Escrow & Title
What is the difference between a lender's (mortgagee's) title insurance policy and an owner's (mortgagor's) title insurance policy?
AThere is no difference; both cover the same risks
BThe lender's policy covers only the loan amount and decreases as the loan is paid down; the owner's policy protects the full purchase price and remains constant✓ Correct
CThe owner's policy is required; the lender's policy is optional
DThe lender's policy covers physical damage; the owner's policy covers title defects
Explanation
A lender's title policy protects the lender up to the loan amount and decreases as the mortgage is paid down. An owner's policy protects the buyer's equity for the full purchase price and remains at that amount.
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Key Terms to Know
Title Insurance
Insurance protecting against financial loss from defects in a property's title that existed before closing but were unknown at the time of purchase.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
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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