Understanding Texas Title Insurance

Posted by Crystal Olenbush on Friday, August 15th, 2008 at 6:03pm.

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.

16 Responses to "Understanding Texas Title Insurance"

Amber wrote: Is all of this necessary to sell/buy a house? Can it be done thru an attorney or is a title company needed?

Posted on Friday, October 3rd, 2008 at 11:33pm.

Jim Olenbush wrote: Hi Amber,
An attorney can assist you with the closing process instead of a title agency, but a title insurance policy is still required for most transactions. It really sounds more complicated than it is! We can help walk you through the process when you are ready to buy or sell a property - just give us a call!

Posted on Friday, October 3rd, 2008 at 11:44pm.

cherry wrote: hi... i heard about title insurance in a product orientation conducted by walton internationals in philippines... in that, investors will receive title insurance as proof of their ownership of a portion of the whole collective ownership..
I am curious how enforceable and how essential is it because we are foreigner investors

Posted on Tuesday, February 24th, 2009 at 1:06pm.

John Morovitz wrote: I bought a title policy when I bought my house.I am about to refinance while increasing the loan.How is Title insurance determined in this case? Thanks John

Posted on Tuesday, May 19th, 2009 at 2:50pm.

BC Richards wrote: I am told title insurance in Texas actually guarantees nothing but simply offers a settlement in the event of a challenge to the property title. Am I required, by Texas Law, to have title insurance, if I am paying cash for the real estate property without the use of a mortgage lender? I intend to hire an independent abstracter to fully research the property & have a physical survey performed before taking possession and a real estate attorney will be involved in the entire process.

Posted on Thursday, December 17th, 2009 at 11:49am.

Jim Olenbush wrote: Cherry,
In Texas, the owner will receive a Warranty Deed, which is proof of ownership. Title Insurance is an insurance policy issued to the buyer insuring that title. I don't know about title insurance in the Philippines.

Posted on Friday, December 18th, 2009 at 4:53pm.

Jim Olenbush wrote: John,
If the refinance is done within 7 years of the last loan to be paid off, a credit will be issued equal to a percentage of what the full premium would be on a policy for the unpaid balance of the loan being paid off. During the first 2 years the credit is figured at 40%, year 3 is figured at 35%, year 4 is at 30%, year 5 is at 25%, year 6 is at 20% and year 7 is at 15%. There is no credit after the seventh year. The credit is deducted from the full premium amount (plus endorsements) on the new loan.

Posted on Friday, December 18th, 2009 at 4:55pm.

Jim Olenbush wrote: BC,
A buyer is not required to obtain an owner's title insurance policy for themselves in Texas. But how much are you paying an independent abstracter, and how does that compare to the cost of a title policy? As real estate agents we have to strongly encourage everyone to go ahead and obtain title insurance. There are good reasons why lenders require it before they put their own cash at risk.

Posted on Friday, December 18th, 2009 at 5:07pm.

Victoria wrote: Are title insurance premiums regulated by the TX Dept of Insurance or are the negotiable from one title company to another? I'm a first-time home buyer and need to know at what point does the transaction occur to purchase title insurance?

Posted on Friday, April 23rd, 2010 at 11:28am.

Jim Olenbush wrote: Yes, the premiums are regulated and not negotiable. The closing usually takes place at a title company and they will issue the title policy at that time.

Good luck with your first home!

Posted on Friday, April 23rd, 2010 at 10:00pm.

Hans wrote: If I purchase a property at a county tax deed sale, and the redemption period expires without the original owner redeeming the property, how long will it take and what steps are necessary in order to get a clear title since I will only receive a Sheriff's deed/quit claim deed when purchased?

Posted on Tuesday, June 22nd, 2010 at 4:55pm.

Jim Olenbush wrote: I know the original owners have a two year redemption period on residential property forfeited in a tax deed sale. I don't know for sure, but I would assume clear title can be issued to you anytime after the redemption period has passed. I suggest contacting a title agency or attorney that does business in your area, as the steps may be different from one place to the next.

Posted on Tuesday, June 22nd, 2010 at 10:41pm.

fran wrote: I am refinancing my home 3 years after the purchase. The home was built in 2007. What risks would require me to purchase Owner's Title insurance if I am the original owner of a newly developed property.

Posted on Friday, August 6th, 2010 at 3:53am.

stuart hamm wrote: Hello Jim, I am in a strange situation with my mortgage company, which appears to be shady. They were asking for a leyyer of subdination for my junior liens so that they could be the first lien holder, a direct qoute from one of their people. They said once this was done I would have to get a new title policy. I received a letter now stating that they are unable to obtain title insurance protection from a title company. I live in Texas and trying to figure out what they mean. My loan was bought and sold and then place in to a securitized mortgage pool and then these people ended up with it. I read briefly that a title company will not issue a title policy if there is a break in assignment. My servicer is not listed at my county courthouse, just my original loan originator who is now out of business. Please help

Posted on Saturday, November 19th, 2011 at 10:19pm.

Sheen wrote: Is it safe to purchase a land with a deed of sale and not the warranty deed. What can go wrong? The seller has this land for three years now and are selling it. Taxes and poa are up to date. How do I find out if there is a lean on the land or not. Even though the seller said title is clear. Thanks

Posted on Tuesday, February 14th, 2012 at 5:52pm.

Gerwyn Williams wrote: Is it really necessary to buy this when you are purchasing a new home on a major development from a large established builder?

Posted on Wednesday, May 2nd, 2012 at 11:59am.

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