Purchasing a home may prove to be the single, largest financial investment made in one’s lifetime; therefore, the importance of fully protecting such an investment cannot be overstated. A Title Insurance Policy provides basic home ownership protection and is essential in its purpose to protect new homeowners from defects in title.
WHAT IS TITLE INSURANCE?
The title insurance is insurance that protects a person from losses arising from disputes about property ownership. Just like cars, homes can transition through several owners and sometimes a fault, error, or defect occurs within the chain of possession. Title insurance protects both the owner of record’s and lender’s interest in the property. When a loan closes, the respective Title Company issues a policy and is paid a one-time only premium that is calculated on the sales price of the property. This payment covers the life of the policy.
A mortgage policy insures the lender and remains in effect until the loan is paid in full. An owner’s policy insures the buyer and is valid as long as the owner (or owner’s heirs) retains title to the property.
THE TITLE SEARCH
Prior to policy issuance, a title company will perform a preliminary search and examination of public record to investigate information surrounding title to a given property. The facts revealed by the search will determine:
- That the seller is, in fact, the legal owner of the property.
- That the ownership being sold is properly vested in the seller’s name.
- The presence of liens or judgments that will need to be satisfied prior to the conveyance of clear title.
- Any existing easements, restrictions, or other granted rights to others who are not on title but whose granted rights may limit ownership.
- The status of property taxes and other public or private assessments.
By conducting a title search, a title agent reviews previous versions of title assessments as well as related contracts to ensure that all the owners have received the title properly (for example, title bestowed after satisfying all the attached liens or mortgages). Defects on title are called “clouds” and must be rectified before any new transfer of the title is completed. Important note: a title policy will not cover any new clouds that appear after a property is purchased.
A Title Company coordinates efforts with the Realtor, Escrow Company, and Lender to ensure that clear title passes properly to the new owner. Title insurance provides homeowners with peace of mind by protecting the security of their homes and the safety of their investments.
Michelle Castle provides mortgage loans to all of North Texas and Southern Oklahoma. Call Michelle Castle at (903) 892-1998 if you are looking for a home loan in North Texas and Southern Oklahoma.