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I Will Be Purchasing a Home
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To protect possibly the most important investment you'll ever make - the
investment in your home. A lender goes to great lengths to minimize the risk of
lending you the money you need to buy a home. First, your credit is checked as
an indication of your ability to pay back your loan. Then, your lender goes a
step further. He or she makes sure that the quality of the title to the
property you are about to buy and which you will pledge as security for the
loan is satisfactory. The lender does this by obtaining a loan policy of title
insurance.
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The loan policy protects the lender against loss due to unknown title defects.
It also protects the lender's interest from certain matters which may exist but
not be knowable at the time of sale. But this policy only protects the lender's
interest. It does not protect you. That's why you need an owner's policy, which
can be issued at the same time as the loan policy for a nominal one-time fee.
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If a lender has title insurance protection and you don't, what possible danger
of loss can you face? As an example, let's say you've bought a home for
$100,000. You've made a $20,000 down payment, and your lender holds an $80,000
mortgage lien or beneficial interest. Your lender has title insurance coverage
protecting his interest up to $80,000. But your $20,000 is not covered. What if
some matter arises affecting the past ownership of the property? The title
insurance company would only defend and protect the interest of the lender. You
would have to assume the financial burden of your own legal defense. If your
defense is not successful, the result could be a total loss of title. The title
insurance company pays the lender's loss and is entitled to take an assignment
of your debt. You are out your down payment, other equity in the property which
you have accumulated, and your home. And you still owe the remaining balance on
your note.
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Title insurance is issued after a careful examination of copies of the public
records. But even the most thorough search cannot absolutely assure that no
title hazards are present, despite the knowledge and experience of professional
title examiners. In addition to matters shown by public records, other title
problems may exist that cannot be disclosed in a search.
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Here are just a few of the most common hidden risks that can cause a loss of
title or create an encumbrance on title:
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False impersonation of the true owner of the property;
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Forged deeds, releases or wills;
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Undisclosed or missing heirs;
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Instruments executed under invalid or expired power of attorney;
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Mistakes in recording legal documents;
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Misinterpretations of wills;
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Deeds by persons of unsound mind;
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Deeds by minors;
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Deeds by persons supposed single, but in fact married;
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Liens for unpaid estate, inheritance, income or gift taxes;
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Fraud;
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Title insurance will pay for defending against any lawsuit attacking your title
as insured, and will either clear up title problems or pay the insured's
losses. For a one-time premium, an owner's title insurance policy remains in
effect as long as you, or your heirs, retain an interest in the property, or
have any obligation under a warranty in any conveyance of it. Owner's
residential title insurance, issued simultaneously with a loan policy, is the
best title insurance value you can get. By combining expertise in risk
elimination at the time of issuing a policy, and protection against hidden
risks as long as the policy remains in effect, your title insurer protects
against title loss.
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The peace of mind in knowing that the investment you've made in your home is a
safe one.
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