What Is a Certificate of Title for a Mortgage?
Parcels of property can change ownership many times over a period of years. Records of these transactions are compiled onto a Certificate of Title. The title is held by the property's owner.
The certificate of title provides a detailed history of the home’s ownership. It lists each owner, sale prices paid, and the dates of these transactions. A title also includes a complete legal description of the property.
Abstractors perform research on the property records at the county offices. The abstractor then complies a listing of all real estate transactions that have occurred into an abstract of title report.
The certificate of title shows proof of ownership to a piece of real estate. When a mortgage loan is obtained, the lending institution usually holds the certificate of title until the loan is paid in full.
Although an abstract of title report may show one thing, defects in the chain of title may exist. For example, a change in ownership may have occurred without being recorded by the county. Someone else may have a legal claim to the property in writing, but not on record.
Due to these considerations, it is wise to purchase title insurance when securing a mortgage loan. Title insurance is paid at the time of closing to ensure the title to the property is clear of errors. If an error does occur, the title insurance will cover any legal fees to resolve the issue.