Which type of policy protects the lender in a real estate transaction?

A lender's title policy is specifically designed to protect the interests of the lender in a real estate transaction. This type of insurance ensures that the lender is safeguarded against any claims or issues that may arise regarding the ownership of the property after the loan is issued. It covers potential losses stemming from defects in the title, such as unknown liens or encumbrances that could affect the lender's ability to recover their investment if the borrower defaults.

This policy is crucial for lenders because it provides them with an added layer of security when financing a property, allowing them to be more confident in their investment. It typically lasts until the loan is paid off, thereby extending protection for the duration of the mortgage.

Other types of title policies, such as the buyer's title policy and the owner's title policy, primarily serve to protect the interests of the property owner or buyer, not the lender. A title binder is an interim document that outlines the terms of coverage for a title insurance policy but does not offer protection in the same way a full policy does. Thus, a lender's title policy is the most appropriate choice in this context.