Escrow and Title Expenses are Mortgage Loan Musts

by Sheryl Landrum
CMR Columnist

We all want to minimize our costs when refinancing our mortgage or when buying a new home and getting a new home mortgage loan. Outside mortgage lender fees, our biggest expense is usually title and escrow. What is the function of title and escrow and how does the expense pay for itself when you are getting a new home loan?

Escrow Acts as a Neutral Force in the Mortgage Process

We all want impartiality when negotiating a new home purchase, refinancing our current mortgage, or entering into any type of property transaction. Your escrow company protects the interests of all parties in a home buying or home refinancing transaction. Your escrow company will:
  • Become the depository for all funds, instructions, and documents that are pertinent to the home buyer's/seller's contract and ensures that all terms and instructions are carried out according to the property contract and the mortgage lender's instructions.
  • Coordinates the timely closing of the home sale or purchase and/or mortgage loan.
  • Coordinates with the borrowers and the title company to make sure the property is vested correctly.
  • Handles the signing of the mortgage loan documents.
  • Disperses all funds according to the contract documents after the mortgage loan has funded and title is recorded.

Title Companies Ensure You Don't Mortgage Property You Can't Legally Own

Title insurance is a one-time fee to insure a borrower's ownership of the property until the mortgage loan is paid off. Your title company will search and examine public records to ascertain that the property you are purchasing can legally be sold by the seller and that there are no recorded liens and encumbrances that could affect you getting clear title of the property. It assures property owners they are getting marketable title and lenders that they are lending to borrowers with legal ownership. Your title company will issue a preliminary report to escrow stating whether title can legally be transferred and will also note any existing restrictions, easements, rights of way or other issues that may limit the right of ownership. Should the property title prove to be unclear after the escrow closes and the new home loan has funded, title insurance will cover the borrower and lender.

Home ownership and a mortgage loan are large and complicated transactions. Having an escrow company mediate and coordinate our home loan is in our best interest. Ensuring that we are spending money on a viable piece of property validates the need for title insurance as well. Talk to your lender or loan officer today to learn more about the value of escrow and title insurance when you are looking at a new home loan.

About the Author
Sheryl Landrum is a Loan Officer in San Diego, California and a freelance writer specializing in mortgage issues.

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