What is Title?
Title refers to the legal rights the owner has to a property. When purchasing a home, the buyer has to ensure it has a clear title and is free from liens or other ownership claims.
What is Title Insurance?
Title insurance is a one-time premium that’s used to protect homebuyers and mortgage lenders against any property loss or damage. Title insurance covers third-party claims on a property that didn’t show up in the initial title search and ensued after a real estate closing.
What does Title Insurance Protect You From?
Title insurance protects homeowners from defects, such as: improperly recorded documents, fraud, liens, forgery, encroachments, and etc.; that are specified in the insurance policy.
Types of Title Insurance
There are two types of title insurance. One is the owner’s policy, which insures the new homeowner, and lender’s policy, which insures the lender’s security interest.
Owner’s Policy
The title insurance is purchased at closing, providing coverage for the homebuyers. It protects the homebuyers from:
- Errors or omissions in deeds
- Mistakes in examining records
- Forgery
- Undisclosed heirs
- etc.
It’s not a necessity to purchase owner’s title policy, but it can give a homebuyer a peace of mind.
Lender’s Policy
The title insurance is usually required to homebuyers when a lender issues a mortgage loan. It’s based on the dollar amount of the loan and protects the lender’s interest if there’s a problem with the title.
Title Insurance Cost
Title insurance is a one-time fee. It’s based on the home’s purchase price. There are factors that affect how much it will cost, which includes: State, Cost of the property, and the type of transaction (ex. purchase or refinance).
If you want to save on title insurance costs, you’ll need to:
- Shop around. Look for a company that offers the best deals.
- Bundle. Some companies will offer a discount if you bundle the lender’s and owner’s policies.
- Negotiate add-ons. Even though premiums are fixed, see if add-ons can be lowered.
Should You Have Title Insurance?
Mortgage lenders require homebuyers to purchase a lender’s title insurance policy. But for homebuyers to protect themselves from title issues, owner’s title insurance is essential.
If you don’t purchase the owner’s title insurance, and a title issue arises, you will be responsible for it, which can turnout to be costly. Even though the thought of purchasing the policy might be an inconvenience, it will last as long as you own the home.
A real estate purchase could be the largest investment you make. The best way to secure this investment is by purchasing an owner’s title insurance.
Need Assistance Finding Title
You can use ALTA Registry to find a title insurance company in your state. Always do your own research to see if the companies are trustworthy.
