What is Title Insurance?
Most buyers take out a mortgage when they purchase a home. But, before a lender will issue a mortgage, there will need to be evidence that the buyers will receive good title to the property. Also, the lender will require that a title insurance policy be purchased, usually at the buyer's expense, guaranteeing the lender's interest in the property.
Why do I need it?
Basically a lender, whether for a construction loan or a purchase loan makes this a requirement to ensure the priority of its mortgage. If a person is paying cash for the property, it is wise to obtain a title insurance policy to protect the owner. Title defects can be common, and when they occur, the consequences can be disastrous. The most common form of defect in regards to construction title is a Mechanic’s Lien.
What is a Mechanic’s Lien?
Any person, who provides services to a property, whether it be labor, material, equipment, or professional service, can place a lien on the subject property if they do not receive full compensation for the service provided. The lien causes ‘clouded’ or a defect in title which prevents the owner of the property from selling to someone else without paying the contractor first. This provides protection to contractors so they can provide the service first and then get paid. It is very important to keep a clear title because lender will not fund the next requested draw if there is a lien placed on the property.
How do I or the Lender prevent Mechanic’s Liens during construction?
122 Date down Endorsements – An updated title search at any given moment during construction to ensure there has been no liens filed on that property during the last time period.
Lien Waivers – Lien waivers are accepted with draw requests to ensure the contractor has been paid or will be paid for work done. This waives the contractor’s right to place a lien on the property.
Can I shop around for the best priced company?
Yes, several local companies can be found in your phone book or an online search. Your Transaction Coordinator will help you find the best quality and the best price.
Why do I have to pay for title insurance again?
Title insurance is paid for on a one-time-only basis. It is not transferable from one party to another. Also, the type of policy you have determines the type of endorsements needed and the price of the premium. Make sure you understand the kind of title insurance you're buying. There are several kinds available. If you have a question about anything in your title search, ask your title insurer or attorney for an explanation before you close.
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Charter Funding Construction Loans
5825 Avenida Encinas, Suite 101
Carlsbad, CA 92008
(888) 590-7466 office (760) 269-3123 fax
www.cfconstructionloans.com
