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Step 15: Title Search and Title Insurance

The title company confirms the seller can sell the home free of surprise claims, and insures it.

Before you can close, the title company (or closing attorney) confirms the seller actually owns the home and can transfer it to you without unexpected claims.

The title search

A title search reviews public records for the property: past deeds, mortgages, liens, judgments, unpaid taxes, easements and restrictions. Problems found here, such as an old unpaid contractor lien, must be cleared before closing.

The title commitment

The results come in a title commitment (also called a preliminary title report). Read it. It lists:

  • Who owns the property now
  • What must be paid off or fixed before closing
  • Exceptions: items the policy won't cover, such as recorded easements

Ask about anything you don't understand, especially easements and restrictions that could affect a fence, addition or pool.

Title insurance

Title insurance protects against title problems that weren't found, such as forgery, a missing heir or a recording error. It's a one-time premium paid at closing.

  • Lender's policy: required by your lender. It protects the lender's loan.
  • Owner's policy: optional in many states, but it's the only policy that protects your equity.

Survey and HOA documents

Some lenders or states require a survey to confirm boundaries. If the home is in an HOA, the escrow company orders the resale certificate showing dues, assessments and rules.

Next: get homeowners insurance.

Your next move, by loan program

  • Conventional: Every financed purchase requires a lender's title policy. An owner's policy is optional but strongly recommended. Track my closing
  • FHA: Lender's title insurance is required. Ask the title company for a quote on the owner's policy too. Track my closing
  • VA: VA limits some fees you can be charged, but title insurance is a normal, allowable closing cost. Track my closing
  • USDA: USDA follows standard title requirements. Any liens must be cleared before closing. Track my closing
  • Jumbo: On higher-value homes, consider extended owner's coverage for survey and boundary issues. Track my closing
  • Investor: Buying in an LLC? The title company will want the operating agreement and proof of who can sign. Track my closing