Owner’s Title Insurance Policy: Why Is Title Insurance Necessary?
The title of your home purchase are the official papers that certify that you own the property with no liens attached or future potential lawsuits. You need clear title when you purchase your home so that your interests are protected. There is no guarantee that when the seller transfers title to you as the home buyers that the title has no liens or potential liens attached to it. A potential problem with the title could be devastating and create tons of paperwork and could be cause you thousands of dollars clearing it up.
Title Insurance: When Does The Title Search Process Start
Once you have entered into a purchase real estate contract and your mortgage approval process is in full motion, your mortgage lender will start the title search process by requesting clear title from the sellers team. Title is normally ordered through a title company and the title company will start the process by searching public records pertaining to the subject property and see if there are any problems or liens with the property’s title. When the title company runs into problems with the property’s title, it is the title company’s job to clear any current and/or potential problems that might arise with the title. A mortgage lender will not approve and clear to close a mortgage loan if there are problems or potential problems with a home’s title. Examples that cloud a title are minor mechanic’s liens such as a contractor liening the property because the seller did not pay them, property taxes not being current so the county putting a lien on the home, or other issues like the building department liening the property for not fixing a building violation or because the seller did not pay a fine.
Owner’s Title Insurance: What Is The Owner’s Title Policy?
The title company will run public searches to see that the title to the home is free and clear from any adverse items but there is no guarantee that certain liens always come up. An owner’s title policy is required by mortgage lenders in the event if the title comes up clean but later some unforseen title issues come up. With the owner’s title policy, you will get coverage in the event if this is the case. The face value of the owner’s title insurance police is the purchase price of the property. The owner’s title policy lasts for the duration on your subject property ownership and there is no monthly payments. The title company will charge you a one time fee at closing. The owner’s title insurance policy will protect you in the event if a heir to the property all of a sudden claims the title to the property and it will cover the legal defenses against you and your property.
Mortgage Lenders Title Insurance Policy
Besides the owners title insurance policy, there is also the Lenders title insurance policy. A lenders title policy does not protect the buyer but the lender should any title problems arise after closing and it is normally the mortgage loan amount.
On cases where a mortgage loan borrower refinances their current mortgage loan, the mortgage lender is going to require updated lenders title insurance policy but not new owners title insurance policy. New lenders title insurance policy is still required if you are refinancing with the same mortgage lender or you have just recently purchased your home.