What Does Title Insurance Policy Cover When Buying Home

This BLOG On What Does Title Insurance Policy Cover When Buying Home Was UPDATED On January 16th, 2019

The title of the home purchase is the official papers that certify that you own the property with no liens attached or future potential lawsuits.

  • Borrowers need clear title policy when purchasing home so that both the owners and lenders interests are protected
  • There is no guarantee that when the seller transfers title to the home buyer that the title has no liens or potential liens attached to it
  • A potential problem with the title could be devastating
  • It can create tons of paperwork and could be due to the owner and lender thousands of dollars clearing it up

In this article, we will cover and discuss What Does Title Policy Cover When Buying Home.

Title Insurance Policy: When Does The Title Search Process Start

Once the home buyer has entered into a purchase real estate contract and the mortgage approval process is in full motion, the lender will start the title search process by requesting a clear title from the sellers’ team.

  • The title is normally ordered through a title company
  • The title company will start the process by searching public records pertaining to the subject property
  • The title company can 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 lender will not approve and clear to close if there are problems or potential problems with a home’s title

Examples that cloud a title are the following:

  • Minor mechanic’s liens such as a contractor lien the property because the seller did not pay them
  • Property taxes not being current so the county putting a lien on the home
  • Other issues like the building department lien the property for not fixing a building violation or because the seller did not pay a fine

What Is Owner’s Title Insurance 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 unforeseen title issues come up
  • With the owner’s title policy provides coverage in the event if this is the case
  • The face value of the owner’s title insurance policy is the purchase price of the property
  • The owner’s title policy lasts for the duration on the subject property owner and there are no monthly payments
  • The title company will charge a one time fee at closing

The owner’s title insurance policy will protect homeowners in the event if an heir to the property all of a sudden claims the title to the property and it will cover the legal defenses.

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 borrower refinances their current mortgage loan, the 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 homeowners are refinancing with the same lender or they have just recently purchased home.

Qualifying For Mortgage With Lender With No Overlays

Gustan Cho Associates is a national lender with no overlays on government and conventional loans. Home Buyers and Homeowners needing to qualify for a mortgage with a national lender with no lender overlays can contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at gcho@gustancho.com. We are available 7 days a week, evenings, weekends, and holidays.

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