You Have Questions about Transfer of Title
We have answers…
What’s Title Insurance and What Are Its Benefits?
Title Insurance is unlike other insurance. It is risk elimination insurance. Title Insurance is designed to protect against any unforeseen “surprises” and is the only insurance issued against occurrences that have already taken place. The premium is paid one time only.
Title Insurance Guarantees Protection
The first step in guaranteeing your protection is a title search. By investigating all records on the subject property, a title search can verify the sellers’ right to transfer ownership, locate possible claims against the subject property, delinquent assessments, errors or miscellaneous defects in the title to the property and virtually eliminate the risk factor for the buyer.
The following are a few examples of defects we look for and cure prior to closing:
Title Insurance is a safeguard for you. It can save you trouble, time, money and most importantly, your home. It acts as a shield against any claim brought against your property.
Just What Am I Signing, Anyway?
Closing Statement, Warranty Deed, Owner’s Affidavit, etc…
In any title closing, you will be signing documents. Unless you have had at least one prior closing, these documents will likely be unfamiliar to you. The following information is designed to explain the highlights of the most common documents and to summarize for you the other types of documents you may be asked to sign.
HUD Closing Settlement Statement
One of the most important documents at your closing, and probably one of the first you will encounter, will be your settlement sheet or closing statement. The official name of this form is the HUD-I Settlement Statement. This form itemizes your closing figure, including all of the amounts you are being charged. The form also shows the total amount owed to close (for the buyer) and the total proceeds of the sale (for the seller). This form will be covered thoroughly during the closing, and you will have the opportunity to ask questions you may have concerning any of the figures.
Another important document at your closing is the Warranty Deed. This will be signed by the sellers, and is the document representing the transfer of ownership rights from the sellers to the buyers. This document contains the full names of all parties, the “legal” description of the property, a list of the restrictions and easements affecting the use of the property, and two important warranties: the warranty of good title and the right to quiet possession. These two represent the guarantee by the sellers that they are entitled to transfer a complete interest in their property.
Promissory Note and Deed of Trust
If financing is being obtained on the property in conjunction with the closing, the buyers will be asked to sign a Promissory Note and Deed of Trust.
The Promissory Note is the document in which loan finds are extended to the buyers in exchange for a promise from them to pay the money back the the lender over a set period of time. The note will contain many of the terms of the loan, including the loan amount, the monthly principal and interest amount, the loan term, and the first and last payment dates.
To enforce the repayment of the loan according to the agreed upon terms, the buyers will also sign a Deed of Trust. This multi-page document puts the real estate up as collateral for the new loan. It restates certain of the loan terms including the loan amount and final payment due date. Further, it reminds the buyers to keep the property in good repair, to include escrow deposits along with their monthly payments of principal and interest, and sets out acceptable procedures for enforcing the terms of the trust created by the deed in the event that the buyers fail to pay as promised.
The sellers will usually be asked to sign an Owner’s Affidavit following their execution of the Warranty Deed. In this affidavit, the sellers will be asked to make certain statements regarding their property and their status, I.e. that there are no outstanding loans or other liens affecting the property, that there are no pending judgements or bankruptcies against the sellers or the property, and that they are legal age and are competent to contract.
Federal Truth In Lending Disclosures
Generally all closings have an additional document which does not have the binding effect of the ones previously discussed, but which is important and required by most lenders: the Federal Truth-In-Lending Disclosure.
The Federal Truth-In-Lending Disclosure represents to the buyers the total cost of their credit. It shows the total amount of interest and loan-related finance charges the buyers will pay over the entire life of the loan. It also shows the total of the payments, principal, interest and loan-related finance charges, that the buyers will pay over the complete loan term. An “amount financed” is shown; this is not the buyers’ full loan amount, but us a lower amount reflecting the subtraction of several loan-related finance charges which are disbursed directly from the loan proceeds to cover up-front costs associated with the loan. (These “up-front costs” may include the loan origination fee, any discount points paid by the buyers, any type of mortgage insurance, and any prepaid interest.)
Additional Closing Docments
In addition to the documents discussed above, each loan type has documents unique to that particular loan program which must be signed at closing. Both FHA and VA loans have specific forms which must be submitted to the FHA and VA in order to be able to obtain the loan funds guaranty. Conventional loans have standard guidelines.
Lenders often have in-house loan documents which must be executed before the loan closing is completed. These forms address a variety of lenders’ needs. Among the most common are forms which show a breakdown of the monthly payment; state that all parties agree to complete any documents or make necessary corrections to existing ones; inform the lender that the buyers intend to use the house as their principal residence; verify that buyers’ credit and employment have not changed materially since the time of loan application; reflect insurance coverage information for the lender’s records; and provide the lender with the buyers’ accurate mailing address in the event that it is different from the address of the property.
We hope this information will be of use to you. If you have questions or need further information please feel free to call or email your concerns.