Choosing the right team to assist you is just as important as deciding what home to buy. Independently, a realtor, loan officer, and Title Company each make an important professional contribution to the overall process. Your realtor guides you in the home selection process and assists with the preparation of the sales contract; your loan officer helps you secure the necessary financing required through a lender; and your Title Company coordinates the parties, searches public records, issues title insurance, coordinates financial and legal matters, and closes the transaction. There are some things to keep in mind and some terms you will want to know when asking for a rate quote.
An Introduction
A title is a recognized and protected legal right to own and occupy a particular space. When you buy a house, you are really purchasing the property’s title. Other parties may contest the title based on past rights and claims that can either infringe on your purchase or cause you to lose money.
Title Insurance is an indemnity against loss resulting from defects in or liens upon a title. Other types of insurance protect you from future incidents whereas title insurance protects you from past incidents that may result in future claims. Although you pay for title insurance only once, its coverage remains in effect so long as you or your heirs own the property. Your coverage continues even if you sell your property in the future if you give warranties of title to your Buyer.
Most lenders require a mortgagee title policy, also known as a lender’s or loan policy. The purchaser has the option of purchasing owner’s coverage or homeowner’s enhanced coverage. The standard owner’s policy protects the owner’s equity in the property that will increase as the loan is paid down. The enhanced coverage provides inflation protection, post-settlement coverage for forgeries and encroachments, some zoning, subdivision and building permit coverage as well as special affirmative coverage not provided for in the standard policy.
The Choice is Yours!
Most states allow consumers to select their own closing agent. Although your real estate agent or lender may recommend a title company, you are not required to use them.
At MAXIMUM, our quality, professionalism, experience and competitive pricing make us the perfect choice for your settlement needs. We work with Lenders to avoid scheduling problems, make sure all title, title insurance, survey and escrow matters are properly handled. In addition, we ensure compliance with the sales contract, thoroughly explain the costs and fees associated with the transaction, and help resolve any disputes that may arise. We are committed to service. We are committed to your satisfaction.
Types of Title Insurance
Three different types of title insurance available to you: a lender's policy, standard owner's policy, and the owner's enhanced policy. The loan policy protects the lender’s investment while the owner’s policies protect the Buyer’s interests. Because pricing varies between states, ask your MAXIMUM Settlement Specialist about pricing in your area and whether the loan and owner’s policies are sold separately or as a package.
The Loan Policy
A lender’s or loan policy is title insurance issued to the mortgage lender to protect them against loss due to title defects that may be unknown at the time of sale. All corporate lenders require this coverage as a condition to the Buyer’s loan. It protects the lender from title problems such as fraud, misrepresentation, improper wills, and other issues that may jeopardize their security in the property. Because this policy only protects the lender up to the amount of the loan, the Buyer needs an owner’s policy to protect their own interest.
If your lender obtains title insurance, it only covers up to the amount of the loan, which is not usually the full property value, and there is no provision for an uninsured party’s legal expense payment. If there is an adverse claim against your property, the lender only becomes concerned if it threatens their ability to foreclose on the property and recover the loan’s principal and interest. Ergo, you still need a policy to cover the full property value and to cover legal expenses in the event of a claim.
The Owner's Title Policy
Title problems are not always found in public records and are sometimes missed in the title search process. Because hidden hazards are so common, we recommend you obtain an owner’s policy to insure you against them.
An owner’s policy is title insurance issued to the Buyer to protect them against loss due to title defects that may be unknown at the time of sale and which may cause fault in ownership. It provides protection from financial loss in the event that charges are claimed against the title to your home. Additionally, it covers legal costs for title defense and payment of claims covered by the policy up to the policy’s maximum coverage amount.
For a onetime premium, your owner's policy remains in effect for the entire duration that you or your heirs retain an interest in the property. It is typically paid at settlement and issued for the property’s purchase price. Only an owner’s policy fully protects you, up to the amount of the policy, from the title’s hidden hazards. The bottom line is that when you purchase our owner’s policy, MAXIMUM will be there and stand behind you, both monetarily and with legal defense, in the event that a covered title problem arises after closing.
In addition to the available standard owner’s policy, you have the option of purchasing a policy with expanded coverage. Detailed in the next section, the owner’s enhanced policy covers more than the owner's policy. Ask your MAXIMUM Settlement Specialist for an explanation of the owner’s enhanced policy so you can decide which policy is best for you.
For your interest and protection, we strongly recommend you purchase an owner’s policy. Every state does not automatically issue an owner's policy and who pays for the policy varies from state to state and sometimes even within a state. No matter who pays for it though, the premium is a onetime fee paid at closing. Be sure to ask your MAXIMUM Settlement Specialist how the owner’s policy is handled in your area and whether the loan and owner’s policies are sold separately or as a package.
If you would like more detailed information on the title search and reasons you should purchase title insurance, please see
Why You Need Title Insurance. If you would like to know more about hidden hazards, please see
70+ Ways to Lose Your Property.
Coverage
The types of risks your title insurance covers depends on the type of owner’s policy you choose. The standard owner’s policy protects the owner’s equity in the property that will increase as the loan is paid down. The enhanced coverage provides inflation protection, post-settlement coverage for forgeries and encroachments, some zoning, subdivision and building permit coverage as well as special affirmative coverages not provided for in the standard policy.
The standard owner’s policy protect against risks such as:
- Forgery and impersonation
- Lack of competency, capacity, or legal authority of a party
- Deed not joined in by a necessary party (co-owner, heir, spouse, corporate officer, or business partner)
- Undisclosed (but recorded) prior mortgage or lien
- Undisclosed (but recorded) easement or use restriction
- Erroneous or inadequate legal descriptions
- Lack of a right of access
- Deeds not properly recorded
In addition to the standard policy’s protection, the owner’s enhanced policy covers risks such as:
- Off-record matters (i.e. claims for adverse possession or prescriptive easement)
- Deed to land with buildings encroaching on land of another incorrect survey
- Silent, or off-record, liens (i.e. mechanic's or estate tax liens)
- Pre-existing violations of subdivision laws, zoning ordinances, or Covenants, Conditions & Restrictions
- Post-policy forgery
- Forced removal of improvements due to lack of building permit (subject to deductible)
- Post-policy construction improvements by a neighbor onto insured land
- Location and dimensions of insured land (survey not required).
Rate Terminology
When purchasing title insurance for your property, you must choose from different available rates. Ask your MAXIMUM Settlement Specialist which of these you may qualify for:
All-Inclusive Rate: A rate that includes a portion of the cost of researching title or conducting closing, such as charges for title insurance, abstract fees, or examination fees.
Basic Rate: A rate charged when a consumer does not qualify for a reduced rate.
Refinance Rate: A loan policy’s reduced rate issued on the new loan in a refinance transaction where the original loan was previously insured within a specific time period.
Reissue Rate: An owner’s policy’s reduced rate charged if a previous policy on the same property was issued within a specified period. Some states also use the term for a refinance rate.
Risk Rate: A rate that does not include the cost of researching title or conducting closing.
Simultaneous Issue Rate: A reduced rate charged, typically for the loan policy, when policies are issued to both an owner and a lender at the same time on the same property or loan.
Your Policy’s Cost
Depending on the state, title insurance rates are set either by companies themselves or by the state’s insurance department. When the State set the rates, each title company must charge the same for each type of title insurance policy and for each rate type. States with legally authorized rating bureaus may have uniform rates as well. The cost of various other title services, however, may or may not be included in the rate. Talk to your MAXIMUM Settlement Specialist to determine how rates are set in your area.
The loan policy’s cost is usually based on your loan’s dollar amount. It only protects the lender's interests in the property and offers you, the Buyer, no protection. Each year, the policy’s amount decreases and eventually disappears as you pay off the loan.
The owner’s policy’s cost depends primarily on the property’s purchase price. Premiums are only paid once but coverage continues as long as you or your heirs maintain an interest in the property. If you sell your property and give a title warranty to the Buyer or the Buyer gives you a mortgage to finance the purchase, your coverage continues to protect your interest.
To approximate your policy’s cost, please utilize the
Estimated Title Policy Fees Calculator.
