What to Expect With Closing Costs

When it comes to closing a real estate transaction, it is important to have a solid understand of the settlement process. Closing costs are the fees due (financial responsibilities) by both the buyer and the seller at the time of sale and vary according to a number of factors. If the prospect of buying or selling a home is in your near future, you may be interested in learning what your associated settlement expenses might entail.

How Are Closing Costs Determined?

Closing costs are determined based on loan amount, taxes, mortgage insurance, and other fees. For buyers, closing costs generally average between 3 – 6% of the total purchase price. Seller costs are derived from deed preparation and other administrative fees and typically hover around 6 – 10% of the sale price, with bulk of these expenses resulting from real estate commission. 

What Do Closing Costs Include?

While total closing costs may be unique to each individual sale, buyer and seller settlement fees generally include the following:

Buyer closing costs:

   -Mortgage insurance, origination fee, and loan discount points (if applicable)

   -Home appraisal fee

   -Homeowner’s insurance

   -Title search and recording fees

   -Transfer taxes

   -Property taxes

    -Lender’s and owner’s title insurance

    -HOA fees (if applicable)

    -Boundary survey fee (if applicable)

    -Other settlement/administrative expenses

Seller closing costs:

    –Loan payoff amount

    -Agent commission

    -Property taxes

    -Deed preparation and courier fees

    -Title transfer and recording fees

    -Home repairs (if applicable)

    -Seller concessions (if applicable)

    -Other settlement/administrative costs

For more information about closing costs or the settlement process in general, contact Linear Title and Escrow today!

New to the Home Buying Process? 11 Terms to Know

Let’s be honest: there’s possibly nothing that simultaneously generates equal levels of excitement and anxiety quite like buying a new home (especially if you’re a first-time home buyer). But doing your due diligence and arming yourself with the knowledge and education of the home buying process can quell some of those nerves and help make certain you make the right moves along the way. Following are eleven terms central to the home buying process that are important for you to know and understand.

  • Earnest money deposit: Formerly referred to as a “good faith deposit,” earnest money is generally a small amount of money given to the seller from the buyer at the time of contract submission to show their serious intent to purchase the property. Once submitted, these funds are typically held in an escrow account by the title company (or other third-party, such as an attorney) and applied toward the down payment on closing day.
  • Contract ratification: This term refers to the point in the real estate transaction where the contract (and associated terms) have been agreed upon and accepted by both parties, but has not yet been signed or put into effect.
  • Home appraisal: In order for a lender to approve a loan/mortgage request, a proper appraisal by an independent third party must be conducted. The appraised value of the home is generally the loan amount amount up to which a lender will offer funding.
  • Home inspection: A home inspection is also performed by an independent third party contractor and is executed to identify any obvious or potential issues with the home that may impact its value. These concerns may be structural, such as pertaining to the roof, or aesthetic in nature.
  • Closing: The signing of documents in the transfer of title on real estate from one party to another is known as “closing” on the loan and is also referred to as “settlement.” On average, the closing process (from contract ratification to close) is between 45 – 60 days.
  • Closing Disclosure (CD) Form: This document includes details of the loan, the buyer’s financial responsibilities to the lender, and other information surrounding settlement on the property. The lender will send the CD Form to the buyer at least three business days prior to closing and should be reviewed by the buyer thoroughly upon receipt. Any inaccuracies or discrepancies regarding the information contained in this document must be addressed and resolved before closing on the loan.
  • Closing costs: Expenses paid by the buyer and seller during the real estate settlement are known as closing costs.
  • Title search: Title is the collection of rights surrounding a piece of real estate that establishes legal interests to such property. Before initiating the closing process, a title agent will conduct a title search to identify any circumstances that may interfere with the proper transfer of legal possession from one party to the next.
  • Title defects: Any factors that prevent the marketability or transfer of title are referred to as title defects. Some of the most common title defects include fraud, liens, forgery, and recording errors.
  • Title insurance: This is a type of indemnity insurance that protects the lender or owner against financial loss due to title defects discovered after the loan has closed. Lender’s and owner’s title insurance are different types of policies and carry independent costs. Lender’s policies are almost always required while owner’s polices (though not required) are highly recommended.
  • Seller concessions: Contributions to closing costs made by the seller on behalf of the buyer are known as seller concessions. These contributions can help lower the overall out-of-pocket costs for the home buyer.

At Linear Title & Escrow, our experienced team is always ready to answer your questions and guide you through the closing process. To learn more, contact us today!

What Factors Can Stall the Closing Process?

Perhaps nothing equates to the excitement of moving into a new house, whether it is your very first abode or your dream home. If you are in the process of purchasing a home, you are likely counting the minutes until your closing day. On average, the real estate settlement process takes about 45 – 60 days, barring any snags on the path to closing. To gain a realistic expectation of the time it takes to go from contract to close, it is prudent to be aware of factors that could potentially stall the closing process. Read on to learn about possible closing hiccups of which to be aware.

Title Defects

Title defects are issues that have the potential to delay closing proceedings. There are a range of title defects, or glitches in the proper transfer of property from one party to the next, which can most certainly slow the process. Your title agent will run a thorough title search on the property to screen for and identify any concerns that may interfere with this ownership transfer and work to resolve any issues as quickly as possible. Some of the most common title defects include:

– Unpaid taxes

– Liens or judgments

– Unknown heirs

– Boundary disputes

– Recording errors

– Improperly probated wills

– Unknown encumbrances/easements

Communication Roadblocks

Maintaining open lines of communication and transparency throughout the entire settlement process is imperative for all parties involved and to the common goal of keeping the closing process on track. Communicating with the appropriate person as quickly as possible to address any concerns is essential. Responding to information requests or other needs can help streamline the proceedings and work toward meeting that target closing date.

Appraisal Delays

Any repairs that are inadvertently undervalued or overlooked by home appraisers may need to be satisfied prior to closing on the loan, as enforced by the lender. Some of these issues may include cracks or leaks in the roof, interior or exterior painting needs, or problems with the HVAC unit.

Incomplete Paperwork

Missing, incomplete, or delayed paperwork will slow the funding of the loan – and ultimately the real estate settlement process. Such necessary documents may include home inspection verification, homeowner’s insurance, and other loan approval information and paperwork.

How You Can Help

As a potential homeowner, you may be wondering what you can do to facilitate the closing process and help to zero-in on that targeted settlement date. Apart from submitting all information/documentation requested by your lender as quickly and thoroughly as possible, it is important to remain in close contact with your real estate agent and title agent. These professionals can help you navigate the process and keep you apprised of any snags that may require your attention. Be sure to review your Closing Disclosure (CD) form in detail upon receipt, which should be remitted to you no later than three business days before your closing date. Any questions or discrepancies concerning this essential document should be addressed prior to the day of settlement. By remaining abreast of the settlement procedure, you can help to foster an efficient, smooth closing process.

Do you have other questions about the closing process? Reach out to the Linear Title & Escrow team today!

Is Title Insurance Necessary?

Real estate is a major financial commitment for most Americans and one of the most valuable assets to own. To protect such an investment, many homebuyers opt to purchase title insurance, which helps safeguard against financial loss in the event title defects surface after closing. While lenders generally require homebuyers to purchase a “lender’s” title insurance policy, “owner’s” title insurance is entirely optional – but highly recommended. Here’s why.

Clouds on Title

Title defects, also referred to as “clouds on title,” are obstacles preventing the proper and full transfer of ownership from one person to another, giving one or more parties some sort of claim, rights of use, or value of possession in a property. There is a wide array of title defects that can exist, but some of those most common include unreleased deeds of trust, clerical or recording errors, improperly probated wills, and judgments or liens. Any type of title defect, no matter how seemingly minor, can stall the closing process and interfere with a real estate sale.

Lender’s vs. Owner’s Title Insurance

Mortgage lenders almost always require homebuyers to purchase a lender’s title insurance policy, which protects the financial institution against loss that may arise from the discovery of title defects after closing or if the mortgage becomes unenforceable for any reason.

Though owner’s title insurance is not mandated, it is generally recommended for the majority of homeowners. An owner’s policy can cover legal costs should it become necessary for a homeowner to defend their property rights in court. It can also remunerate the policy holder if they lose the property to another party over such enforceable property rights. As a one-time payment, an owner’s policy is purchased at the time of sale and covers the homeowner for as long the property remains in their possession. Owner’s title insurance policies are typically valued at the original purchase price.

Get the answers to your title insurance questions today! Contact our experienced team at Linear Title & Escrow to learn more.

What You Need to Know About Closing on a Refinance

With interest rates still among the lowest in recent years, refinancing your home loan may be something you wish to consider. Refinancing a mortgage can be beneficial in a number of scenarios, from reducing interest rates and monthly payments to replacing one type of mortgage product with another that better serves your needs. Some homeowners even refinance to cash out a portion of the equity accrued in their properties.

If you have never refinanced a home loan before, you may be wondering if and how the closing process differs from the initial sale. Read on to learn what you need to know when preparing to close on your refinance loan.

Refinance vs. Initial Sale Closing: What Is the Difference?

Some people are surprised to learn that refinancing an existing mortgage still requires the formal process of a settlement, or closing. While there are a number of general similarities between closing on an initial sale and a refinance, the process of refinancing differs in a few ways:

• Time: Though the same number of steps must be taken during the loan approval process, the time from application-to-close is slightly faster with a refinance loan when compared to the initial sale. On average, the timeframe is between 30 – 45 days.

• Closing Costs: While you will still be responsible for closing costs when refinancing your mortgage, the overall percentage may be less than what you paid during your initial purchase. Refinance loans generally carry no fixed costs.

• Title Insurance: If an Owner’s Title Insurance policy was purchased at time of sale, then a re-issue rate is given on the Lender’s Title Insurance policy for the refinance loan.

What to Bring to the Closing Table

Closing day is generally the same, whether you are purchasing a home or refinancing an existing loan. The items you will need to bring to your refinance closing include:

  • Government-issued identification
  • Certified check (in the exact amount due)
  • Proof of homeowner’s insurance

Have other questions about closing on your refinance loan? Get in touch with the team at Linear Title & Escrow today!

What Occurs When a Title Defect Is Found?

In real estate, a title defect (also referred to a “cloud on title”) is an issue interfering with the proper transfer of property ownership from the seller(s) to the buyer(s). During the settlement process, the title agent or closing attorney will conduct a thorough title search, reviewing the history of the deed through public records to determine if any other parties have any ownership stake in the property.

What Is a Title Search?

A title search also seeks to reveal if any liens or other claims against the piece of real estate are in effect. The overarching purpose of a title search is to identify such concerns and allow for the resolution of title defects, which is necessary loan settlement can occur.

Common Title Defects

Title defects may involve a wide range of encumbrances. Some of the most common defects include errors or omissions on public records, improperly probated wills, unidentified heirs, mechanic’s liens, tax liens, unpaid mortgages, and unknown easements, among others.

Title Resolution

When title defects are discovered, the title agent initiates a remediation process to resolve the defect and render the title clear and free. While some types of clouds on title are corrected quickly (such as errors in public records), others may require more research, time, and even court proceedings to rectify.

The type of defect dictates the course of action taken to resolve the issue. In many cases, however, title problems are amended via the recording of a supportive or corrective document that supplies the accurate information and releases the encumbrance. (A quit claim deed is one such type of document.) Title defects that surface in the form of liens, judgments, or defaults on mortgages must be paid and receipt of payment must be submitted and recorded.

Protect Your Interests With Title Insurance

Though titles agents work diligently to conduct a thorough title search, there may be unidentified or unforeseen defects that surface after closing. The best way for homebuyers to protect their financial interests and prevent the loss or real property is through an Owner’s Title Insurance policy. This indemnity policy remunerates the homeowner in the event that a title defect arises and they subsequently lose their interest in the property. It can also cover the costs of defending their ownership stake in a court of law.

For all of your title needs, questions, and concerns, contact the knowledgeable team at Linear Title and Escrow today.

Top Questions About Title Insurance

As you go through the process of closing on a home, you’re likely to hear the term “title insurance” as some point throughout the proceedings. This officious-sounding phrase may be recognizable or completely unfamiliar, depending on whether you’re a seasoned pro or first-time home buyer. While a straight-forward concept in most regards, there is (at times) some confusion about what title insurance actually is and whether it’s truly necessary. To help make sense of it all, we’ve compiled a list of the title insurance questions we’re asked most often.

What, Exactly, Is Title Insurance?

Before we get into specific questions about title insurance, let’s first review what title insurance actually is. Title insurance is a type of indemnity policy that protects a participating party against financial losses associated with a specific piece of real estate in the event a title problem arises following the settlement process.

What is the difference between lender’s title insurance and owner’s title insurance?

A lender’s policy safeguards the financial interests of the institution supplying the mortgage should the loan become unenforceable due to title problems that interfere with the proper transfer of ownership. An owner’s policy protects the home buyer against financial loss surrounding their property should title defects surface after closing.

Is title insurance mandatory?

Most lenders do require that home buyers purchase a lender’s title policy. Owner’s title insurance is not mandatory, but is highly recommended for most people who purchase real estate.

How can owner’s title insurance protect my interests?

Having an owner’s title insurance policy in place can cover legal costs for defending title as well as remunerate the homeowner should another party be successful at proving a sound ownership stake in the property for which the policy covers.

What can I expect to pay for title insurance?

Both lender’s and owner’s title insurance is paid in a single payment submitted during the home closing process. The cost of these policies is based on the loan amount and sales price for a new purchase and the loan amount for a mortgage refinance.

What will an owner’s title insurance policy cover?

Depending on the policy type (standard vs. enhanced), owner’s title insurance may cover court costs associated with defending the homeowner’s interests and financial loss due to a range of title defects, such as fraud, recording errors, and improperly executed wills, among others.

Do I need a new policy if I refinance?

Both a lender’s and an owner’s policy will remain in effect until the homeowner or their heirs sell or transfer ownership of the property to another party. If the loan is refinanced, the lender will require the purchase of a new Lender’s policy; however, a re-issue rate will be given. The original owner’s policy will still be applicable following the refinancing of a home loan.

Learn more about this topic by visiting our title insurance page or contacting our knowledge team at Linear Title & Escrow today!