You’re forgiven for thinking that insurance is the least exciting matter related to buying a home. However, title insurance is critical to establishing peace of mind as a homeowner.
When you buy a house, you take title to the property and establish legal ownership—confirmed by local public land records. As part of the closing procedure, your lender will require a title search, and you’ll need to purchase name insurance that covers your property.
- Potential title problems
Part of your settlement process will be to have a title search conducted by employees of your title or resolution company through local property records. Some of the issues they’re looking for comprise the following:
• Disputes between prior owners over wills: If your property was inherited and then sold through the heirs, there could be other heirs contesting the wil.
•Liens for unpaid home taxes. Liens for contractors who worked on the home but were never paid.
•Clerical problems in courthouse documents: Believe it or not, a easy typo may lead to title claim problems.
•Fraudulent claims against the property or forged signatures: For instance, if a group of heirs can’t get a holdout to agree to sell the home.
Lender’s Title Insurance and Owner’s Title Insurance
Although as the purchaser you pay for the lender’s title insurance premium, that policy only covers the lender in the case of a claim against the name. The policy pays for the expense of researching a claim and any court costs incurred due to the dispute.
Your title corporation will offer you owner’s title insurance in addition to the lender’s policy. In several states, owner’s insurance is optional. In most areas, it’s common for buyers to purchase owner’s title insurance, but in several areas it’s more common for the seller to buy the policy.
Owner’s title insurance is recommended, because lender’s insurance won’t defend you personally if the insurance company loses a battle over legal title. You’d be compulsory to pay for the continued fight over the title and could lose your investment in the property.
Shopping for title insurance
Unlike other types of insurance, title insurance is paid with a particular premium at your closing. If you’re buying a resale or refinancing, you may be eligible for a reissue rate, which could offer a considerable discount off the usual premium—because the title policy is already in effect, and the title research has already been done.
In several states, title insurance premiums are the same no substance who you work with, but in the majority of states, you may save money by shopping around.