Mortgage Settlement
Closing Costs and Fees for Transferring Ownership


Title Search

The purpose of a title search is to assure you and your lender that the seller is the legal owner of the property that you are buying and that there are no outstanding claims or liens against it. The title search may be performed by a lawyer, an escrow or title company, or other specialist prior to closing.

Public real estate records can be spread among several local government offices, including surveyors, county courts, tax assessors, and recorders of deeds. Liens, records of deaths, divorces, court judgments, and contests over wills -- all of which can affect ownership rights -- must also be examined before closing.

If real estate records are computerized, the title search can be completed fairly quickly. In some cases, however, the title search may involve visiting courthouses and examining other public records and files, which is more time-consuming.

Title Insurance

Most lenders require a title insurance policy. This policy insures the lender against an error in the results of the title search. If a problem arises, the insurance covers the lender's investment in your mortgage.

The cost of the policy (a one-time premium) is usually based on the loan amount and is often paid by the buyer. However, you may negotiate with the seller to pay all or part of the premium (fee).

The title insurance required by the lender protects only the lender. To protect yourself against title problems, you may want to buy an "owner's" title insurance policy. Normally the additional premium cost is based on the cost of the lender's policy, but this premium can vary from area to area.

Some advice on keeping title insurance costs low: If the house you are buying was owned by the seller for only a few years, check with the seller's title company. You may be able to get a "re-issue rate," because the time between title searches was short. As well, if you are refinancing, you may be able to get a "re-issue rate" on your title insurance. The premium is likely to be lower than the regular rate for a new policy. If no claims have been made against the title since the previous title search was done, the insurer may consider the property to be a lower insurance risk.

Usually you will have to buy title insurance from a company acceptable to your lender. However, you can still shop around for the best premium rates (which can vary depending on how much competition there is in your market area). If you decide to buy an "owner's title policy," look for one with as few exclusions from coverage as possible. Exclusions are listed in each policy, and if a policy has many exclusions -- that is, situations under which the insurer will not pay for your title problems -- you may end up with little coverage. The estimated cost of title services and title insurance varies by state. For example, a lender's policy on a $100,000 loan can range from $175 in one state to $900 in another. In some states, the price can even vary by county.

Settlement Companies and Others Conducting the Settlement

Settlements are conducted by title insurance companies, real estate brokers, lending institutions, escrow companies, or attorneys. In most cases, the settlement agent is providing a service to the lender, and you may be required to pay for these services. You can also hire your own attorney to represent you at all stages of the transaction, including settlement.

You may be involved in some of the closing activities and not in others, depending on local practices and on the professionals with whom you are working. In some regions, all the people involved in the sale -- the buyer, the seller, the lender, the real estate agents, attorneys (for the buyer, seller, and lender), and representatives from the title firm -- may meet to sign forms and transfer funds. In other regions, closing is handled by a title or escrow firm that collects all the funding, paperwork, and signatures and makes the necessary disbursements. The firm delivers the check to the seller and the house keys to you.

Costs for settlement services vary widely, depending on the professional services involved. Regardless of the way closing is handled in your region, shop around and ask for information on all services provided and all fees charged.

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