VA Loan Articles
VA Loans and Title InsuranceDoes the VA require title insurance? Some borrowers may discuss their VA loan options with a lender that does require title insurance, but is this a VA-mandated or lender required feature of VA home loans?
VA Pamphlet 26-7, Chapter Nine has the answer: title insurance is not mandatory under the VA loan program. But VA loan rules do permit lenders to require such insurance.
According to Chapter Nine, "VA does not require a lender making a VA loan or the veteran-borrower to obtain title insurance. The lender may apply its own title insurance requirements to VA loan transactions. VA requires only that title to the property meet the standards described.in `Estate of the Veteran in the Property.'"
Where does the justification for this rule come from? VA loan rules say, "VA regulations at 38 CFR 36.4354 provide the parameters for the required estate of a veteran in real property securing a VA-guaranteed loan. The lender is responsible for ensuring the loan conforms to these parameters. Generally, title to the estate shall be that which is acceptable to informed buyers, title companies, and attorneys in the community in which the property is situated."
So in essence, any required title insurance is not included "against the wishes of the VA". Some lenders require title insurance, some many not.
In addition to title insurance, you should be aware of related issues that govern titles.The same portion of VA Pamphlet 26-7, Chapter Nine that establishes that a lender is free to require title insurance also has guidelines that state lenders cannot restrict the VA borrower from selling the property purchased with a VA guaranteed mortgage. This is a very important feature of the VA loan rulebook to be aware of. It states:
"Restrictions on the purchase or resale of the property are unacceptable to VA, with certain exceptions. The lender must:
- ensure any restrictions fall within the exceptions provided by VA regulations at 38 CFR 36.4308 and 38 CFR 36.4354
- consult VA where doubt exists
- obtain VA approval where appropriate, and
- fully inform the veteran and obtain his or her consent to the restrictions in writing at the time of loan application."