The Ins and Outs of Title Insurance
There are a number of different steps you will have to go through to finalize the purchase of your new home. Purchasing title insurance is one of the rather unfamiliar steps, but is vitally important. Title insurance is there to protect you and your lender from sticky legal situations that involve claims to ownership of the property that you are buying. A title is the document that gives you ownership and it is key that your title is “clear” or does not have other claims against it like a liens, easements or unknown owners.
There are some interesting situations that can occur during the home buying process that make it necessary to have title insurance to protect yourself and your lender. On the most extreme end of the scale is criminal activity like home selling scams where a property is deliberately sold by people who don’t have legal ownership. More typical are issues that have to do with wills that are out of date and questions regarding inheritance and who actually owns, and can sell a house; cosigners for a seller such as in cases of divorce; or liens, or legal debts against a property that need to be paid from the proceeds of a sale.
Purchasing title insurance is carried out soon after you sign the purchase agreement on your new home. Your closing attorney and real estate professional will guide you through this process.
Title insurance is a combination of two policies; one for the lender and the other for the borrower. Your lender wants to make sure that the loan it is providing is for a legitimate and legal transaction. You will not be given a loan unless you have lender’s title insurance, also called a mortgagee’s policy, that covers the amount of the mortgage.
You will also purchase an Owner’s Policy of Title Insurance. This policy covers your legal fees and possible losses including financial coverage if you lose your home due to a title dispute. Even if this policy is not required by your lender, it is worthwhile to purchase. It will protect you from problems that can occur during the sale but also questions regarding ownership that could crop up in the future. Make sure that it covers the full sales price of your home and includes an inflation rider as your home value increases.
Contact me if you need help understanding more fully the need for title insurance and how to take care of purchasing these policies.
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