Fairfax Title Company Blog

When it comes to securing title insurance and closing on a home during a purchase, all parties involved need to navigate their fair share of paperwork. During this hustle and bustle, it can be confusing to keep track of the proper names of everyone related to the agreement – the seller, buyer, owners and lenders, and more.

However, understanding exactly what these terms mean is critical when considering what you are agreeing to and how it will affect you both during closing and beyond. The difference between the owners and lenders, in particular, is vital when you are selecting your title insurance policy so that you can be sure you have secured coverage as intended.

Who Is The Lender And What Is Their Policy?

A “lender” is the entity that is providing the money for the home purchase in the event that the party interested in buying the home cannot fully fund the purchase on their own with a cash offer.

Your lender is likely your mortgage company who is offering you the loan that must be repaid over time. You may have noticed that in your closing paperwork, you are paying for a lender’s title insurance policy. This is common and even expected; title insurance protects a party from unexpected issues that arise with a property’s title or history after the purchase is complete.

For example, if it is discovered after closing that the home still has liens on it that need to be paid, the new homeowner would be required to pay these off, even if they had no part in their origination.

For this reason, lenders require the party buying the house to pay for a title insurance policy for them. The lender is making a financial investment into the property with the expectation of being paid back.

However, the person buying the property may not be able or willing to pay back the mortgage if additional liens or other expenses and challenges interfere; thus, the lender is protecting their investment with title insurance. The buyer is responsible for paying for this, but it does not actually cover the buyer; this policy is for the lender only.

Are Owners Covered During Closing?

This is where many new buyers get confused. They paid for a title insurance policy during closing, so why aren’t they covered? The policy that buyers automatically pay for is the lender’s; buyers who want their own policy must secure an owner’s title insurance policy.

The owner of a home is the party who has been sold the property for the purpose of occupation. Thus, if the seller previously had title insurance on the property, it is no longer in effect once the seller is no longer the owner of that home. You will need to secure your own, new policy in order to be protected, because the seller cannot transfer their title insurance to you, the new owner.

Things To Know When Selecting Title Insurance During A Purchase

While the seller cannot directly transfer their policy to you during closing, it is entirely possible that you may agree during discussions that the seller can improve the deal on the home by funding your new title insurance policy. However, this is not a requirement.

Similarly, it is the buyer who selects the title insurance agency during closing, and both the buyer (the new owner) and the lender will use that agency for insurance. Thus, you can vet your own insurance agency if you like, or you can follow the recommendation of your lender if you feel overwhelmed.

Title insurance does not function like other types of insurance such as auto and homeowner’s that you pay monthly. Instead, title insurance is a one-time payment that permanently covers you for as long as you remain the owner of the home.

Standard coverage protects against former liens, undisclosed heirs, forgery and fraud, but if you want even more robust coverage, you can add more protection at an additional cost. This is sometimes referred to as enhanced title insurance, or you may add riders for things like zoning issues and property line disputes if you would find them helpful.

Trust The Experts To Help You Secure The Right Coverage

Whether you are just considering title insurance for the first time or you already know what type of coverage you need and are considering the best agencies, do not hesitate to ask any questions that you have. The experts at Mathis Title Company are available to help you fully and transparently understand the process so that you can make the right decision for you. Reach out to learn more or to schedule an appointment.

The process of filling out all the paperwork and ensuring that everything is in order when purchasing a home can already feel overwhelming, leading many people to choose to cut down on that aspect of the project as much as possible. For this reason, it is common for homebuyers to either skip title insurance entirely or to misunderstand the papers that they are signing about their lender’s title insurance policy.

Some may also be hesitant to add further costs onto their closing, but the reality is that owners title insurance is an effective and affordable means of protecting your investment – as long as you acquire the right policy.

What Is Owners Title Insurance?

An owner’s title insurance policy is a means of protecting your new home purchase. Every time that a significant event (such as a sale) happens to a property, it is recorded in the deed to that location. The transfer between the seller and the new owner is documented – but what happens if something goes awry during this step?

If someone forges details or previously unknown aspects about the house are not properly recorded, the person who owns the home could find themselves in a lot of trouble. Owner’s title insurance protects people against these potential outcomes.

Title insurance is a powerful protector. However, one of the most common misunderstandings when buying a home revolves around title insurance and how buyers assume that they are covered when really they are not. In order to understand how this happens, you must be sure to keep your terminology straight. When someone makes a property purchase, they will almost always be responsible for paying for lender’s title insurance during closing.

Many people see this line item and assume that, because it is title insurance, they can use the policy since they are paying for it. However, lender’s title insurance is a purchase mandated by the mortgage lender to protect their investment, and the policy is only for them. If you want protection, you will need to acquire your own separate owner’s title insurance policy.

The Areas That Title Insurance Can Address

If forgery or other issues affect your title, you may not actually have a legal right to own your home unless you have a title insurance policy to protect you. Similarly, if the previous owners had a lien on the property that they did not pay off and this was not disclosed to you before you purchased, you would become responsible for paying off that lien – even though you had nothing to do with its origination in the first place.

Title insurance can also provide for your legal fees if you must go to court to contest ownership of your home, such as if a previously undisclosed or unknown heir or inheritor has made a claim on your property. Some policies cover zoning issues and a wide variety of other concerns as well.

Budgeting For A Title Insurance Policy

Closing costs are expensive, and not everyone is eager to add more to that total. However, title insurance is affordable – usually between .5% and 1% of your home’s value – and is paid as a single lump sum upfront rather than in installments like other insurance. This keeps it affordable and much easier to budget for, after which you are covered for the entire time that you own the property.

Is Owner’s Title Insurance Worth It?

Owner’s title insurance is a powerful tool to secure the purchase that, for many people, ends up being the largest financial decision of their lives. If a problem arises with your title and you do not have an insurance policy, you could lose your home, as well as any equity that you have accumulated in it over time.

Compared to this potential loss, the temporary and affordable bill for an owner’s title insurance policy is generally considered to be worth the expense. However, what exactly should be covered is unique to you, and you can discuss your options with an expert title insurance provider.

Trust The Experts To Provide Comprehensive Information To Get You Started

Whether you are still learning more about title insurance so that you can make an informed decision or you are ready to lock in a policy and review options for riders and coverage, be sure to trust a reputable firm. The professionals at Mathis Title Company would be happy to help you understand all of your options and create a title insurance policy that is customized to your specific needs. Reach out to learn more about our services or to schedule an appointment to get started on title insurance.

Virginia maintains a robust set of laws and protections that govern the home buying process, for both the seller and the buyer. As you consider the large financial investment that is purchasing a property, one of the protections that you may choose to take advantage of is your access to title insurance.

Title insurance requirements vary by state, but in Virginia, you can rest assured that the process will be comprehensive and provide you with a policy that will protect your new home from formerly undisclosed issues as long as you are aware of your own coverages and exceptions.

Title Defects Must Be Disclosed If Known

The primary advantage of title insurance is that it safeguards your financial investment when you purchase a property; if the former owners had failed to pay property taxes or otherwise were subject to a lien on their home, this information may slip through the cracks during a purchase. If the title of the property is transferred to you without knowing about the lien, as the new homeowner, you would then be responsible for paying off the lien, even though you had no part in its creation.

However, one of the requirements of title insurance is that it fully discloses any such problems to you as soon as they are known. Most commonly, this will arise as part of a title search that is conducted prior to approving your policy. Additionally, much like substantial issues with the home are the responsibility of the seller to declare, sellers should notify their agents of such title problems. In the event that they do not, title insurance still serves as a backup.

The Lender Generally Requires Their Own Policy

Another common requirement with title insurance in Virginia is that the lender will require their own policy. Many homeowners find themselves misunderstanding their mortgage and closing paperwork because they see that one of their fees is for the purchase of lender’s title insurance. Thus, they assume that they have already purchased a policy for themselves, only to discover later that they are not covered at all.

Lenders typically require that the buyer purchase a policy that specifically covers the lender so that, should an issue arise that makes the mortgage unenforceable, the lender does not lose their money. This coverage does not extend to the buyer, who will need to secure their own policy.

There Is No Set Mandate for Who Pays the Premium

Contrary to popular belief, there is no requirement that either the buyer or seller purchase the buyer’s title insurance in Virginia. Some sellers may offer to do so in order to improve the deal on the property and encourage a buyer to close, but it is not the seller’s responsibility to do so. If the seller does not offer to purchase title insurance, the buyer may do so on their own.

Agencies Claiming To Be Licensed Insurers Must Be Registered With The State

You should always keep your insurance policies limited only to agencies that are licensed in the field. In Virginia, any agencies that claim to carry the proper licensing documents must register with the state as proof of proper licensing, and as a buyer (or even a seller), you can check on these details yourself.

The State Corporation Commission keeps detailed records of all licensed insurance agencies, which can be found here. It is important that you vet any potential insurance agency that you would like to work with for title insurance to ensure that your purchase is enforceable and will protect you as intended.

Selling insurance is a regulated industry for which a license is required, and any agency that does not maintain a license is likely to compromise in other critical areas as well. Unlicensed agents also cannot secure insurance against mistakes, which means that if your agency makes an error that costs you and you seek legal action, the agency may not have enough money to pay for the damages.

Trust The Experts To Assist You In Securing The Perfect Title Insurance

Whether you are just learning about how title insurance can help you for the first time during your home buying journey or you are ready to acquire a policy prior to (or even after) your closing, be sure to trust the experts.

The professionals at Mathis Title Company would be happy to answer any questions that you may have. They can take the time to demonstrate their compliance with all of the critical requirements that Virginia mandates. Reach out to learn more about their services or to get started on a title insurance policy.