A title is an evidence that verifies one has the right to possession of land. Title insurance plays a major role in making certain that your homeownership is free and clear of any rights or claims of prior owners. Title insurance protects the homeowner and the mortgage lender from potential risks associated with defects in title.
There are two kinds of title insurance: Owner's and Lender's.
Owner's Coverage is issued at the time the buyer purchases the property. Coverage is paid based upon the purchase price or the loan amount, whichever is greater. Coverage will last as long as the buyer or the buyer's heirs have an interest in the property. However, an owner's policy is not issued when you refinance.
Lender's or Mortgagee's Coverage protects the lender's investment in the property. However, this policy insures the lender against title defects that may affect the security of the mortgage loan - not the buyer's investment. The lender's title insurance policy is based on the amount of the mortgage and it decreases as the mortgage is paid off. Even if the lender has a title policy, the buyer still needs an owner's title policy to protect his/her interest.
Title insurance is necessary to protect against those risks which are present in all real estate transactions. Hidden hazards, which cannot be detected in the examination of title, can be a forgery, incompetence of grantor or mortgagor, fraud, unknown heirs, impersonation, prior taxes, or liens. And these are just to name a few.
Many people may attend the closing: the buyer and their real estate agent, a loan officer, the seller (or builder) and their real estate agent and your settlement officer.
During the meeting, which usually takes about an hour, the buyer and the seller review all of the relevant closing papers, many of which must be signed. Then after the buyer provides a cashier's or certified check for the down payment and closing costs, the keys are passed to the buyer and the proceeds are given to the seller.
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