What is a title company?

Buying a home and getting a mortgage can be a long and complicated process. It is likely to be one of the biggest and most important purchases of your life and the title company is there as part of the process to make sure that documents are in order and to disclose things that need to be known about the property before you close on it and the transaction is finalized. They are a major part of the closing process and may fulfill various duties during the end of what can be the stressful process of buying a home.
The first role of the title company is their responsibility for researching the property and discovering anything such as liens, unpaid taxes, mortgages, or judgement that are attached to the property. Other important things they are responsible for discovering are items such as easements and leases that affect the property. As part of this role the title company also offers title insurance, which is usually required by the lender. Title insurance protects the buyer against claims of ownership against the property once you have closed.
Secondly, they are they as an intermediary between the buyer and seller during the closing process. During closing, the title company is generally responsible for the escrow accounts from which settlement and closing costs are paid from. In this role they are expected to act in an honest manner as custodians for the accounts. Often they are tasked with conducting closing which has them producing all necessary paperwork for the transaction such as tax certificates and funding documents. When closing is complete the title company is responsible for recording the legal documents such as the deed and mortgage at the courthouse and returning the originals to the respective parties. They also may be responsible for various administrative jobs such as dispensing commission checks to any necessary parties involved in the transaction.

As you go through the process of buying a home, you will have to work with a title company. The title company is responsible for making sure that there are no debts attached to the property before the purchase goes through, as well as providing title insurance to protect your ownership of the property.

What Does the Title Company Do?

The main responsibility of the title company is to research the property you plan to buy, and then issue insurance meant to help protect the mortgage lender in the event that something was missed in the initial research.

A title company’s main purpose is to establish a clear line of ownership on the property. The title company researches the property for ownership disputes; before the property can be purchased, these disputes need to be resolved.

On top of that, the title company searches the records related to the property to find out if there are unpaid debts. Before a lender agrees to provide you with the funds to buy a home, it wants to know that unpaid debts and taxes aren’t going to put your ability to make your mortgage payments at risk.

After returning a clean title search, the same title company will often issue you title insurance. This insurance policy will protect you should a past owner ever dispute your ownership of the property, or if back taxes and debts one day come up concerning the property. A title insurance policy is just one of the necessary purchases a homeowner needs to make as part of the process. Lenders are more comfortable when borrowers have title insurance.

Who Pays for Title Insurance?

In most cases, the borrower pays for the title insurance. Often, the mortgage lender puts a borrower in contact with the title company, and often takes care of the logistics, although borrowers can often choose their preferred title company. As you look to buy a home, you will find that there are a number of costs associated with the mortgage. Title insurance is one of the many fees that you will pay as you close on your mortgage.

Title insurance usually costs between $1,000 and $4,000, depending on what state you live in. Sometimes, a formula, such as multiplying the purchase price by 0.005 is used. If you buy a home for $250,000, the title insurance, by this method, would be $1,250. Find out ahead of time how your title insurance premium will be figured.

Title insurance is only a one-time cost, though, so you don’t have to worry about paying it on a recurring basis. Some lenders might waive the fee, or pay it for you, but most require you to pay for title insurance, along with PMI, your credit check, attorney fees, and any other related costs that crop up.