Home buyers and sellers in Florida tend to focus on certain aspects of the transaction more than others. Down payments, mortgage pre-approvals and appraisals are certainly important, but many people tend to forget about title insurance.
Title insurance provides coverage against certain issues that may challenge the interest and rights to legally own and enjoy a property. When a mortgage lender orders a title insurance policy, it is because it wants to protect the interest created by the financial lien placed against the home.
A title insurance owner’s policy is somewhat similar to the one ordered by the mortgage lender, but it actually insures the home buyer and not the bank.
When a title insurance company issues a lender’s or owner’s policy, the insurer is essentially guaranteeing that the title is clear for the bank to place a lien and for the buyer to become the owner.
A title is considered clear when licensed agents have determined that there are no liens, claims, easements, or restrictions that would impede the transfer of interest in the property. This determination is made through establishing a chain of title, searching property and legal records, and going through the abstracting process.
A mortgage lender will not process a loan application unless the title insurance can issue a commitment. The lender’s risk of proceeding without this commitment would be too high; imagine what would happen if the bank attempts to place a lien on a home that has a legal claim against it.
Home buyers should get into the habit of requesting title insurance; in many cases, a commitment to issue an owner’s policy can be set as a condition to closing. In Florida, title insurance rates are promulgated and very affordable for home buyers.
In the end, an owner’s policy of title insurance gives new homeowners the peace of mind they deserve.