First-Time Homebuyer's Guide to Title and Escrow

Welcome to Your Home Buying Journey

Congratulations on taking the exciting step toward homeownership! As a first-time homebuyer, you're embarking on one of life's most significant milestones. While the process can feel overwhelming with all its unfamiliar terms and procedures, understanding the title and escrow process demystifies these crucial steps and helps ensure a smooth path to your new home.

This comprehensive guide is designed specifically for first-time buyers, explaining the title and escrow process in clear, straightforward terms. By the time you finish reading, you'll know exactly what to expect, what questions to ask, and how to navigate each stage with confidence.

What Are Title and Escrow? The Basics

Before diving into the process, let's clarify these fundamental concepts:

What Is "Title"?

Title refers to your legal right to own, use, and sell a property. When you buy a home, you're not just purchasing a physical building—you're acquiring the legal title to that property. Having "clear title" means your ownership rights are properly established and free from disputes or claims by others.

What Is "Escrow"?

Escrow is a neutral third-party arrangement where money, documents, and instructions are held until all conditions of the sale are met. Think of the escrow company as a trusted referee who ensures both buyer and seller fulfill their commitments before the transaction is finalized. For a deeper dive, see Understanding the Escrow Process.

What Is a "Title Company"?

The title company performs the title search, issues title insurance, and often handles the escrow and closing process. They're your partners in ensuring you receive clear, insurable ownership of your new home.

Your Title and Escrow Timeline

Here's what happens from the moment your offer is accepted until you get your keys:

Step 1: Contract Accepted — Escrow Opens

When the seller accepts your offer, the real work begins. Within a day or two:

• The purchase contract is sent to the escrow/title company
• An escrow account is opened for your transaction
• You deposit your earnest money (typically 1-3% of purchase price)
• The title company assigns an officer to handle your closing

What you should do: Promptly provide your earnest money deposit and any requested information. Keep copies of everything.

Step 2: Title Search Begins

The title company examines public records to verify the seller's ownership and identify any issues:

• Ownership history (chain of title) is traced
• Existing mortgages and liens are identified
• Court records are checked for judgments
• Tax records are verified
• Easements and restrictions are discovered

Learn more in The Title Search Process Explained.

Step 3: Preliminary Title Report

You receive the preliminary title report (also called a title commitment), showing:

• Current ownership information
• Legal description of the property
• Requirements to be met before closing
• Exceptions (items not covered by title insurance)

What you should do: Review this carefully! Ask your title officer or real estate agent about anything you don't understand.

Step 4: Issues Are Resolved

If the title search reveals problems, the title company works to resolve them:

• Outstanding liens are paid from seller's proceeds
• Missing documents are obtained
• Recording errors are corrected
• Signature issues are resolved

Most issues can be resolved before closing, though some may cause delays.

Step 5: Your Loan Is Finalized

While title work proceeds, your lender completes the mortgage process:

• Your application is underwritten
• The appraisal is completed
• Final loan approval is issued
• Loan documents are sent to the title company

Stay responsive to lender requests—delays in providing documents can delay closing.

Step 6: Final Documents Prepared

The title/escrow company prepares closing documents:

• Settlement statement showing all funds and fees
• Deed transferring ownership to you
• Mortgage documents for your lender
• Various disclosures and affidavits

Step 7: Final Walkthrough

Before closing, you do a final walkthrough of the property to verify:

• The property is in expected condition
• Agreed repairs have been completed
• Fixtures and appliances are present
• The seller has vacated (if applicable)

Step 8: Closing Day — Signing

At closing, you'll sign numerous documents. Bring:

• Valid government-issued photo ID
• Any additional documentation requested
• Certified funds or wire transfer confirmation for your closing costs

The signing typically takes 30-60 minutes. The escrow officer will explain each document.

Step 9: Funding

After signing, the financial pieces come together:

• Your down payment and closing costs are applied
• Your lender wires the mortgage funds
• All funds are verified and reconciled

Step 10: Recording — You're a Homeowner!

The deed is recorded with the county, making your ownership official:

• The deed is recorded in public records
• Funds are disbursed to the seller
• You receive your keys
• Congratulations—you own a home!

Understanding Title Insurance

As a first-time buyer, you'll encounter title insurance during closing. Here's what you need to know:

What Title Insurance Does

Title insurance protects against problems in the property's ownership history that weren't discovered during the title search—things like undisclosed liens, forgery, recording errors, or unknown heirs. For the full explanation, see What Is Title Insurance?

Two Types of Policies

• Lender's policy: Required by your mortgage company, protects their investment
• Owner's policy: Optional but highly recommended, protects YOUR investment

Important: The lender's policy does NOT protect you. We strongly recommend purchasing an owner's policy. Learn more in Owner's vs. Lender's Title Insurance.

The Cost

Title insurance is a one-time premium paid at closing—no ongoing payments. The cost is typically 0.5-1% of the purchase price. It's included in your closing costs (see Closing Costs Explained).

Understanding Closing Costs

Beyond your down payment, you'll pay closing costs—typically 2-5% of the purchase price. Common costs include:

• Loan origination and processing fees
• Appraisal and inspection fees
• Title search and insurance
• Escrow fees
• Recording fees
• Prepaid taxes and insurance

Your lender provides a Loan Estimate early in the process and a Closing Disclosure at least three days before closing, so you'll know what to expect.

Questions Every First-Time Buyer Should Ask

Don't be shy about asking questions—here are important ones:

About Title

• Are there any issues with the title that need to be resolved?
• What exceptions will be listed in my title policy?
• What easements or restrictions affect the property?
• Do you recommend an owner's title insurance policy?

About Escrow

• What's the estimated closing date?
• How much are my total closing costs?
• How should I deliver my funds for closing?
• What documents do I need to bring?

About the Process

• Who should I contact if I have questions?
• What could delay my closing?
• When will I receive my keys?

Protecting Yourself from Wire Fraud

This is critically important: Wire fraud targeting homebuyers is a serious threat. Criminals send fake wire instructions to steal down payments. Protect yourself by:

• ALWAYS verifying wire instructions by phone using a number you know is legitimate
• Never trusting wire instructions received only via email
• Being suspicious of last-minute changes to wire instructions

Read our complete guide: Protecting Yourself from Wire Fraud.

The Bottom Line

Buying your first home is an exciting milestone, and the title and escrow process is designed to protect you. By understanding these steps, asking questions, and working with experienced professionals, you'll navigate the process confidently.

Remember: There are no silly questions in real estate. Your title and escrow team is here to help you understand every aspect of your purchase. Don't hesitate to reach out whenever you need clarification or reassurance.

Welcome to homeownership!