What is Title Insurance?
Title Insurance is protection that may be purchased to assure there is no financial loss from flaws in title or of illegality of mortgage liens. Title Insurance is designed to protect both an owner and a lender from numerous title defects or hindrances that exist upon the Closing. There are two types of Title Insurance: Lender’s Policy, which protects the lending institution, and Owner’s Policy, which protects the owner’s interests in the property.
When is Title Insurance Purchased?
The Title Insurance policy price is based upon the purchase price of the property and may be acquired at the time of closing for a one-time fee. The establishment of the Title Insurance policy begins at the onset of the closing process.
Must the future home buyer purchase Title Insurance?
Though highly recommended, the purchase of Title Insurance is not required if the buyer pays cash for his home. However, the majority of banks and other lending institutions require the borrower to obtain a Lender’s Policy equal to the amount of the loan.
As your closing agent, Lyon County Abstract & Title requires that your buyer protect himself. If Title Insurance is not purchased, the buyer must complete a Title Opinion.
What is a Title Opinion? – – CLICK on button, which takes you to Title Opinion page.
What is the difference between a Lender’s Policy and an Owner’s Policy?
Title Insurance for mortgage lenders is called a Lender’s Policy. The Lender’s Policy is generally based on the amount of the loan and protects the lender up to that amount, and it also protects the lender should any title issues occur. The policy amount decreases each year until the loan is paid in full or the property is sold. At that point the policy expires.
An Owner’s Policy, which is Title Insurance for property owners, is purchased as a one-time fee at Closing in the amount of the purchase price. Unlike a Lender’s Policy, an Owner’s Policy does not expire when the loan is paid in full; instead, the Owner’s Policy fully protects the owner’s equity in the property.
Title Insurance protects your clients from the following:
Incorrect completion of documents
Erroneous recording of legal documents
Erroneous indexing of legal documents
Erroneous legal descriptions of property
Forgeries and fraud
Unidentified or omitted heirs
Outstanding taxes and assessments
Outstanding judgments and liens
Misinterpretation of wills
Mental incompetence of grantors of property
Impersonation of the true landowners by fraudulent persons
Fraudulence in obtaining essential signatures
Lender’s refusal to provide financing based upon condition of title
Potential purchaser’s refusal to accept title based upon condition of title