Escrow & Title
Which party typically pays for the lender's title insurance policy?
AThe seller
BThe buyer/borrower✓ Correct
CThe lender
DThe real estate agent
Explanation
Although customs vary, in most transactions the buyer/borrower pays the premium for the lender's title insurance policy as a condition of the loan.
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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.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
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.
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