Title Insurance: What do I Need to Know?

Have you heard the one about the friend who couldn’t close his loan, because but there was an issue with title insurance? Don’t be that friend!

All lenders require Title Insurance.

FAQs about Title Insurance:

• Who benefits from title insurance? Well, it depends. Lender’s title insurance protects the lender and owner’s title insurance works for the borrower.

• What’s the difference? Lender’s title insurance is mandatory and owner’s title insurance is often optional. We recommend always purchasing the Owner’s Title Policy. This is not a place to save money.

• What is the purpose of title insurance? Title insurance ensures that the borrower has the clear ownership of the property. Additionally, title insurance also protects the lender by ensuring their claim on the property if they are not repaid for the loan.

What could possibly go wrong with the title?

We have seen many issues that make title complicated. We call issues with title a “cloud on title”. Title agents are always looking for “clear title”. Things that cloud a title could include:

• errors in the survey
• boundary disputes
• liens placed on the property (before you even purchased it)
• old tax liabilities
• improper settling of estates after a death or divorce
• Previous EIDL loans

What is the process of obtaining title insurance?  Your title agent will run a preliminary title report on any property you are financing. Then, they will see if there are any claims on the property. Afterwards, the title officer then has to remove anything that would cloud title. Sometimes, there are things the seller has to do. As you can see, title issues can be complicated. Thus it is critical to hire a competent attorney to advise you when engaging in financing loans.

• How do borrowers pay for title insurance? Title insurance is based upon the value of the loan. Every year, the lender renews their title insurance and this cost is included in your loan. The price lowers each year as the loan is paid off. Borrowers only pay for Owner’s insurance once, at closing.

If you are considering a loan for purchase or refinance or construction and would like to discuss your plans, feel free to contact our team.  We can conduct a business evaluation and even prequalify you for a loan at no cost to you. We will help you determine your DSCR and LTV and match you to appropriate lenders for your projects.