Title and Insurance on an Investor Loan

Rate and leverage get all the attention. Title and insurance are what actually delay closings, and they delay them at the end, when everyone has already committed.

What the lender needs on title

A lender's policy insuring their lien position, and a commitment showing the title is clear enough to insure. That is it in principle. In practice the search turns up things nobody expected.

• Unreleased liens from a paid-off loan that was never formally discharged.
• Contractor liens from work done by a previous owner.
• Unpaid taxes or municipal charges attaching to the property, not the seller.
• Easements and boundary issues, which matter more on a build than a rental.
• Probate and heirship gaps, the slowest of all to clear.

Order the search as early as you can. A cloud found in week one is an inconvenience; the same cloud found the day before closing is a lost deal.

Insurance a vacant rehab actually needs

This catches flippers constantly. A standard homeowner's policy is not the right product for a property that is unoccupied and being worked on, and a policy that lapses or is written on the wrong basis will stop a funding.

• Builder's risk or vacant property cover for the rehab period.
• Liability, because there are trades on site.
• Coverage sized to replacement cost, not to your purchase price.
• The lender named as mortgagee or loss payee. Nearly every last-minute insurance problem is this one line being wrong.

When the property converts from rehab to rental, the policy has to convert too. See DSCR for the hold side.

Costs

Title, escrow, and recording are third-party costs, not lender margin. They look broadly similar whoever funds you, which is why they are the wrong place to shop and the right place to plan. Points and origination fees covers which lines are actually being quoted.

Keep the file moving

Title and insurance are the two items most often outstanding when everything else is ready. Hard money loan documents lists what to have prepared, and how fast a hard money loan can close explains what genuinely sets the pace.

Requirements vary by program and are confirmed in underwriting. Not a commitment to lend.