You already purchased your home, but now you want to refinance. Whether you need to tap into the equity in your home or lower your interest rate, you need the help of several professionals. Of course, you need a lender to provide you with the loan, but you also need a title company. The title agent plays several roles in the refinancing process. Even though you don’t need anyone to hold escrow or create an owner’s policy for you, there are still ways the title agents will help you get through refinancing.
Researching the Title
Before you purchased the home for the first time, the title company had to perform a thorough title search. During this search, they made sure that every transfer of ownership occurred legally. They also made sure that there were no outstanding liens on the property. If there were any liens, you would not have been able to purchase the property with financing from a bank. Liens attach to the property, not the owners, so if you took ownership of a property with liens on it, they became your responsibility. No bank would allow that to happen.
Now that you owned the home over the past few years and the property will not transfer ownership, you still need a title search. The title agent needs to determine that nothing occurred with the ownership of the property between the time you purchased it and now. The most common scenario is a judgment or lien someone placed on your property as a result of your actions. Maybe you had some work done on the home that a contractor did not receive full payment or a subcontractor filed a lien because he was not paid. This could also occur if you had a collection against you and the creditor filed a judgment. These items will show up on the title search. No lender will close on a loan without a clear title. You will need to take the necessary steps to clear the title before you can refinance.
Clearing the Title
If there are issues with the title, the title company can help you clear it up. They have the resources to find the underlying cause of the judgment or lien. This at least gives you the right people to contact to get the process started. The title agent cannot clear the lien without the right paperwork, though. You have to have official paperwork showing that the issue was cleared up in a legal manner, especially if you have a judgment reporting on the title. Once this occurs, the title agent can clear the title and allow you to move forward with refinancing.
Lender’s Policy Required
The good news is if you purchased an owner’s policy to protect your ownership in the property, you do not have to purchase it again with the refinance. That is a one-time purchase that covers you as long as you own the home. However, the lender’s policy is a different story. The lender’s policy that came into effect when you purchased the home is only good until you pay that loan off. If you refinance, that loan will no longer exist, which means the policy no longer exists. This means you have to purchase a new lender’s policy for the new loan. This helps to protect the lender from losing its stake in your home should you default on it. Many title companies offer a discount for any subsequent lender’s policies, especially if you have the original policy handy.
The Title Company Closes your Loan
Just like the title company closed your purchase loan, they will do the same for your refinance. The process will be shorter and there will not be as many people present at the closing, but you still need the title agent. The title agent prepares the Settlement Statement and lets you know if you need to bring any cash to the closing. It is not as common to bring money to the closing for a refinance as it is for a purchase, though. The closing agent will send you a copy of the Settlement Statement before the closing so you can review it and ask any questions before you get to the closing table. On the Settlement Statement, you will see the different places your money will get disbursed once the loan closes.
At the closing, the title agent oversees the entire process. He is the one who goes through the documents with you and answers any questions. The closing agent is usually the person you contact if you decide to rescind on your refinance as well. You generally get 3 days to change your mind on a refinance and the closing agent serves as the neutral third party should you decide to change your mind.
Finishing up the Loan Details
Lastly, the closing agent oversees the final details of the loan. Once the three business days pass, the title company can disburse the funds the appropriate parties. They can also pass the mortgage deed along to the recorder’s office for recording. The title agent will make sure all funds get to where they need to go either by wiring them or mailing checks. They then make sure the details of the loan are complete and close out the loan.
The title company fees on a refinance are not nearly as high as they probably were when you purchased the home. There are fees you must pay, but to a much lesser degree than you originally paid. Most of the hard work is done once you purchased the home, but the title agent still has some stuff to oversee. They have to make sure the home does not change ownership and that your rights are overseen during the refinance process. The title agent plays an important role in the refinancing process. They do add to the closing costs on your refinance, but they protect your interests in the loan process – they are fees well worth paying.
