When buying a house, part of the process involves transferring title of the property over to you. In many areas, this work is done by a title company at closing. Learning how a title company works in advance can help you know what to expect during the process of closing your mortgage and buying a new house.

What Do Title Companies Do?

Title companies do research on the titles of property, and determine if it can be legally transferred to a buyer. The title company will research the transactions involving a piece of land all the way back to the land’s original owner. The title company will make sure that the title to the property was transferred properly each time along the way. This way, the title company can prove that the current owner of the property has the right to transfer ownership of the property to a new owner.

Title Insurance

Title companies also offer a product known as title insurance. Title insurance is a type of insurance policy that guarantees that the buyer of the property will not lose his investment in the property. For example, if a title insurance policy is issued and then some kind of discrepancy is discovered that makes the sale invalid, the buyer will be reimbursed for his expenses by the title company.

There are two different kinds of title insurance that can be issued by the title company. The first type of policy protects the mortgage lender in the agreement. This way, if something happens, the mortgage company will be paid back for the loan. The second type of policy that can be purchased by the title company is one that is for the homeowner. This type of insurance is optional and can be purchased by the buyer of the property.

Considerations

As a new homebuyer, you don’t have to purchase title insurance for yourself. However, you probably will be required to buy title insurance for your lender. This is included as part of the closing costs for the mortgage. The lender needs to ensure that it is protected from every possible contingency so that it can limit the risk associated with your mortgage. While this will add to the total closing costs of your mortgage, it is a requirement with most lenders. In many cases, you will also conduct your closing at the title company offices. This involves signing several documents, and completing the transfer of the property.

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