When purchasing or refinancing a home for the first time, you’ll probably ask yourself: What is a title company and how will their services help me? Well, we have a few answers for you.
What Is It?
Title insurance is protection against loss arising from problems connected to the title of your property. This includes liens, fraud, undisclosed heirs, unpaid real estate taxes, etc. To obtain title insurance, you’ll pay a one-time premium (a modest amount in relation to the value of your soon-to-be property) that will protect your property from other people’s claims to it.
How Do They Help Get My Mortgage to Closing?
There’s a lot to the title process, so we’ve outlined some behind-the-scenes actions that a title company will take to help get your mortgage to closing:
First, they’ll conduct a title search.
This ensures a buyer who is making a purchase will be the rightful owner to it once the transaction is complete. A title abstract, which provides a history of the property and its ownership, will determine if there are any liens or claims to the property by another party. A title company also looks for any outstanding mortgages, judgments or unpaid taxes associated with the property, as well as any restrictions, easements, leases or other issues that might impact ownership.
They’ll survey the property.
This requirement varies by state and transaction type.With your authorization, the title company will order a survey or drawing of the property. This is to discover any potential problems (like if a neighbor’s addition was built on your property) and verify that the home is within its set boundaries.
They research property taxes.
Your title company will follow up with local or state taxing authorities to ensure that the property’s taxes are paid up-to-date. This will be reflected on your HUD-1 settlement statement (things like homeowner’s association costs are prorated based on your closing date).
They’ll issue a title opinion letter.
This document will list what needs to be completed, or what problems need to be corrected before the home buyer can receive a “good title” and be cleared to close on the loan.
Title insurance will be issued to the lender always and to the owner, optionally.
- Lender’s title insurance is required and paid for by the buyer. It protects the mortgage company’s investment in the property.
- Owner’s title insurance is optional, but strongly recommended. It protects the property owner against any title claims or fraud issues that may arise in the future. Read more about the two types of title insurance here.
You will be given a HUD-1 settlement statement
Before the end of the loan process, your lender will send all mortgage documents to your title company for review. This allows the title company to write your HUD-1 settlement statement. (If the transaction is a refinance, the lender prepares the HUD and the title company reviews it.) HUD-1 is crucial in your mortgage, because it details all costs associated with the purchase and sale of the property. This document is constantly changing as your title company updates closing figures (like prorated taxes, insurance and interest) until closing day arrives.
What Role Do They Play At a Document Signing?
At the final document signing appointment, the title company appoints a Signing Agent (or Attorney as required in some states) who’ll review all of the necessary documentation and collect a check for closing costs (if applicable). Finally, the title company will ensure that the new titles, deeds and other documents are recorded with the appropriate entities. Read an even more in-depth explanation on title insurance here.
Have any questions about title companies or the title part of a mortgage? We’re all ears! Let us know your thoughts in the comments or visit the Title Source home page.