Escrow & Title
In Colorado, a 'lender's title insurance policy' is most commonly required for:
AA. Cash purchases only
BB. All mortgage transactions, where the lender requires protection of their security interest against title defects✓ Correct
CC. Commercial transactions only
DD. Purchases of new construction only
Explanation
Lenders almost universally require a lender's title insurance policy (ALTA Lender's Policy / Mortgagee Policy) for any mortgage transaction. This policy protects the lender's security interest (lien) against title defects that might impair the lender's ability to foreclose or recover the full loan amount.
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Key Terms to Know
Lien
A financial claim against a property that serves as security for a debt or obligation, giving the creditor the right to foreclose if unpaid.
Title InsuranceInsurance protecting against financial loss from defects in a property's title that existed before closing but were unknown at the time of purchase.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Math Concepts
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