What is the purpose of a title search?

The purpose of a title search is to confirm the legal ownership of the property and identify any claims or liens against it. This process involves examining public records to verify the current owner of the property and to ensure that there are no outstanding claims that could affect the lender's investment. It helps protect both the lender and the borrower by ensuring that the borrower has clear title to the property being financed, meaning they have the right to own, sell, or lease it without any legal disputes or claims from others. This step is crucial in preventing issues that could arise after the loan is issued, such as ownership disputes or claims from creditors that could compromise the loan’s security.

In contrast, while assessing a borrower’s income is vital for determining loan eligibility, it does not pertain to the title search process. A property appraisal serves a different purpose, focusing on determining the market value of the property rather than confirming ownership. Similarly, providing documents for loan approval involves collecting and verifying financial and credit information from the borrower, which is separate from the title verification process emphasized during a title search.