1. What is Title Insurance?
Title insurance helps provide home buyers and/or mortgage lenders protection against losses resulting from unknown defects in the title to your property that existed before the closing of a real estate transaction.
Those unknown “defects” could be:
- outstanding liens on the property (e.g., unpaid real estate taxes by a prior owner)
- encumbrances (anything that might hinder the owner’s right of ownership; e.g., errors or omissions in deeds),
- undisclosed errors, fraud, forgery, mistakes in examining records
2. What Do Title Insurance Agents/Companies Do?
Title insurance agents/companies search public records to develop and document the chain of ownership of a property. If any liens or encumbrances are found, the title company might require a home buyer to eliminate them before issuing a title policy. Title insurance agents might also hold money in escrow and perform closing services for an additional fee. Unlike a Realtor or an Attorney, the title company does not represent you.
3. How Does Title Insurance Work?
Title insurance policies are indemnity policies that typically protect against losses arising from events that occur before the date of the policy, which is the date of closing. This is different from other types of insurance policies, such as auto or life insurance, which protect against losses resulting from accidents or events that occur after the policy is issued. A title policy is usually paid for with a one-time premium that is handled at the closing of the real estate transaction.
4. Who Needs Title Insurance?
Lenders
If a mortgage is obtained in order to purchase property, nearly all lenders require that a home buyer purchase the lender’s title insurance policy for an amount equal to the loan. A lender’s policy is issued to a mortgage lender. The policy gives the lender protection from covered losses arising from any defects in the title that have become known only after the insured property has been financed. The lender’s insurance policy will remains in effect until the amount financed has been repaid or the property is resold or refinanced.
Owners
Either a home seller or home buyer may buy an owner’s policy. In many areas, sellers pay for owner title policies as part of their obligation in the transfer of title to the home buyer. The question of who pays for the owner’s policy can be negotiated as part of a purchase agreement.
An owner’s policy is issued to a home buyer. It protects the buyer from covered losses arising from any unknown defects in the title that existed before the purchase which become known only after ownership of the property is acquired. Your owner’s policy remains in effect as long as you own or maintain an ownership interest in the insured property.
5. What to Expect at Closing
For helpful information as to what to expect at closing, please follow this link:
https://www.bankrate.com/mortgages/understanding-the-closing-process/
6. What is my Realtor’s role at the closing?
Realtors may help you with some last minute negotiating items or help you prepare for last minute move-in tasks. However, it is against the law for them to provide you with legal advice and it is best not to ask them legal questions.
7. What is my loan officer’s role at the closing?
Loan officers are there to help if any last minute issues occur regarding the financing of your home. Some loan officers attend closing and some feel they can best serve you from their office. Your loan officer is prohibited from providing you with legal advice.
