Title Insurance and Your Escrow
As part of closing your California escrow, one of the things you'll be dealing with is Title Insurance. Your title company will charge a fee at the time of closing for issuing a title policy, which is basically a written guarantee of good and merchantable (clear) title, subject to things of record like unpaid taxes, covenants, conditions, and restrictions (CC&R's), etc. These exceptions to coverage are important issues that you will want to review carefully, and title insurance companies typically make this easy to do.
When you're involved in a California real estate closing that involves a federally-insured loan (most loans), all of your debits and credits are required to be shown on what's called a HUD-1 Form. Here's a breakdown of some typical charges you may incur and what they consist of:
- Broker's Real Estate Commission: The agreed-upon fee for your broker charged to market and sell your home is listed here.
- Loan Fees: This could involve, for example, a loan-origination fee, discount point(s), appraisal fee, credit report fee, mortgage application fee, etc.
- Prepaid Items: This would involve interest on your loan and, if applicable, mortgage insurance premium (MIP) charges.
- Escrow Impounds/Reserves: Lenders typically require that your hazard insurance, flood insurance (if applicable), and annual real estate taxes be paid through an impound account that is set up and funded at the close of escrow, and pain into each month through your mortgage payment.
- Title/Closing Charges: This would be the real estate closing fee charged by the closing company, any applicable loan closing fee, title insurance, document fees, etc.
- Recording and Filing Fees: This would include any recording fees charged by the county, along with ant filing fees and/or transfer fees.
- Other Misc. Charges: This could include any survey fees and any unpaid inspection fees.
You will also see pro-rations for things like taxes and HOA (homeowner's) dues, with the seller being responsible for paying for the time they've owned the property. Buyers will typically get credit from the seller for this pro-ration at closing, and then be responsible for the entire annual bill when it becomes due next year.
There's a lot to know about Title Insurance, Closing Costs, and how they affect your NorCal real estate escrow closing, so be sure to contact us with any questions you might have. If you would like to read more details, we've provided a link to information provides by The American Land Title Association (ALTA). Founded in 1907, ALTA is the national trade association and voice of the abstract and title insurance industry. ALTA members search, review and insure land titles to protect home buyers and mortgage lenders who invest in real estate. ALTA is headquartered in Washington, DC.
Click on the blue "Home Closing 101" icon to the left and you'll be able to get more details on how Title Insurance works, why you need title insurance, what typical closing costs are, the closing process, and why these things are such an important part of the escrow closing process.
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