Why title problems matter
A mortgage lender finances the purchase based on the expectation that the property will be clear collateral. Title issues—such as liens, forged deeds, boundary disputes, or missing documents—threaten that expectation and can stop a closing, delay funding, or increase your costs. Lenders almost always require a title search and title insurance before they finalize a mortgage to protect their legal interest (see Consumer Financial Protection Bureau guidance on title insurance).
In my practice advising buyers and lenders, I’ve seen closings delayed weeks when a forgotten tax lien surfaced, and I’ve helped clients resolve estate-transfer gaps that demanded a quiet title action. Addressing title problems early is speedier and cheaper than fixing them under time pressure at closing.
How title searches and title insurance work
When you apply for a mortgage, the lender orders a title search. Title professionals (title companies, abstractors, or attorneys) review public records—deeds, mortgages, liens, judgments, probates, and plats—looking for anything that affects ownership or priority. The search produces a title report that lists recorded defects and exceptions.
Title insurance then protects the buyer and lender against covered defects that were missed by the search or that arise after closing. Lenders normally require a lender’s title insurance policy to protect the mortgage lien; buyers can (and usually should) also buy an owner’s policy to protect their ownership. For details on why lenders require insurance, see FinHelp’s explainer: Understanding Title Insurance and Why Lenders Require It.
(Authoritative sources: Consumer Financial Protection Bureau; U.S. Department of Housing and Urban Development. See sources at the end.)
Common title issues that can derail a mortgage — and how to fix them
Below are the issues that show up most often, the risk each poses to a mortgage, and practical fixes.
- Liens (tax, judgment, contractor, or mortgage liens)
- What it is: A lien is a legal claim against the property for unpaid debts. Tax liens (federal, state, or local), unpaid contractor bills, child-support liens, and earlier mortgages are common examples.
- Why it sinks a mortgage: Lenders require their mortgage lien to have first priority (or an agreed priority). Existing liens must be cleared or subordinated before funding.
- Fix: Pay off the lien at closing; negotiate a payoff plan or lien release with the creditor; obtain a subordination agreement in limited cases. Title companies can sometimes escrow funds at closing to satisfy liens. See our article on How Property Title Issues Can Delay Mortgage Closings for typical turnaround times.
- Errors or omissions in public records (misspelled names, wrong legal description)
- What it is: Clerical mistakes, incorrect legal descriptions, or missing recordings can obscure ownership.
- Why it sinks a mortgage: Errors create doubt about what exactly is being transferred, and lenders avoid unclear collateral.
- Fix: Prepare and record corrective documents (corrective deed, affidavit, or ratification). In some cases, a re-recording or a court action may be necessary. Ask the seller to cure record errors before closing.
- Missing or defective deeds (unrecorded transfers, probate gaps)
- What it is: A deed that was never recorded, an undocumented family transfer, or a chain-of-title gap during an estate transfer.
- Why it sinks a mortgage: Without recorded proof, the seller cannot demonstrate marketable title to transfer.
- Fix: Obtain missing recorded documents or a court order (quiet title) to establish ownership. If the issue is probate-related, complete the probate or affidavit process the county requires. Expect additional time and legal cost.
- Forged or fraudulent documents
- What it is: Forged signatures, fraudulent reconveyances, or identity theft that led to improper transfers.
- Why it sinks a mortgage: Fraud voids the chain of title and creates a risk the real owner could reclaim the property.
- Fix: Investigate immediately; title companies will often require a claim or a cure through litigation. Title insurance can cover certain fraud claims, but coverage depends on the policy and exceptions.
- Boundary and easement disputes
- What it is: Neighbor disputes over the property line, unrecorded encroachments, or unclear easement rights.
- Why it sinks a mortgage: Lenders worry if the usable property is reduced or if future legal fights could affect value.
- Fix: Obtain a boundary survey; secure written easement agreements or obtain recorded releases. Sometimes mediation or a court partition action is required for permanent resolution.
- Multiple or missing signatures and ownership splits
- What it is: Multiple owners (joint tenants, heirs, LLC members) require signatures from everyone with an ownership interest. Missing signatures block the transfer.
- Why it sinks a mortgage: A lender needs all owners to sign to create a valid mortgage lien.
- Fix: Track down missing owners; use heirship affidavits; get notarized powers of attorney if allowed; or resolve through court when owners cannot be located.
- Restrictive covenants and recorded agreements
- What it is: Covenants, conditions, and restrictions (CC&Rs) from homeowners’ associations or prior agreements limiting use of the property.
- Why it sinks a mortgage: Some restrictions affect marketability or the lender’s collateral value.
- Fix: Review CC&Rs early; negotiate payoff or amended covenants where possible; ensure HOA assessments and transfer fees are current.
Timeline and typical costs
- Title search: a few days to two weeks for standard residential properties; more if the chain of title is complex.
- Clearing simple liens (payoff or release): often resolved at closing; costs equal the payoff amount plus fees.
- Corrective recordings or affidavits: typically a few days to weeks, plus modest recording fees.
- Quiet title actions or probate fixes: several weeks to months; legal fees vary widely and are typically the most expensive remedy.
Costs depend on complexity and local recording fees. Title insurance premiums are often a one-time charge at closing and vary by state and purchase price.
Practical pre-closing checklist (do this before making an offer when possible)
- Ask the seller for recent title documentation and a copy of the deed.
- Order a preemptive title search or discuss this with your agent or lender.
- Request a survey if the property’s lines are unclear or if there are visible encroachments.
- Ask for seller-payoff statements for mortgages, HOAs, and tax bills.
- Confirm any probate or estate-transfer paperwork is complete.
Working with professionals: who to involve and when
- Title company or abstractor: conducts the search and issues the title report and policies.
- Real estate attorney: handles complex curatives, quiet title actions, or contested deeds (highly recommended for probate or fraud issues).
- Surveyor: provides a boundary or ALTA survey to confirm legal descriptions and identify encroachments.
- Real estate agent: coordinates seller cooperation and negotiates repairs or closing credits.
In my 15+ years advising buyers, I recommend hiring a real estate attorney when the title report shows anything beyond routine liens or recorded mortgages. Issues tied to estates, forged documents, or unclear ownership benefit from legal review.
Common mistakes and misconceptions
- “Title companies fix everything automatically.” Not true—title companies report defects and may insure against some unknowns, but many defects must be cured before closing.
- “If I have title insurance, I don’t need to worry.” Title insurance protects against certain losses, but it does not prevent the need to cure existing recorded defects before closing.
- “Title issues are rare.” They’re common enough that lenders expect and budget time for a title search.
Frequently asked questions
Q: If a lien is found, who pays to remove it?
A: Usually the seller pays to clear liens that arose during their ownership; however, buyers can negotiate concessions or a reduced price to cover payoff costs.
Q: Does title insurance cover all title problems?
A: No. Title policies list exceptions (e.g., unrecorded easements) and exclusions. Review policy language closely. CFPB and ALTA explain typical coverages and exceptions.
Q: What if a deed shows an incorrect name spelling?
A: Most states allow corrective affidavits or corrective deeds to be recorded; these are generally straightforward but must be notarized and comply with county rules.
Steps to cure a title problem quickly (practical workflow)
- Stop the clock: notify your lender and title company immediately after the issue is found.
- Identify the exact defect from the title report (liens, gap, name error, etc.).
- Gather seller documentation (payoff letters, prior deeds, probate documents).
- Determine the simplest legal remedy (payoff, corrective recording, affidavit, or quiet title).
- Get written agreements and signed releases recorded.
- If litigation is required, discuss interim steps with the lender—sometimes lenders will hold funds in escrow or delay closing until the case is resolved.
Document checklist to keep handy
- Existing deed and chain-of-title documents
- Mortgage payoff statements
- Tax payment records and tax clearance certificates
- HOA statements and estoppel letters
- Probate documents, wills, or death certificates
- Affidavits of heirship or corrective deeds
Internal resources
- Read FinHelp’s deeper guide on title insurance: Understanding Title Insurance and Why Lenders Require It
- For practical timelines and common delays see: How Property Title Issues Can Delay Mortgage Closings
- Learn about curative steps lenders expect: What Lenders Mean by ‘Clean Title’ and Title Curative Steps
Professional disclaimer
This article is educational and reflects common practices in U.S. residential real estate as of 2025. It is not legal advice. For tailored guidance about a specific title problem, consult a licensed real estate attorney or a qualified title professional in the property’s county.
Sources and further reading
- Consumer Financial Protection Bureau, “How to obtain title insurance” and related Q&A (consumerfinance.gov).
- U.S. Department of Housing and Urban Development, Buyer’s guides and HUD resources on title searches (hud.gov).
- American Land Title Association (ALTA), resources on title insurance and claims (alta.org).
- FinHelp glossary: Understanding Title Insurance and Why Lenders Require It; How Property Title Issues Can Delay Mortgage Closings; What Lenders Mean by ‘Clean Title’ and Title Curative Steps.
(If you need, I can provide a one-page pre-closing checklist tailored to your situation or review a title report for common flags. This is educational and not a substitute for local legal counsel.)
