Who handles the closing
In Virginia the closing is usually run by a settlement agent: a title company or a real estate attorney. Virginia regulates settlement agents under its Consumer Real Estate Settlement Protection Act, so ask any company you use to confirm it is licensed or registered. In Maryland, title companies and attorneys handle settlements the same way.
You can usually choose your own settlement company. Federal law (RESPA Section 9) bars a seller from requiring you to buy title insurance from a particular company as a condition of the sale. Your lender will give you a list in your Loan Estimate, but title and settlement fees appear under services you can shop for, so compare a few quotes.
What the title company does
- Searches the title. It checks land records for who owns the lot, old mortgages, liens, easements, rights of way and anything else recorded against it.
- Clears problems before closing. Old loans get paid off, missing releases get chased down, and anything that can’t be fixed is listed as an exception on your policy.
- Issues title insurance. A lender’s policy protects the bank and is required. An owner’s policy protects you and is optional, but on land you are about to put a seven figure house on, most people buy it. You pay once, at closing.
- Records the deed and the loan. The deed and the deed of trust (Virginia) or mortgage (Maryland) are recorded with the county, and recording taxes are paid then.
Easements and setbacks matter more on a lot
On a house you are buying as is, an old utility easement rarely matters. On a lot you plan to build on, it can decide where the house goes. Read every exception in the title commitment and compare it with the survey. A sewer easement across the back third of a lot, or a recorded covenant that limits height, changes what you can build. Your builder and architect should see the title commitment and the survey before you close, not after.
What a construction loan adds
- One closing or two. With a one-time close construction loan you buy the lot (if you don’t own it) and close the construction loan and the mortgage at the same table. With a two-time close you close the construction loan now and the mortgage when the house is done, with a second round of title work and fees. See how construction loans work.
- Recording taxes on the full loan. The loan is recorded for its full amount at closing, even though the money comes out in draws, so recording taxes are based on that amount. Ask for this number early; on a large jumbo loan it is a real line item.
- Title updates at each draw. Before the lender pays a draw, it usually asks the title company to check that no new liens were filed since the last one. This is sometimes called a date down, and there is a small fee each time.
- Lien waivers. At each draw the builder signs a waiver saying it has been paid for the work so far, and good lenders ask for waivers from major subcontractors and suppliers too. In both Virginia and Maryland, unpaid subcontractors and suppliers can in some cases file a lien against your property even if you paid the builder. Waivers are your protection.
- Surveys. Expect a boundary survey before you buy, and a house location survey (often called a wall check) once the foundation is in, to prove the house sits where the permit says.
Fees to expect
Your Loan Estimate and Closing Disclosure list every fee. On a lot purchase with a construction loan, look for:
- Settlement or closing fee, title search and exam fee
- Lender’s title policy and, if you choose, owner’s title policy
- Recording fees and recording or transfer taxes (Virginia and Maryland both charge them, and Maryland counties add their own)
- Survey costs
- Draw inspection fees and title update fees during construction
- Lender fees, appraisal (done on the finished house), and any rate lock fee
Who pays which tax differs between Virginia and Maryland and can be negotiated in the contract, so ask your settlement company for an estimate before you sign.
A short checklist
- Get the title commitment and survey as soon as the lot is under contract.
- Send both to your builder or architect and ask: can we build what we want here?
- Get quotes from two or three settlement companies.
- Ask the lender how draws, inspections and title updates work, and what each one costs.
- Make sure your builder contract requires lien waivers with every payment request.
This guide is general information, not legal advice. For anything unusual on a title (an old right of way, a boundary dispute, a covenant), talk to a real estate attorney.
