Today, we’ll talk
about what
title insurance is and exactly what you’re paying for.
Whenever I sit down
with a borrower, they ask what fees they can expect when they’re getting ready
to close. One of those components is title insurance, which can be kind of
pricey, but is very important. The
important thing to remember is that title insurance is a one-time fee that is
paid for at the time of closing. Typically, this is mandatory, so that we
know that the property is going to be free and clear of any liens or clouds on
title.
After hearing that,
you may think to yourself “I don’t need that, it’s just an extra cost.” You might think that your home is free of
any lien or clouds on title, but your builder or neighbor may have liens on
your property. For example, if you buy a house where a contractor did some
work for a previous owner but it wasn’t paid, it could affect your ability to
refinance down the road if there are liens against the property.
Another thing you need
to be aware of is the TILA-RESPA Integrated Disclosure (TRIP). TRIP was
established because of the Dodd-Frank Act of 2010, which was a response to the
mortgage crash. The Dodd-Frank Act aimed at making sure buyers are aware of
what they’re getting into and understand their financial obligations. This change affects all of us, but the
worst of it is going to land on the lending side of things.
The thing that will
affect you, the buyer, the most is once you get the closing disclosure, or
settlement statement, which replaces the HUD-1 statement. If we, the lender,
send the disclosure through the mail, you assume three business days for
delivery and then three days for review prior to closing. For example, assuming
you receive the settlement statement on Friday, it will be Wednesday before you
can close. This means there will be no more last second closings, as the
process has now been drawn out a bit.
Do you have more questions that we didn’t answer here? Feel
free to reach out! We’re happy to help.
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