When you purchase your home, your lender needs to determine that there are no problems with the home’s title and that the seller really owns the property. Problems with the title can impact your ownership of the property, leading to a possible financial loss and restrictions on your use of the home. That is why a title search is performed and a title insurance policy is issued to protect your ownership.
After your purchase agreement has been accepted by the seller, Trident’s title professionals will search the public records to look for any problems with the home’s title. The search typically involves a review of land records going back many years. It’s a fact that more than one third of all title searches reveal a title problem of some kind that must be corrected before you go to closing. For example, a previous owner may have had construction done on the property but never fully paid the contractor, who subsequently obtains a lien on the home. Or the previous owner may have failed to pay local or state taxes, which also become liens on the property that must be paid before ownership can be transferred to you. Trident will resolve problems like these before you go to closing.
There are two types of title insurance: Owners Title Insurance, as described below, and Lenders Title Insurance, also called a Loan Policy. Most lenders require a Loan Policy when they issue your mortgage. The Loan Policy is based on the dollar amount of your mortgage and only protects the lender’s interests in the property should a problem with the title arise. It does not protect the buyer. The amount of policy coverage decreases each year as the mortgage is paid down and eventually disappears when the loan is paid off.
What happens if a problem come to light after you move in? Sometimes title problems occur that could not be found in the public records. To help protect you in these unforeseen events, you need an Owners Policy of Title Insurance. Your Owners Policy is usually issued for the purchase price of your new home. You pay a one-time fee at closing and the policy covers you for as long as you or your heirs have an ownership interest in the property. Only an Owners Policy fully protects you should a covered title problem arise that was undiscovered during the title search.
Possible hidden title problems can include:
Your Owners Policy protects you against claims arising from any covered title problem that may be found after you buy your home. That means your title company will be there to help pay valid claims and cover the costs of defending an attack on your title. It is important to know that obtaining an Owners Policy isn’t necessarily an automatic part of the closing process. Trident Land Transfer strongly recommends the purchase of an Owners Policy and will always include it in your title quote. For a modest a one-time fee paid at closing, the Owners Policy protects you for as long as you or your heirs have an interest in the property.
You also have the option of purchasing a policy with expanded coverage. It’s called the Enhanced Policy and it covers an additional range of potential title problems that may arise after settlement. Trident Land Transfer provides the Enhanced Policy, when the purchaser selects this policy, as it provides broader coverage at a very modest additional fee. Your Trident Settlement Officer will explain the additional benefits so you can decide which policy is the best one for you.
When you refinance you are obtaining a new mortgage, even if you stay with your original lender. Your lender will usually require a new title search and Loan Policy to protect their investment in the property. You will not need to purchase a new Owners Policy; the one you bought at your original closing is good for as long as you and your heirs have an interest in the property.
Even if you recently purchased or refinanced your home, there are problems that could arise with the title. For instance, you might have incurred a mechanics lien from a contractor who claims they have not been paid. Or you might have a judgment placed on your house due to unpaid taxes, homeowner dues, or child support. The lender wants reassurance that the title to the property being financed is clear.
You may think a newly constructed home would not require title insurance since there have been no previous owners. But new construction raises special title problems for the lender and owner. For one thing, there were most likely many prior owners of the unimproved land. A title search will uncover any existing liens and a survey will determine the boundaries of the property being purchased. In addition, a builder may have failed to pay subcontractors and suppliers. This could result in the subcontractor or supplier placing a lien on your property. Again, lenders want to be sure the property has clear title, and that they are insuring the correct property. Purchasing an Owners Policy will protect you against these potential problems and pay for any legal fees involved in defending a claim.