Closing and Title Costs
It's the big day.
The day you go to the title or escrow company, sign your name on the dotted
line, hand over a check and prepare to take ownership of your new home.
It's also the day that you and the seller will pay "closing" or
settlement costs, an accumulation of separate charges paid to different entities
for the professional services associated with the buying and selling of real
It's too often a day filled with uncertainty and stress.
To help you better understand this confusing subject, the Land Title Association
has answered some of the questions most commonly asked about title, closing and
What services will I be paying for when I pay closing costs?
You will usually be paying for such things as real estate commissions, appraisal
fees, loan fees, escrow charges, advance payments such as property taxes and
homeowner's insurance, title insurance premiums, pest inspections and the like.
How much should I expect to pay in closing costs?
The amount you pay for closing costs will vary; however, when buying your home
and obtaining a new loan, an estimate of your closing costs will be provided to
you pursuant to the Real Estate Settlement Procedures Act after you submit your
loan application. This disclosure provides you with a good faith estimate of
what your closing costs will be in the real estate process. An itemized list of
charges will be prepared when you close your transaction and take title to your
Can I pay for my closing costs in installments?
No, and it is easy to understand why. Many different parties will have fulfilled
their responsibilities and be awaiting payment upon closing. The title or escrow
company will disburse money to those parties, pursuant to the escrow
instructions, when funds are available.
Will I be allowed to write a personal check to cover my closing cost?
Your closing funds should be in the form of a cashier's check, issued by an
institution from the state of your purchase, made payable to the title company
or escrow office in the amount requested. A personal check may delay the closing
or may be unacceptable to the title or escrow company. An out-of-state check
could also cause a delay in your closing due to possible delays in clearing the
How much can I expect to pay for Title Insurance?
This point is often misunderstood. Although the title company or escrow office
usually serves as a meeting ground for closing the sale, only a small percentage
of total closing fees are actually for title insurance protection.
Your title insurance premium may actually amount to less than one percent of the
purchase price of your home, and less than ten percent of your total closing
costs. The title policy is good for as long as you and your heirs own the
property with the payment of only one premium.
Why are separate owner's and lender's title insurance policies issued?
Both you and your lender will want the security offered by title insurance.
Your home is an important purchase, and you will want to be certain your home is
yours, all yours. Title insurance companies insure your rights and interests in
order to protect you against claims.
Your lender is looking to insure the enforceability of their lien on your
property and marketability. What is meant by "marketability"? Local
lenders will "originate" a loan here, and, often, sell it to an
out-of-state investor. This investor, who may never see the property, needs to
know that he has a valid and enforceable lien. Title insurance is the way of
making certain. Without a current title policy, the loan is essentially
What does my Title dollar pay for?
Title insurers, unlike property or casualty insurance companies, operate under
the theory of "risk elimination."
Risk elimination can only be accomplished after an intensive period of risk
Title companies spend a high percentage of their operating revenue each year
collecting, storing, maintaining and analyzing official records for information
that affects title to real property. The issuance of a title insurance policy is
highly labor-intensive. It is based upon the maintenance of a title
"plant" or library of title records, in many cases dating back over a
hundred years. Each day, recorded documents affecting real property are posted
to these plants so that when a title search on a particular parcel is requested,
the information is already organized for rapid and accurate retrieval.
Trained title experts are able, with the aid of their extensive title plants, to
identify the rights others may have in your property, such as recorded liens,
legal actions, disputed interests, rights of way or other encumbrances on your
title. Before closing your transaction, you can seek to "clear" those
encumbrances which you do not wish to assume.
The goal of title companies is to conduct such a thorough search and evaluation
of public records that no claims will ever arise. Of course, this is
impossible--we live in an imperfect world, where human error and changing legal
interpretations make 100 percent risk elimination impossible. When claims do
arise, title insurance companies have professional claims personnel to make sure
that your property rights are protected pursuant to the terms of your policy.
To conclude, when you pay for your title insurance policy, you are paying for a
team of professionals who have worked together to deliver you a title insurance
policy which represents protection for your ownership of real property.
Who can I look for straight answers on Title, Closing, and closing costs?
Title or escrow company personnel are available to review and explain your title
policy and your closing statement.