Lender's Policy
The policy a lender requires to insure the validity and priority of its lien.
01
What It Means
A lender's policy — sometimes called a loan policy — insures the lender's interest in the property, generally in the amount of the loan. It addresses the validity, enforceability, and priority of the lender's lien.
Coverage typically decreases as the loan is paid down and ends when the loan is satisfied.
02
Why It Matters
Nearly every institutional lender requires a loan policy as a condition of funding, along with specific endorsements tied to the loan program and property type.
Lender requirements sometimes trigger additional work — a survey, a zoning endorsement, an entity resolution — that affects the closing timeline.
03
Common Misconceptions
- "The lender's policy is for my benefit." It insures the lender's lien, not the buyer's equity or ownership.
- "One policy is enough for everyone." Owner's and lender's policies are issued separately, though they are often ordered together.
- "Refinancing carries the old policy forward." A refinance generally requires a new loan policy for the new lien.
04
Questions to Ask
- What endorsements is my lender requiring, and why?
- Will a survey be required to satisfy lender conditions?
- How is the loan policy premium calculated?
- Are reissue or refinance rates available?
- What outstanding requirements could delay loan approval?
05
Related Reading & Resources
The most successful real estate decisions often involve collaboration between several professionals working toward the same goal. Understanding each person's role helps you ask better questions and make more confident decisions.
06
Other Title Terms
- Title SearchThe research process that traces recorded ownership and identifies documents affecting a property's title.
- Title CommitmentThe document that sets out what the title company found and the terms on which it would insure title.
- Title InsuranceCoverage designed to protect against certain covered defects in title that existed before the policy was issued.
- Owner's PolicyThe title insurance policy that protects the buyer's ownership interest rather than the lender's loan.
- EscrowThe neutral holding and disbursement of funds and documents according to the parties' written instructions.
- ClosingThe point at which documents are signed, funds are disbursed, and ownership transfers.
Questions About the Closing Process?
Closing on a property involves many moving parts, from title research and escrow to signing documents and recording ownership. I'd be happy to help you understand the process, answer your questions, and connect you with experienced title professionals as you prepare for your transaction.
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