If you have already gotten your Loan Estimate, you may have seen a charge for “title fees.” If this is the case, you need not be concerned.
These expenses include the costs of title insurance and settlement services that are associated with doing title due diligence, producing settlement agreements, providing title insurance, and other things.
In a nutshell, the title company’s function is to handle all the behind-the-scenes work that must be completed before a property purchase or refinancing.
An overview of title and settlement services, including how they help you get to closing and what you may anticipate from the process:
What Exactly Is The Title?
The term “title” refers to the legal ownership rights to a piece of real estate. It is necessary to have a “straightforward” title to a property in order for a home purchase or refinancing transaction to complete. This means that no one else has a claim to it in the form of existing liens or debts.
For the transaction to proceed, your title company is responsible for identifying any issues that may prevent a clear title from being obtained.
What Is The Role Of The Title Company?
A title firm is in charge of reviewing any title claims that may arise and preparing for the closure. The escrow account is also managed by them, which retains cash that must be put aside for the house purchase or refinancing until specific requirements are satisfied, or the transaction is completed, after which the funds are distributed to the involved persons.
For example, suppose you’re purchasing a property and placed an earnest money deposit. In that case, they will typically keep the cash in an escrow account maintained by the title firm until they complete the transaction.
While the title company may not seem as visible as your real estate agent or lender throughout a loan process, they are an equally crucial team member. Their job behind the scenes is critical in ensuring that you make it to the negotiating table.
Here are title firms’ procedures to bring you to the closing table during a mortgage transaction:
Title Search And Examination
One of the initial phases in the title procedure entails a little of detective work on the buyer’s part. You should expect your title firm to do some preliminary investigation to discover more about the property’s history. A title search is what we often refer to as.
For all transactions, this search will reveal the home’s previous ownership information as well as any red flags that might cause the sale or refinancing to be put on hold.
A title search will also identify all owners who are interested in the transfer of real estate and who will be needed to complete vesting forms at the time of closing, which is particularly important in house purchase transactions.
In addition, the title firm will search for and investigate any liens or judgments on the property that may be associated with bankruptcy cases, divorce settlements, outstanding mortgages, past-due property taxes, or other issues. It is necessary to pay off any outstanding amounts prior to the transfer of ownership.
A title search may also disclose property limits or limitations that were not previously known. Some specifics that may come up are as follows:
- There might be boundary concerns if the house or other buildings were constructed outside of the property borders.
- Easements that potentially provide access to your property to other parties such as utility companies, government organizations, or enterprises.
- Because of restrictions or historical significance, some regulations may need to be observed when it comes to changing or remodeling the house.
These examinations aim to prevent you and the lender from being held liable for any unresolved title problems, such as inaccuracies in public records, erroneous surveys, or breaches of property or construction code regulations that may arise.
It is critical to identify these concerns before closing in order to avoid assuming responsibility for them after the sale.
If any snags develop throughout the course of the title examination, not all of them will necessarily prohibit you from completing the transaction.
Before you can purchase a house or refinance your mortgage, you must first ensure that the title to the property is free of encumbrances.
Your processing specialist will notify you as soon as they discover any bottlenecks that might prevent you from completing your transaction.
1. Correct Any Typographical Problems And Fix Any Title Concerns
If the title company discovers any concerns, they may begin working on resolving them right away in order to keep your closing on track and on time. They may speak with the seller to learn more about ownership conflicts, and they may request documentation to demonstrate that someone else does not own the property.
For example, if the issue concerns an unpaid roofing bill, the title firm may be required to work with the existing owner and the roofing contractor to fix the issue.
2. Provide Title Insurance Coverage
The green light is given to a title firm after they are convinced that a property is clear of title problems, and they may proceed to offer title insurance coverage. This shields both purchasers and lenders against claims based on events that occurred in the past, such as prior owner liens or ownership troubles.
While a lender’s title insurance policy is needed in every buy or refinance mortgage transaction, an owners’ title insurance policy is additional and optional coverage. It is thus advised that you get buyer protection to guarantee that you are shielded from any possible legal troubles that may develop in the future due to previous events.
Choosing to buy an owner’s policy ensures that your coverage will stay current, even if your home is sold or refinanced at some point in the future.
3. Settlement And Signing Of The Contract
A settlement date or a closing date may be scheduled by the title company with a clear title and title insurance policy in place and when all other things necessary by the lender have been completed by the title company.
It will prepare the closing documentation in collaboration between your title firm and your lender.
You need to sign your closing papers on settlement day, which may include mortgage documentation for either a buy or refinancing transaction. In the case of a house purchase, it will also contain a transfer of ownership agreement for the property being purchased.
In addition, you may be required to pay a check or wire money for closing expenses and mortgage escrow for homeowner’s insurance and property taxes.
After the completion of all required papers, the documents will be returned to the title firm for inspection before being sent to the lender for processing.
The funds will be transferred to the title firm by the lender, which will then distribute the payments after the lender has authorized all the documentation.
4. The Recording And Financing Of Mortgages
If all goes according to plan on your closing day, the title firm will submit your mortgage for recording at the county records office on your behalf. Then, for the sake of the public record, local authorities will make a note of the specifics.
This is the time at which the title company will release cash for the new mortgage loan, along with payments for property taxes and homeowners’ insurance (if applicable).
Refinancing means that the title company will pay off your prior mortgage and transfer monies to your bank account in the case of a cash-out mortgage refinance.
5. The Provision Of Title And Settlement Services Is Crucially Important
The title and settlement services procedure may appear less exciting than other aspects of the home buying and mortgage process, such as choosing custom kitchen finishes or new hardwood flooring, but it is an essential stage in the house buying and financing process.
The majority of the title services work will take place behind the scenes, but you will be able to rest after your lender has approved your mortgage and you are sure that the property is legally yours.