Later on, you find out the seller inherited the home when his father died and actually only owns half of the home. You can imagine what an unpleasant situation that would be for everyone.
A search from a title company would have revealed the second owner and stopped the sale before you close on the mortgage. Your title company will conduct a property survey. Required to close on a home in most states, surveys ensure that the home occupies only the space indicated on the title. The abstract is not your title insurance policy.
Title companies provide two kinds of title insurance policies: one for you, the buyer, and one for your lender. Because your lender has a financial interest in the property, title insurance protects them the same as it does you: financially and legally, if someone comes forth with a claim for the property that was missed in the title search.
But unlike most insurance policies that require you to pay a yearly or monthly premium to keep your coverage, you only have to pay title insurance once when you close on the property. Your title phrasing may also affect how you pay property taxes and fees if you sell your home in the future. Title companies usually manage the closing on your home.
Title companies may hold and manage money in escrow, with the help of an escrow agent. An escrow account is a savings account managed by a third party — in this case the title company — which distributes payouts under certain conditions. Escrow accounts are common in real estate transactions because mortgage lenders want to make sure that you have enough money for certain expenses. All parties involved in the process of buying a house will need to send or receive funds related to the transaction.
Whichever title company you decide to use is completely up to you. Plus, they'll manage the closing of your home. You can certainly put your mind at ease and double-check that the title agent chosen is both knowledgeable and well-versed in the field. Your lender or real estate agent will use a title company that they know can get the job done without any hiccups. Frankly, your best bet is to defer to your team and simply remain in communication until your closing day.
Those who want to be more involved in the process might decide to browse reviews of title companies and talk to their contact about anything of note.
Remember that a home purchase is one of the largest financial transactions you will ever make. Mortgage Basics Search. Continue reading for an in-depth look at title companies. What does a title company do? How do they make money? Finally, similar to other types of insurance, if you bundle lenders and title policies together, the title company is more likely to give you a better deal.
Your lender, lawyer, or real estate agent may recommend a title company for you. According to the Consumer Finance Protection Bureau, your lender is required to give you a list of companies in your area that provide the closing services you can shop for, which includes title insurance. These are the important questions. Now that you know how a title works, go forth and secure a mortgage with confidence. You can also give one of our Home Loan Experts a call at Published on October 9, Understanding The Difference Between A Title And A Deed One of the more befuddling things about the signing process on closing day is understanding the difference between a title and a deed.
Perform A Title Search The first thing a title company will do is perform a title search, which entails looking for potential obstacles to the clean transfer of ownership. The thing that most often immediately comes to mind is whether other people have ownership in or rights to the property, but a title search also looks for the following issues: Outstanding Mortgages: Unless the previous home is owned free and clear, the current homeowner will have a mortgage tied to the property.
This will need to be paid off at closing so that the title can be transferred to you. Other Existing Liens: You could have a lien on the property for other things like a home equity line of credit or a loan to pay off solar panels, for example. These will need to be paid off or otherwise removed before you can close. The dues of the previous owner will need to be dealt with one way or the other before moving forward.
Judgments Or Unpaid Tax Liens: If the previous owner has some unfulfilled responsibility, they can be taken to court and the complaining party can win a judgment that stays with the property until the person is paid. If the IRS or another taxing authority places a lien on the property for unpaid taxes, they can collect proceeds in the event of a sale. Both issues must be taken care of. Examples of restrictions would be a requirement to be a certain age to live in a community or a requirement to belong to a certain group.
An example of an easement might be the right to use space for parking. Leases: Is the property rented out to anyone for a specified term?
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