- Appraisal: The estimate value of the property based on the location, condition and recent sales of similar homes in the surrounding area.
- Chain of Title: A document containing all previous property owners, listed in chronological order from the first owner to the present owner.
- Clear Title: Undisputed, legal property owner which means there are no liens or levies from creditors or other parties that may cause legal confusion.
- Closing Costs: Fees paid at the day of closing by both sellers and buyers. These fees can cover lender expenses, taxes and insurance.
- Contingent: After an offer has been accepted, finalization of the closing can be contingent on certain terms such as inspection, appraisal, etc.
- Debt to Income Ratio: In order to qualify for a loan, your monthly debt cannot exceed 43% of your monthly income.
- Deed: A recorded legal document transferring ownership from seller to buyer.
- Due Diligence: The period of time when a buyer examines a home’s condition and contract terms before becoming legally obligated to purchase.
- Earnest Money Deposit: A deposit that accompanies an offer to show the seller good faith. This deposit is held safely in escrow and put towards the purchase.
- Escrow Account: An account where all closing costs are collected and disbursed.
- HOA: Homeowner’s Association-the organization that determines rules and standards for a community.
- Inspection: Examination of the home for its condition that is conducted by a licensed professional of your choosing.
- Loan to Value Ratio: How the lender determines if the loan is worth the risk associated with it.
- Offer: An agreement between a buyer and seller to purchase real estate. Also referred to as the sales contract.
- Prequalification: The process to determine if a borrower is qualified for a loan.
- Private Mortgage Insurance (PMI): A policy that protects your lender in case you default on your loan. Typically, if your down payment is less than 20% on a conventional loan, you will also need to pay for PMI.
- Title: Shows legal ownership to a property.
- Title Search: The process of examining public records and retrieving documents on the history of a piece of property to determine and confirm the property’s legal ownership and find out what claims or liens are on the property.
Frequently Asked Questions
Title insurance is designed to protect you from incidents in the past. This is unique because most insurance protects you from future events. In addition, with title insurance, you only make one payment at the time of closing. There are no yearly or monthly fees with title insurance.
Below is a list of the most common hidden risks that can cause a loss of title or create an encumbrance on your title:
- Mistakes in recording legal documents
- Undisclosed or missing heirs
- Liens for unpaid estate, in heritance, income or gift taxes
- Forged deed, releases or wills
- Misinterpretations of wills
- Deeds by persons of unsound mind, by minors or by person supposedly single, but in fact married
- False impersonation of the trust owner of the property
- Instruments executed under invalid or expired power of attorney
Title insurance protects you from claims arising from any one of these events if the event took place before you bought the property.
On most residential properties, there are two parties who need coverage: the lender and the homeowner. The lender needs protection only for the amount of the loan. As the homeowner, you should have an owner’s policy for the purchase price of the home.
The one-time payment for owner’s title insurance is low relative to the value of your home and is regulated by the state of Florida.
Actually, you are not required by law to have title insurance. Keep in mind that title insurance protects you from events that have happened in the past and if for some reason you do have a defective title, you are opening yourself up to the potential of huge personal loss. If you have a mortgage on the property, the lender most always requires you to buy a loan policy to protect their interests.
Your owner’s title insurance policy lasts for as long as you or your heirs own your property. Your life will change over time, but your peace of mind never will.
A deed is the actual legal document that would transfer the ownership (title) of a property from one person to another.
If title insurance is required or requested, you should get a title commitment at the time of your closing. The actual policy may not be issued for some time depending upon the prior mortgage satisfaction being received and recorded along with the new property deed.
Re-issue credit is a discount offered to parties that can prove that a prior title insurance policy existed on the real estate being insured. Because it was previously insured, there is less risk to the insurance company and a lower rate applies.
In order to receive a reissue credit for title insurance, a copy of the prior title policy issued in their name of the seller, or borrower on a refinance transaction, must be submitted and one of the following conditions must apply:
- Policies issued with an effective date of less than three years after the effective date of the policy insuring the seller or mortgagor in the current transaction, or
- Loan policies issued on refinancing of property insured by an original owner’s policy which insured the title of the current mortgagor.