What Is Title Insurance
Title insurance is the type of insurance that protects homeowners and mortgage lenders against claims regarding the legal ownership of their home or property. In addition, the insurance policy covers legal fees in the event of title disputes after purchase.
Title insurance, unlike other types of insurance that cover future mishaps and are not designed to cover them for past title discrepancies or prior owners that may be discovered during or after the purchase process.
What Is Title Insurance?
The title insurance covers any issues that may have arisen with a property or home's title, which the title agency might not have noticed during the home-buying process. The title company conducts a public record search on every real estate transaction to verify that buying the property is free from liens and ownership disputes. This confirms that the seller is legally allowed to sell the property.
This process is usually smooth, but title insurance can be useful in the event of disputes. These are some of the most common title issues:
Forgeries of title
Back taxes
Filing errors
There are unknown heirs to this estate who claim ownership
Conflicting or inconsistent wills
Liens are often from unpaid contractor bills or home equity lines of credit (HELOCs).
Undocumented easements
What Are The Different Types Of Title Insurance?
There are two types of title insurance: owner's insurance (also known as buyer's insurance) and lender's insurance. Both provide the same protection, but they cover different parties with financial stakes in a property.
What Is The Lender's Insurance Title?
Title insurance is designed to protect your lender from any title claims that could put your home at risk. Title insurance is required by lenders almost every time a borrower applies for a loan. It is considered a closing expense.
What Is Owner's Insurance?
Owner's title insurance is designed to protect homeowners in the event of any claims regarding their home. Although it is not necessary in most cases, the owner's insurance policy is highly recommended. You can pay for it at closing. However, you might want to negotiate for it if you're buying a home.
What Is A Warranty On The Title?
If your lender does not require title insurance and you are purchasing home cash, you may request that the seller give you a warranty on the title. This will state that they are the only party entitled to the sale of the property.
What Is The Cost Of Title Insurance?
The cost of title insurance policies can range from $500 to $3,500 per policy. However, costs vary by provider. Costs can also vary depending on the property's location, the purchase price, and the extent of coverage. In addition, you may choose to add a restriction endorsement to protect your home from any HOA violations or subdivision violations.
The title insurance premium is a one-time fee that must be paid at closing. You may also be responsible for wire transfer fees and courier charges.
You can easily compare prices from different title insurance companies in many states. However, in certain states like Texas and Florida, all insurance companies must provide the same level of coverage at the same cost. This means that shopping around is not possible.
What Title Insurance Do I Need?
It all depends on the transaction. Buyers aren't required to have their policies in most cases. However, you can still get title insurance to help protect you from future legal costs.
Let's say you buy a house and discover six months later that there was a lien from a contractor for $40,000. You might have to pay the lien to clear your title or pay legal fees.
How To Choose The Right Title Company
Choose a title company that is highly recommended by family members, friends, lenders, or agents. It is also worth looking at the number of transactions completed, years of experience, and reviews online from past clients.
Who Pays For Title Coverage?
As a closing cost, typically, the buyer pays for title insurance from their lender. The seller often pays for the owner's title insurance, which is usually not required.
