Home Mortgage Refinancing Procedure: Title Search

The Importance of a Title Search in the Home Mortgage Refinancing Process

A title search, in essence, determines legal ownership of a property. This search involves tracing the history of the property through documents of ownership. This search is generally done before a property is sold, and for refinance purposes. This determines whether there are any encumbrances that might affect the loan process or the loan company’s risk level.

The Interest in Real Estate

The title search will reveal the seller’s or home mortgage refinancing party’s interest in the property. It will also reveal any liens on the property. This shows a potential refinance lender whether she is accepting a mortgage for something that is actually in the possession of the person who is applying for refinancing or if there are conditions that apply to the property that did not show up in the original loan.

Limited Title Insurance Coverage When Seeking Home Mortgage Refinancing

For a home mortgage refinancing loan, you will likely be asked for a limited coverage search instead of full coverage. The limited search looks for any liens against the owner or owners on the title or the property itself, as well as owner bankruptcies. (In addition, a full search would also include easements, covenants, ordinances, etc., that would affect the sale of the property, as well as other details.) Remember that this title belongs to a chain of ownership evidence of your property. The mortgage company is concerned with your right to own, finance, refinance, or otherwise place their possible collateral at risk.

Recent Transactions and Your Title

In the most basic sense, the search begins with the most recent transactions and goes back from there to the original property acquisition. Some of the things that affect the title are marriages, divorces, deaths and sales. Through this chain of information, a lender will know whether you have the right to refinance the loan on that particular property.

Protecting Against Financial Loss

Often owners will purchase title insurance to protect them against financial loss of having to defend their right to the title of the property. Owner’s title insurance covers clear title, signatures, errors in recording, covenant restrictions on the land, liens and encumbrances, and forgeries or other fraud.

The Benefits of Title Insurance in Home Mortgage Refinancing

Because it protects you from problems with your title, this insurance is one of the best investments you can make for your home, whether you’re refinancing or buying. You may want to consider getting the title search taken care of—and purchasing title insurance—before you start talking to lenders.