| Frequently Asked Questions |
| Please take a moment to further educate yourself about the role of title insurance in a real estate transaction: |
What Is Title Insurance?
Title insurance is a policy of protection against loss arising from problems connected to the title to your property. Title insurance covers the insured party for any claims and legal fees that arise from a matter that is insured by the title policy.
Why Do I Need Title Insurance?
You need title insurance to protect you and your lender. Your home is often the largest single investment you will ever make. Title insurance protects you against loss from defects in the title, and/or claims made by others that a defect exists. The purpose of title insurance is to protect against loss caused by defects. Once insured, you are protected from title defects and claims against the title to your property even if they are not discovered for many years. Defects or problems could include fraud, forgery, unknown heirs, liens and encroaching neighbors. If you are uninsured and your title is challenged you will have to pay out of pocket to defend your claim to title in court.
What Are The Different Types Of Title Policies?
There are two types of title policies: A Lender’s Policy and an Owner’s Policy. The Lender’s policy protects the lender’s interest in the property as security for the outstanding balance of the buyer/owner’s mortgage. The Owner’s policy protects the buyer’s investment in the property up to the face amount of the policy. You pay a one time premium at closing for your Owner’s Policy and it remains in effect as long as you own the property.
How Does Title Insurance Protect Me If A Claim Should Arise?
If a claim is made against your property, title insurance, in accordance with the title policy, will assure your legal defense, including paying court costs and related fees. If the claim proves valid, you will be reimbursed for your actual loss up to the face amount of the policy.
What Kind of Issues Can a Title Search Reveal?
A title search can reveal defects in title, liens, encumbrances and restrictions including unpaid taxes, easements, unsatisfied mortgages, judgments against the property owner and restrictions of use or transfer. Not all title problems will appear in the public record however an Owner’s Policy will protect you from loss caused by undisclosed non public items such as: Fraud, Forgery, Invalid Power of Attorney, Mental Incompetence of a signer on a Deed and Undue Influence (Duress) over the grantor.
Is Title Insurance a One Time Cost?
Yes, you pay the fee at closing. Then you’re covered for as long as you own your home or until you amend the deed to your property.
When Does Title Insurance Protection Begin and End?
Title insurance protects against losses arising from events that occurred prior to the policy date. Policy coverage extends back in time for an indefinite period. Title insurance is the only type of insurance that insures past events. This is contrary to other forms of insurance such as automobile or homeowner’s insurance which protect against losses resulting from future events.
Why Do I Need A New Title Policy Each Time I Refinance?
Your lender will require that you purchase a new Lender’s policy each time you refinance even if you refinance with the same lender. The lender wants to determine whether new title issues may have arisen since the time you purchased your property. A Lender’s title policy assures your lender that you actually own the property and insures that no one else has a preemptive position in front of the lender. A Lender’s policy is only good for the life of the loan and ceases to exist when you pay off the mortgage.
What Is A Settlement?
A settlement is also known as a closing. It is the event where the ownership of property is transferred from the seller to the buyer or in the case of a refinance, it is the event that confirms your refinance application and affirmatively discloses all final terms and disclosures of your new mortgage. Once all the title research is completed and free of issues and your prior to closing mortgage conditions have been satisfied you will proceed to settlement. Closing can be held at an attorney’s office, title agent’s office, realtor’s office or location of your choice provided that conforms to state guidelines.
What Is A HUD Settlement Statement (HUD-1)?
This is a summary of the financial portion of the real estate transaction. The HUD will list the purchase price, loan amount, closing costs for both the buyer and seller and show all pro-rations and sums to be disbursed by the escrow agent to all parties.
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