Title Insurance

Title insurance provides a guarantee of ownership of your home. It informs you of the nature of any other interests in the property and protects you against recorded claims of ownership to, or interests in, your property. Before a transaction involving a loan on or sale of property is completed, the title company searches public land records for matters affecting that title. Many title searches disclose title problems that are resolved before the insurance is issued. The result of the record examination is then summarized in a preliminary document called a “Commitment for Title Insurance” or “Preliminary Title Report”. This report documents the status of ownership and enables the lender or purchaser to evaluate the legal condition of title to the property before it is acquired. The commitment also constitutes an agreement by the title company to issue a title insurance policy if certain requirements stated in the commitment are satisfied. Occasionally, in spite of an exhaustive title search, hidden hazards can emerge after the closing. Things such as mistakes in public records, previously undisclosed heirs claiming ownership of property, or forged deeds could cloud the title. Title insurance protects you from hidden risks not revealed by the attorney’s or abstractor’s search.

When you obtain a new loan, the lender will require title insurance. Even if you recently purchased your home, there are some problems that could arise, such as: a mechanic’s lien from a contractor who claims to have not been paid for materials or labor – or a judgement placed on your home for unpaid taxes. Before financing, the lender will want to make sure the property is owned in a manner consistent with their underwriting standards.

Construction of new homes raises special title problems for the lender and owner. You may think you are the first owner when constructing a home on a purchased lot. However, 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, builders may fail to pay subcontractors or material suppliers. This could result in a lien being placed on your property. Again, lenders want to be sure the property has a clean title. Purchasing an Owner’s Policy will protect you against these potential problems and pay for legal fees involved in defending a claim.

There are two primary types of title insurance policies: lender’s title insurance, also called a Loan Policy, and owner’s title insurance, also called an Owner’s Policy. Most lenders require a Loan Policy when they issue you a mortgage. The Loan Policy is usually based on the dollar amount of your mortgage. It protects the lender’s interest in the property should a problem arise with the title. The Owner’s Policy protects you! It is usually issued for the total purchase price of the real estate. It is purchased for a one-time fee at closing and lasts as long as you or your heirs have an interest in the property. Owner’s title insurance informs you of any other interests in the property and protects you against hidden claims of owner-ship to or interests in your property. Owner’s title insurance also pays for any legal fees involved in defending a claim to your title. Most people have fire, automobile, and life insurance. You pay premiums every year to continue your protection. When you purchase an Owner’s Title Insurance Policy, you pay your premium only once for coverage that will protect your initial investment for as long as you own your home. If policies are issued simultaneously to both owner and the lender on the same property, a premium discount may be applied.

Title Insurance Calculation

Virginia	UGT
Rates/$1,000.00	Lenders	Owner
Up to 100,000	2.9	3.9
Over 100,000-500,000	2.4	3.4
Over 500,001-5,000,000	2	3
Over 500,001 (Call UGT)
Minimum	85	85
Simultaneous Issue	50
Reissue Rate	70%	70%
Reissue Minimum
Endorsements:
8.1 Environmental	15
9.0 Comprehensive	50
Construction/Mech Lien
Add 1.00 Per $1,000.00

Refi Example for Lenders Policy Loan amount $200,000 For the first $100,000 divide by 1,000 = 100 100 multiplies by 2.9- $2.90 The remaining $100,000 divides by 1,000 = 100 100 multiplied by 2.4 = $240 Adding the two together gives you your lenders coverage of $530 ($290+ $240 = $530) Purchase: Example for Lenders and Owners policy Purchase with sales price of $250,000 and loan amount of $200,000 Calculating owner’s policy $100,000 divided by 1,000 = 100 multiplied by 3.9 = $390 $150,000 divided by 1,000 = 150 multiplied by 3.4 = $510 Adding the two together gives you your owners coverage of $900 ($390 + $510 = $900) If owner’s insurance is purchased, then Lenders Insurance Policy on $200,000 can and will be issued for only $50 Total insurance on MF purchase of $250,000 would then be $950.00 (Based on current 2008 rates)