What is Title Insurance?

By Sheryl Landrum
LoanPage.com Columnist

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Hidden hazards can attach themselves to real estate. When you are considering the purchase of a new home and a new home loan or when you are refinancing your existing mortgage, your lender will require title insurance. Why is title insurance important to a homeowner and why does your lender require it before granting you a home mortgage loan?

Title insurance assures owners that they are acquiring marketable title to their new home or that they currently have it on their existing home and mortgage. Lenders place a lien on a home when they grant a new home loan or refinance an existing mortgage; they need to know, therefore, that the deed to the home is clear and/or can be legally transferred to a new owner before the home loan closes. Title companies research public records to ensure that a properties title is without defect and to determine recorded ownership.

What does title insurance protect you and a lender from? Title insurance protects against:
  • » Forged signatures on a deed.
  • » Mistakes in the interpretation of wills, trusts, or other legal documents.
  • » Impersonation of the real owner.
  • » Deeds delivered without legal consent.
  • » Recording mistakes or other errors in copying or indexing.
  • » Deeds and mortgages signed by persons of unsound mind, minors, or single people who are in fact married.
  • » Undisclosed and missing heirs.
  • » Falsification of records.
  • » It protects a lender from invalidity or unenforceability of the lien of the insured mortgage on the title.
  • » It protects a lenders lien position on the mortgage in case of default.

About the Author
Sheryl Landrum is a Senior Loan Officer with Charter Funding, Inc. in Carlsbad, California and a freelance writer on mortgage issues.

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