When you’re in the process of buying a home, you’ll hear new terms flying past you right and left. PMI, points and contingencies — it can be totally overwhelming! While I can’t clear up all of those terms in one blog, I can help you understand one — title insurance. Here are 9 things you should know:
- A title is the owner’s right to own and use a piece of property. FindLaw says, “Although the idea of legal title can be applied to anything, people most often use it in reference to real estate and automobiles, because those are substantial purchases which can have complicated ownership arrangements.”
- Yes, you do need to have a title search done prior to purchasing insurance. A thorough search inspects the history of ownership on the property. Title searches can uncover liens, easements, limitations and, most importantly, if anyone else can claim rights to the property. You want a thorough title search completed to make sure you will rightfully be able to claim full ownership upon purchase.
- You need title insurance. This isn’t a step you should skip. Title insurance can protect you from potentially large debts. (For details, keep reading!)
- Title insurance covers the time up until you purchased the property. This insurance is unlike most policies in that you aren’t buying it to prepare for the future. You’re purchasing this to protect you from past events on the property. Generally, title insurance won’t cover anything after the purchase date, but if five years after purchase you find that back taxes are owed on the property, you should be covered under your title insurance and not liable for the money owed.
- You could be a victim of fraud if you don’t get it. A seller could attempt to sell you a home that he or she doesn’t actually own. Without a title search and insurance, this could be your worst nightmare.
- Your closing agent can help you obtain title insurance. Closing agents typically get the ball rolling and choose your title insurance company. You do have the right to choose your own title insurance company, though, so speak up if you have a preference!
- You need a lender’s policy. These policies are a lender’s policy and a borrower’s policy. When you take a mortgage loan, lenders require you to purchase a policy that will cover their legal defense costs and reimburse them for any missed payments should another party claim the house as their own.
- You also need a borrower’s policy. Your lender requires the borrower’s policy to cover your own fees and losses to protect them additionally from loss. Remember, even if you aren’t required to have your own policy, it’s a good idea to purchase on anyway.
- Your realtor or mortgage lender is there to answer your questions. No question is silly when purchasing a home. If the title insurance process is confusing to you in any way, your realtor and mortgage lender are there to support you.
For answers to your title insurance questions and more, contact me! I build strong relationships with my clients and am here to support you through every step of the home-buying process.