To protect possibly the most important investment you’ll ever make – the investment in real estate.
A lender goes to great lengths to minimize the risk of lending money for the purchase of real estate. First, credit is checked as an indication of the borrower’s ability to repay the loan.
Then, the lender seeks assurance that the quality of the title to the property to be acquired and which will be pledged as security for the loan is satisfactory. The lender does this by obtaining a loan policy of title insurance.
The Loan Policy Does Not Protect The Borrower
The loan policy protects the lender against loss due to unknown title defects. It also protects the lender’s interest from certain matters which may exist, but may not be known at the time of the sale.
But, this policy only protects the lender’s interest. It does not protect the borrower. That is why a real estate purchaser needs an owner’s policy, which can be issued at the same time as the loan policy, usually for a nominal one-time fee.