining power.

So there you have it, Pre-Qualification & Pre-Approval.

Now when your Real Estate Agent asks “have you spoken to a lender?” you’ll know why.

Until the next post … may health and happiness abound!

Closing Escrow & Giving Your Landlord The 30 Day Notice

Closing Escrow & Giving Your Landlord The 30 Day Notice

When a client that’s currently renting decides to buy a place of their own, they’re obligated to give the landlord notice of their intent to vacate, typically 30 days in advance. At what point in the home buying process should the notice be presented? This seems like another of those questions with an obvious answer, but we’re talking about real estate and mortgages here, so as usual, the answer isn’t as straightforward as it appears.

In my 22 years as a mortgage professional I’ve been asked this question hundreds of times and over the years experienced has shaped my response. After about 3 or 4 years in the industry I realized the question shouldn’t solely focus on when a homebuyer presents a 30 day notice to their landlord, but equally important, how should the homebuyer present the notice.

It’s obvious the 30 day notice to vacate should be given 30 days prior to the date by which you’ll fully vacate, but the underlying question is when can the buyer take possession of the place they’re buying. The purchase agreement and escrow instructions call for a specific closing date, often the contract will say on or before a certain date – but there is always certain date cited.

Unfortunately, my experience has been that about 40% of transactions do not close on time. Every deal has a glitch of some sort; sometimes it’s a major glitch, sometimes minor, but there’s always something that must be worked out before a transaction can advance. It’s the nature of the beast.

In addition, unbeknownst to most borrowers, there is an army of people involved in closing a real estate transaction, including:

• Real estate agents
• Brokers
• Transaction coordinators
• Lenders
• Underwriters
• Loan processors
• Regulation specialist
• Document drawers
• Funders
• General inspectors
• Termite inspectors
• Appraisers
• Escrow officers
• Title officers
• Insurance agents
• Notary publics
• Fedex (or a sililar overnight carrier)
• File auditors
• And others …

Generally speaking, everyone has to do a good job for a transaction to close on time, and if a mistake is made, it has to recognized, owned, and resolved as quickly as possible. To no one’s surprise, I’m sure, sometimes this group works like a well-oiled machine, and at other times, well, not so much.

Under the best of circumstances, when human performance is at its peak, and everything is done correctly, on time, to a T, I’ve had transactions fail to close as scheduled. A case in point would be the time we were scheduled to close on a Monday, but over the weekend a water main broke about 100 feet up the street and flooded the entire first floor of the subject property. The flooring had to be replaced and there was extensive drywall damage, etc. With delays for insurance claims processing and repairs, we closed almost 6 weeks later.

Similarly, I once had a lender in Pennsylvania who lost electricity and could not fund a loan for five days because of a snow storm on the Eastern Seaboard. In another instance we were awaiting an original deed that was delayed two days because the Fedex hub in Memphis was shut down due to a massive thunderstorm.

Between humanity’s inclination to make mistakes, acts of God, and a myriad of other unforeseen circumstances, it is wise to leave some room when submitting the 30 day notice. Let the landlord know you are scheduled to close on a particular day, but because of the nature of the transaction, and the possibility that things can happen beyond anyone’s control, you’d like some flexibility relative to the move out day. Discuss this with the manager before submitting the 30 day notice, and regardless of their response, address this in your letter when you give the 30 day notice.

Rest assured, Sidwell works extremely hard to always close on time (see our video, Timing Matters), but Life Happens! Exercise prudence and save yourself some grief. I’d recommend adding 5 – 10 days.

Until the next post … may health and happiness abound!

Good Credit Scores Do Not Guarantee Home Ownership: Credit Depth Is Also Needed

Good Credit Scores Do Not Guarantee Home Ownership : Credit Depth Is Also Needed

Like many others in the real estate and mortgage industry, I cringe each time one of the new credit score commercials are aired. I’m sure many of you have also seen these promotions. The scene typically opens with a credit applicant conferring with a loan officer or credit decision maker, confidently proclaiming a version of the following: “I’m more than qualified for this loan, Mr. Banker, because I’ve checked my credit score with Credit Café (or some similarly named credit monitoring service) and I have a 725 mid score, so the only thing you should be asking is what color I want, and if there is anything else you can do for me.” Yes, it’s a bit over the top, and often misleading. Granted, if you have a 725 score you’ve done a pretty good job of managing your credit profile, but it doesn’t automatically give you carte blanche when it comes to obtaining a home loan.

In fact, when seeking a mortgage the 725 mid score may not be enough. What the TV ads don’t say is that lenders also want to see credit depth. Credit depth is a minimal acceptable level of positively reported credit and debt management experience. For example, on a particular loan product, the lender’s underwriting guideline may call for a minimum score of 700, but that minimum score is virtually always coupled with a depth requirement that calls for a minimum of 3 open accounts, reviewed for 24 months or longer, with at least one account having a minimum balance of let’s say, $5000. That’s why the score alone can be misleading and shouldn’t be used to give the impression that a potential borrower qualifies, when at best it simply means they’re eligible.

So why is there a credit depth requirement? To make sure that substance accompanies the shine. For example, let’s assume that Ann and Arnold Public are 57 years old and were married 35 years ago. Arnold is an engineer and Ann is a professor of music. The Public’s are also parents to a set of twins, Daniel and Dana. They bought their first home in 1981, a $280,000 condo in San Francisco, and obtained a 15 year mortgage. They paid off the condo in 1997 and purchased an $800,000 home in Forest Knolls. The home in Forest Knolls was also paid-off in 15 years. During their 35 year marriage they have also bought and paid for eight (8) vehicles, and paid-off another $6,000 per year in revolving debt. Three years ago the state of California found itself in financial exigency and could not pay all of its public employees, so Ann lost her job as a professor. Now living on one income, Ann and Arnold got behind on a few bills and their mid credit score dropped to 630. Ann has finally returned to work and the Public’s have started to rebuild their credit rating.

While Ann & Arnold were struggling through the downturn, their twins, Dana and Daniel were enrolled in college. Dana applied for a student MasterCard as a freshman and was approved. Dana is now a junior. She’s had her MasterCard for 22 months, has an $800 limit, and always pays as agreed (the minimum payment is $16 per month). Dana’s credit score is now 705, seventy-five points higher than her parents. That’s right, Dana has managed to pay $16 per month for 22 months–her total financial history–and repaying $352 has gotten her a 705 score. Her parents, on the other hand, have borrowed and fully repaid over $1,000,000 in mortgage loans, $310,000 for automobiles and $200,000 for revolving debt, totaling over 1.5 million dollars through 35 years of marriage. In doing so they’ve proven repeatedly that they’re seasoned users of credit and responsible managers of debt. Unfortunately, their credit score, which is essentially a financial snapshot, doesn’t currently reflect their true nature as financial consumers.

This is why credit scores alone can sometimes be deceptive. Attractive scores don’t always equate to substance, buying power, or even creditworthiness. Likewise, scores that are less than stellar don’t necessarily mean that a borrower is a poor credit risk. Yes, Dana the daughter has a perfect credit record, in the same sense that a 15 year old who received their DMV Learner’s Permit this morning has a perfect driving record. But, as they’d say in Texas, she’s all hat and no cattle. Again, that’s why lenders want to see credit depth. Ann and Arnold, even with the subpar credit scores, are a much better risk. They have substance, experience, and consistency that spans almost four decades.

If you’ve got the credit scores with the depth to match, and are so inclined, put on your peacock feathers and strut like there’s no tomorrow. Otherwise, be wary of claims suggesting all you need is a particular score and the lending world becomes your oyster—it may become your foil.

Until the next post … may health and happiness abound!

Hello All!

Hello All!

Welcome to the FIRST EDITION of Your Mortgage Blog. This blog is a resource of the Sidwell Companies.

And so, it’s come to this. After more than 20 years of arranging mortgages in the state of California and encountering every type of borrower, loan program and mortgage scenario imaginable, we’ve been told that we must start blogging. Our millennial associates insist that such knowledge has to be shared. With that in mind, treasured reader, please be gentle, as we make our first foray into the blogosphere. Does this blogging thing require some type of license? Should it?

The objective of this blog is fairly simple. We want to explain home loans in a clear, understandable and sometimes funny manner. The goal is to remove fear and intimidation from the mortgage lending process. We understand that Life Happens! And regardless of the circumstance there’s probably a way for the average person to buy a home, or at least start down the path to home ownership. We want to show you that path.

If you’re an elite borrower or seasoned real estate investor, we have something for you as well. You’ll find cutting edge mortgage products and creative approaches that you’ll find attractive, even inspiring, once we peek under the hood.

We’ll also discuss topics and post videos that don’t always relate to mortgages, but are nonetheless engaging and rewarding.

So thanks for reading our first blog and I look forward to you joining us for future posts. You can even subscribe so you won’t miss a word.

Until the next post … may health and happiness abound!