Understanding Texas Title Insurance

When purchasing a home in Texas, you will need to look into obtaining title insurance.  With this type of insurance, you form a contract with a title company as determined by the Texas Department of Insurance.  Before making your purchase, it is important to understand how title insurance works and the type of title insurance you will need.

The Owner’s Policy of Title Insurance

One form of title insurance you will need to obtain is the Owner’s Policy of Title Insurance.  This insurance is actually issued to you and provides you with protection against specific title risks.  Some of these risks include:

• Clerical Mistakes
• Defective Acknowledgement on Documents
• Delinquent Taxes
• Forgery
• Fraud
• Illegal Trusts
• Lost Wills
• Mistakes in Legal Description
• Platting Discrepancies
• Undisclosed Heirs
  

In general, the person selling the property is responsible for paying for the Owner’s Policy.  Determining who pays for the Owner’s Policy can be negotiated, however, and may be partially paid for by the person buying the house.  The premium amount for these properties is determined by the sale price of the home.

The Mortgage Policy of Title Insurance

Unlike the Owner’s Policy of Title Insurance, Mortgage Policy of Title Insurance is issued to the lender.  The purpose of this insurance is to validate the lien that the lender has on the property.  Before this policy is issued, the insurance company must first perform a careful search of federal, state, and county records associated with real estate. 

In order to complete its research accurately, title companies must utilize their abstract plant.  The abstract plant maintains references to every death, deed, divorce, or mortgage that may have an effect on the property. After this information is examined, the title company decides whether or not it will issue a policy.

The person borrowing money in order to pay for the home is responsible for paying for the Mortgage Policy.  The premium for the Mortgage Policy is determined by the amount of the loan. 

In addition to orchestrating the title insurance, a title company also acts as the escrow agent when a home purchase takes place. As such, the title company has certain responsibilities to the seller, the buyer, and the lending institution.  This includes receiving the money and documentation from the buyer that is required to complete the transaction.  Once all of the requirements are fulfilled, the home purchase can be considered closed.