The Role of Lenders

Lenders provide the financial means for the majority of homeowners to purchase houses. Typical lending sources include banks, savings & loans, credit unions, and financial organizations or mortgage companies. These entities evaluate a potential purchaser's overall financial condition, including reviewing work/salary history, income/expense ratios, credit references, etc. to determine whether or not the purchaser can qualify for a loan.

Lenders also evaluate the subject property to verify that it is adequately valued for the money that is being loaned. They do this by obtaining an appraisal, which reflects the current market and replacement cost value of the property.

The lenders review the preliminary title commitment and survey, as well as any and all inspections of the property; because they have similar interests as the purchaser/owner, since they will have a first lien on the property.

When all of the items have been reviewed to their satisfaction and the purchaser has been approved, the lender will send closing instructions and all required documentation to the title company. The lender then provides the necessary funds for the title company to complete the transaction.

The Role of the Title Company

The title company acts as a disinterested third party to the real estate transaction, protecting the rights and interests of all parties. It basically follows the instructions of the buyer and seller as laid out in the sales contract, and the lender and purchaser as stated in the loan closing instructions.

In addition, the title company supplies title insurance, providing protection for the owner and the lender. The title company evaluates the history of the title and determines what it is able to insure. In the event of a claim against the insured title, the title company will bear any responsibility to defend against the claim and pay any necessary damages.

The title company also holds the funds and documents necessary to complete the real estate transaction. Typically, once the title company receives the funds from the lender and the purchaser, the seller signs the deed and transfers the property to the purchaser. Then, the title company distributes the funds, satisfies any previous liens and closing costs, and then distributes the remainder of the funds to the seller. It then delivers the loan documents to the lender, records the lender's mortgage, and delivers the Deed to the buyer after recording it in the county records.