Title Search · Title Insurance · Closing Services
What Does a Title Company Do? Their Role in Your Mortgage Closing Explained
The title company performs three critical functions in your home purchase: they search public records to verify the seller has clear ownership, they issue title insurance to protect you and your lender against future claims, and they conduct the closing where documents are signed and funds are disbursed.
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Title Search
- Purpose: Verify the seller legally owns the property and has the right to transfer it to you free of undisclosed liens or claims
- What they check: Deed history, mortgages, tax liens, judgment liens, easements, and any encumbrances on the property title
- Timeline: The title search typically takes 1 to 2 weeks and must be completed before closing
- Action: Review the preliminary title report for any exceptions or issues that need resolution before closing
Title Insurance
- Lender’s policy: Required by every mortgage lender — protects the lender against title defects for the life of the loan
- Owner’s policy: Optional but strongly recommended — protects you against title claims for as long as you own the property
- One-time cost: Both policies are paid once at closing and provide coverage indefinitely — no monthly premiums
- Action: Always purchase an owner’s title policy — it is typically $500 to $1,500 and protects against losses that could exceed the home’s value
Closing Agent
- Document preparation: The title company prepares the settlement statement, deed, and all closing documents
- Fund management: They hold earnest money in escrow and coordinate the disbursement of funds at closing
- Recording: After closing, they record the deed and mortgage with the county recorder to make the transfer official
- Action: Confirm wire instructions directly with the title company by phone — wire fraud is the biggest closing-day risk
Costs
- Title search: $200 to $400 — the cost to search public records for the property’s title history
- Lender’s title insurance: $500 to $1,500 — required, calculated based on loan amount
- Owner’s title insurance: $500 to $1,500 — optional, calculated based on purchase price
- Action: You have the right to shop for title services — compare fees from 2 to 3 title companies before your lender selects one
Frequently Asked Questions
Who chooses the title company?
Is title insurance worth the cost?
What happens if a title defect is found?
The Bottom Line Up Front
The title company is the neutral third party that makes sure the property you are buying actually belongs to the seller, that no one else has a claim to it, and that the closing documents are executed correctly. They search, insure, and close — three functions that protect both you and your lender from title-related losses.
Most buyers interact with the title company twice: when they receive the preliminary title report and when they sit down at the closing table. But the title company’s work spans the entire period between your accepted offer and closing day. They research public records going back decades to identify any liens, encumbrances, or ownership disputes. They issue insurance policies that protect against claims that the search may have missed. And they coordinate the closing itself — preparing documents, managing funds, and recording the deed with the county.
- Title search examines public records for ownership history, liens, judgments, easements, and encumbrances — any issue must be resolved before the title company will issue insurance
- Lender’s title insurance is required on every mortgage transaction — it protects the lender’s interest in the property for the life of the loan
- Owner’s title insurance is optional but highly recommended — it protects your equity and ownership rights against claims that surface after closing
- The title company serves as the closing agent in most transactions — they prepare documents, hold escrow funds, coordinate disbursements, and record the deed
What Does a Title Search Reveal?
A title search is a thorough examination of public records to verify that the seller has clear, marketable ownership of the property. It reveals any issues that could affect your ownership after closing.
- Ownership chain: the title examiner traces the deed history (chain of title) to verify that the seller obtained ownership legally and has the right to transfer it
- Outstanding liens: mortgages, home equity loans, tax liens, mechanic’s liens, and judgment liens that are attached to the property and must be paid off before or at closing
- Easements and restrictions: rights of way, utility easements, and covenants that affect how you can use the property — these do not prevent the sale but are important to know about
- Property boundaries: the legal description is verified against survey records to confirm the property’s boundaries match what is being sold
- Unpaid taxes: delinquent property taxes create a lien that must be satisfied at closing — the title company verifies the tax status with the county
What Does Title Insurance Cover?
Title insurance protects against losses from title defects that existed before you bought the property but were not discovered during the title search. It is a one-time premium paid at closing with no ongoing cost.
- Undisclosed liens: a previous owner’s unpaid contractor or tax debt that was not found in the title search but surfaces after closing as a claim against the property
- Forgery and fraud: a previous deed in the chain of title that was forged or fraudulently executed — this can invalidate subsequent transfers including yours
- Recording errors: clerical mistakes in public records that create ambiguity about ownership or lien priority
- Missing heirs: a previous owner died and their heirs were not properly notified — the missing heir can claim an ownership interest in the property years later
- Boundary disputes: a neighbor claims that a portion of your property actually belongs to them based on a survey or deed discrepancy
Lender Reality Check
Lender’s title insurance only protects the lender’s financial interest in the property. It does not protect you as the homeowner. If a title claim surfaces after closing that reduces or eliminates your ownership, the lender’s policy covers the lender’s loss on the mortgage balance — not your equity loss. Owner’s title insurance is the policy that protects your investment, and at $500 to $1,500, it is one of the cheapest insurance products you will ever buy.
What Does the Title Company Do at Closing?
The title company conducts the closing — also called settlement — where all documents are signed, funds are disbursed, and ownership officially transfers from seller to buyer.
- Document preparation: the title company prepares the HUD-1 or Closing Disclosure settlement statement, the deed, the mortgage note, and all ancillary closing documents
- Escrow management: they hold the buyer’s earnest money deposit in an escrow account and coordinate the receipt of loan funds from the lender and purchase funds from the buyer
- Disbursement: at closing, the title company distributes funds to the seller, pays off the seller’s existing mortgage, pays real estate commissions, and distributes closing costs to the appropriate parties
- Recording: after closing, the title company records the new deed and mortgage with the county recorder’s office — this makes the ownership transfer part of the public record
The Bottom Line
The title company protects your investment by verifying ownership, insuring against hidden claims, and conducting a clean closing. Their work happens largely behind the scenes, but it is essential to every mortgage transaction. Always purchase owner’s title insurance and verify wire instructions by phone before sending closing funds.
Frequently Asked Questions
Can I shop for my own title company?
Yes. Under RESPA, you have the right to shop for title services. Your lender provides a list of recommended providers, but you are not required to use their suggestion. Compare fees from 2 to 3 title companies — the savings on title insurance and closing fees can reach $500 to $1,000.
What is a title commitment?
A title commitment (or preliminary title report) is a document issued by the title company before closing that outlines the terms under which they will issue title insurance. It lists the current owner, any liens or encumbrances found in the search, and any exceptions to coverage. Review it carefully and ask about any items you do not understand.
How long does a title search take?
A standard title search takes 1 to 2 weeks. Properties with complex ownership history, multiple liens, or title defects can take longer. The title company begins the search shortly after the purchase agreement is executed and aims to complete it well before the scheduled closing date.
Do you need title insurance for a cash purchase?
Lender’s title insurance is only required when there is a mortgage. Cash buyers are not required to purchase any title insurance. However, owner’s title insurance is strongly recommended for cash purchases because it protects your entire investment against title claims — without a lender policy, there is no safety net at all.
What is the difference between title insurance and homeowners insurance?
Title insurance protects against problems with the property’s legal ownership — liens, fraud, boundary disputes, and recording errors that existed before you bought the home. Homeowners insurance protects against physical damage to the property — fire, storm, theft, and liability. They cover completely different risks.
Can a title issue prevent closing?
Yes. If the title search reveals an unresolvable defect — an uncleared lien, a boundary dispute, or a break in the chain of ownership — the title company cannot issue insurance and the closing cannot proceed. Most title issues can be resolved with time, but some require legal action that can delay closing by weeks or months.
How do I protect against wire fraud at closing?
Always verify wire instructions by calling the title company directly using a phone number from their website or your previous correspondence — never from an email. Wire fraud schemes involve hackers intercepting emails and sending fake wire instructions. Once funds are wired to a fraudulent account, recovery is extremely difficult.
Does the title company hold the deed?
The title company records the deed with the county recorder after closing. Once recorded, the deed is part of the public record. The original recorded deed is typically mailed to the homeowner within 4 to 8 weeks after closing. The title company does not retain permanent possession of the deed.