Hazard Insurance & Property Tax

Hazard Insurance & Property Tax Questions

Who is responsible for the payment of hazard insurance premiums and property tax installments?
The University does not impound for hazard insurance premiums or property tax installments. Accordingly, you are responsible for the timely payment of these items. Given that these expenses often total several thousand dollars per year, we suggest that you plan for these expenses by establishing a separate monthly savings plan to accumulate the necessary funds for these expenses.
What are the hazard insurance requirements for my loan?
As you may be aware, hazard insurance is required on your property in an amount equal to the full replacement value of the improvements on the property as established by your property insurer. Forms of residential property insurance that are acceptable under University Mortgage Loan Programs include: (1) Guaranteed Full Replacement Cost Coverage; or (2) Extended Replacement Cost Coverage that pays up to a specified amount above the policy limit. In many cases, especially if the home is several years old, it is advisable to also obtain a partial or full building code upgrade endorsement.
Which hazard insurance companies are acceptable for my loan?
You may obtain the required property insurance from any properly licensed insurance company qualified to do business in California and rated by the A.M. Best Company as general policyholder's rating of "B" or better in Best's Insurance Reports. We will also accept coverage from the California FAIR plan if it is the only coverage that can be obtained at a reasonable cost. If the company you would like to do business with is not rated by Best's Insurance Reports, please contact us.
Why do you sometimes ask for copies of my renewed hazard insurance policy?
Typically, we will receive a hazard renewal insurance form directly from the company when the annual premium has been paid. Occasionally, however, the firm will not send us the policy and we need to contact you for a copy.
Do you require earthquake insurance?
If earthquake insurance is required, we will notify you during the initial processing of your loan. If we do not advise you specifically, earthquake insurance is not required as a condition of your loan.
How are property taxes assessed in California?

The fiscal year period for the state of California runs from July 1st to June 30th. Property taxes are assessed and collected at the County level. With rare exception, there are no separate tax bills issued by either cities or school districts.
Property taxes are collected in two equal installments. The first installment, representing July 1st through December 31st is due on November 1st and delinquent on December 10th. The second installment, representing January 1st through June 30th, is due on March 1st and delinquent on April 10th. Payments must be received (not postmarked) by 5:00 on the delinquent date or will be assessed a 10% penalty. The penalties increase substantially if not paid by June 30th of that tax year.

The amount of the taxes is determined by the value of the property. At minimum, for the first full fiscal year after purchase most homeowners will pay property taxes equal to 1% of the sales price. The property value may be adjusted by the assessor each year to account for inflation, but any annual upwards adjustment cannot exceed 2%. In many communities, an additional assessment will be levied due to bonds that have been voter approved. These additional assessments typically fund school districts, transportation needs, water supplies, sanitary districts and regional parks. As a general rule, these assessments will add an additional .25% to .50% to the amount of the tax bill.

After the close of escrow, most borrowers will receive a supplemental tax bill in addition to the regular tax bill. The regular tax bill reflects the value of the property at the time the seller owned it. The supplemental tax bill is based on the difference between the seller's value, as determined by the existing tax rolls, and the new value, established at the time of sale. The amount due is prorated over the remaining months of the fiscal year. All subsequent tax bills will be based on the reassessed value, subject to annual increases as described above.

A Homeowners' Exemption will reduce the assessed value of your home by $7,000. To apply for a Homeowners Exemption, contact your County Tax Assessor.