What is title insurance?
Title Insurance is a contract of indemnity between the insured and a title insurance company. The form of this contract is set by the Texas Department of Insurance and is commonly called a title insurance policy. Should title, as insured, to the land or affecting the lien of the mortgage be challenged, the title insurance company has several options to fulfill its obligations to the insured under the title insurance policy. These options include paying the claim, initiating all necessary legal proceedings to clear the title to the property, indemnify the insured, reinsure at current value without making exception to the covered title risk, indemnify another title insurer that reinsures the title without making exception to the covered title risk, secure a release of the covered title risk, or take a combination of these actions. The maximum liability under the policy is limited to the amount of insurance shown in the policy.
A policy of title insurance is based upon an examination of the public records that affect title to real property and represents the judgment of the company as to the insurability of the title. It is not an abstract of title or a representation or warranty as to title.
If I refinance other loans (purchase money, home improvements and the like) can I get home equity money?
Yes. But, beware — any home equity money makes the entire loan a home equity loan. Then, you are limited to only one open home equity loan at a time and only 1 every 12 months
How often can I take out a home equity loan?
Only one home equity loan can be taken out in any 12-month period.
What's special about Texas home equity loans?
- Total debt, including the home equity loan, cannot exceed 80% of the agreed fair market value of the property.
- Maximum fees and costs cannot exceed 3% of the loan. Such fees include lender costs, tax reports, title insurance premiums and surveys.
- 12 days must pass between the loan application and closing.
- The loan cannot be funded until a 3-day rescission period passes.
- Borrowers have no personal liability; the property is the only security for the loan.
- The loan can only be foreclosed judicially. Other loans in Texas can be foreclosed non-judicially.
How do I declare a homestead?
Upon purchasing a home, contact the appropriate county’s appraisal district and request the necessary documents for declaring a homestead.
- Dallas County: 214-631-0910
- Collin County: 972-578-5200
- Denton County: 972-434-2602 Metro
Are all title insurance premiums the same?
The policy forms, premium rates, rules, and procedures for title insurance are promulgated and controlled by the Texas Department of Insurance in accordance with the Texas Insurance Code, Chapter 9. Therefore, yes, all companies charge exactly the same premium rates.
What will happen at my closing?
Your closing will take place at our office, which will act as escrow agent and title insurer. As detailed in the earnest money contract, the title insurance agent may hold the earnest money, prepare the closing statement, and generally coordinate with all the entities involved in the closing. This includes collecting invoices and written information from the mortgage lender, insurance agent, surveyor, attorneys for buyer-seller-lender, tax search firm, mechanical and termite inspection companies, and title underwriter. In addition to acting as escrow agent, the title company will research the title to your home and issue a commitment for the title insurance reflecting the ownership, restrictions, easements, liens and other exceptions that will have an effect on the property. At the time of closing, the title company will allocate the fees between the purchaser and seller in accordance with the contract, lender’s instructions and local custom. The closing will take about forty-five to sixty minutes; however, occasionally there are last minute delays from one of the many servicing companies, especially at the end of the month. After the buyer and the seller have signed the necessary documents, the title company will return the mortgage papers and proposed title policies to the lender for review and funding of the loan. Upon receipt of the buyer’s funds and the loan amount, the title company will disburse all proceeds as shown on the closing statement. Title insurance regulations require funds to be in the form of either a cashier’s or certified check payable to the title company or transferred to the title company’s bank via wire transfer.
What danger of loss can you face?
If a lender has title insurance protection and you do not, what possible danger of loss can you face? As an example, a purchase of property is made in the amount of $200,000. The equity investment or down payment is $40,000, which leaves a loan amount of $160,000. But your equity of $40,000 is not covered. What if something comes up regarding past ownership of the property? The title insurance company would only defend and protect the interest of the lender. The owner/borrower would have to assume the financial burden of the legal defense. If the legal defense is not successful, the result could be a complete loss of title. The title insurance company pays the lender’s loss and is entitled to take an assignment of the borrower’s debt. The borrower loses the down payment, all other equity acquired, and the property. At the same time, the balance of the note is still due.
If closing prior to the end of the year, is it imperative that the taxes be paid for the entire year?
In Texas, taxes are due and payable for the current year on October 1 and delinquent on February 1 of the following year. If you choose your transaction on or after October 1 and want the policy to insure that taxes for the current year are paid, then the title company must collect the taxes and pay them to the different taxing authorities. Most lenders require that taxes be paid at closing if they are scheduled to close after October 1. Regardless of whether taxes are paid, taxes will be prorated through the date of the closing, charging each party taxes for the portion of the year in which they own the property.
Is it common in Texas for the seller to pay for the buyer's owner title policy?
Yes, in Texas it has been standard for the seller to pay for the buyer’s Owner Title Policy unless other terms have been arranged.
On a refinance, am I entitled to a credit on my title policy if I do not close with the same title company?
The Texas Department of Insurance regulates all title premiums throughout the state. They offer a credit on a refinance transaction for the title policy premium if the last title policy issued was 7 years or less regardless of the title company that was used to issue the policy. Credit is issued in the following manner:
- 40% for a title policy less than 2 years old
- 35% for a title policy greater than 2, but less than 3 years old
- 30% for a title policy greater than 3, but less than 4 years old
- 25% for a title policy greater than 4, but less than 5 years old
- 20% for a title policy greater than 5, but less than 6 years old
- 15% for a title policy greater than 6, but less than 7 years old
Can you afford title insurance?
The federal government and big business companies require it when they deal in property and loans-you could not afford a loss better than they could. If you are in a position to buy property or lend money, be insured-it is a bargain.
What is the sense of paying a premium for a title policy if an attorney has carefully searched the records?
There are many hidden defects that may affect the title to real estate. Some examples are:
- False Representation
- Lost Wills
- Mistakes at Law
- Mistakes in Description
- Undisclosed Heirs
- Clerical Mistakes
- Illegal Trusts
- Defective Acknowledgments
These defects are of such a nature that they may not appear in the records. Therefore, they may not be picked up by even the most thorough search.
Can a defective title be cured?
A title insurance policy does not insure against known title problems; neither does it create or cure title defects, liens or encumbrances or of the problems which are bond in the chain of title. Sometimes an affidavit, deed or other instrument will allow the title company to assume the risk. Other times a court order will be required. Title companies do not provide legal advice or draw legal papers.
Can one get title insurance on any property?
Title Insurance is available for almost every property. However, there are many facts that affect property that would not be economically sound for a title insurance company to accept as a risk. The title insurance company may choose to insure the land by accepting from coverage such risk. In that case, the title insurance company provides title insurance for the matters set in the policy, but not for the excepted matter.
Is title insurance like other insurance?
No. A policy of title insurance insures a state of facts that exist at the policy date. It does not cover subsequent events. Such insurance is sometimes called “retrospective” insurance since it insures against matters that occurred in the past.
Who uses mortgage policies of title insurance?
A Mortgagee Policy of Title Insurance is usually required by a lender of money. The lender must be assured that the loan is secured by a valid lien against the land. As payments are made under the mortgage, the coverage provided by the Mortgagee Policy of Title Insurance decreases. The Mortgagee Policy of Title Insurance provides no title insurance to the owner of the land.
- Under foreclosure of the loan, the coverage provided under the Mortgagee Policy of Title Insurance continues in favor of the foreclosing lender so long as the lender holds title to the land, or has a lien from a buyer from the lender or is liable under the warranty in a deed to a third party.
Is there only one type of title insurance policy?
No. There are two major types of title insurance policies. The Owner Policy of Title Insurance insures the owner against certain listed title risks and the Mortgagee Policy of Title Insurance insures the lender that the mortgage is a valid lien against the property.
What protection do you get from an owner policy of title insurance?
The Owner Policy of Title Insurance insures the owner against loss or damage sustained by the insured if title is not vested as shown in the policy; if there are any defects, liens or encumbrances not set out in the policy; if there are liens for labor materials having an inception at or prior to the policy date; if there is a lack of legal right of access to and from the land; or if there is a lack of good and indefeasible title to the land. The Owner Policy of Title Insurance provides title insurance protection to the insured for as long as the insured or his heirs, or successors own the property or are liable under warranty of title made upon sale of the property.
The premium for the Owner Policy of Title Insurance is paid when the policy is issued; there are no recurring premiums. An Owner Policy (if Title Insurance does not) insure any state of facts which an accurate survey would show, including conflicts of boundary lines and encroachments or protrusions of improvements. These survey matters may be insured if the company is provided with an acceptable survey and an additional premium is paid. In no case does the Owner Policy of Title Insurance insure an actual amount of land.