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What Is Title Insurance?
You've signed a purchase agreement and you're scheduled for a closing on the home of your dreams. Who wants to think about something as obscure as title insurance? Actually, you'd be foolish not to.
A title is a document that verifies your legal right to your new home. To make sure there are no past errors or legal entanglements that might effect your ownership rights, all properties are subject to a title search before closing. Sometimes however, a title problem will unexpectedly surface days, weeks or years later. If a problem does occur, you'll be glad to have the protection of title insurance. There are two kinds of title insurance: one that protects the lender (required) and one that protects you (optional).
Don't underestimate the importance of this coverage!
Lets take a hypothetical situation...
Elizabeth and John bought a home for $95,000, making a $20,000 down payment. Their lender held a $75,000 mortgage lien and required them to furnish title insurance to protect this interest. A month after closing, a relative of a previous owner made claim to the home... and the claim proved valid. The title insurer reimbursed the lender for his cost, and the mortgage note was then turned over to the title company. John and Elizabeth are out their $20,000 down payment, their equity in the property, their home - and they still owe the remaining balance of the mortgage!
Lender's Policy
- Mandatory for buyers to purchase
- Protects the mortgage lender
- Covers title defects, easement problems, judgments or liens
- Remains in effect until the mortgage is paid off
Owner's Policy
- Optional for buyer to purchase (a small investment for peace of mind)
- One-time premium
- Costs up to 1% of the property
- Protects you the buyer, against title defects, easements, judgments or liens
- Pays for court costs and fees associated with claims, plus any losses
- Covers you and your heirs forever, even after you sell the property
- Easiest way to transfer title when you sell
Potential Threats to Your Title
- Sudden appearance of unknown heirs
- Discovery of forgery, fraud or impersonation
- Evidence of unfiled deeds
- Discovery of unfiled or defective documents
- Liens for unpaid taxes or assessments
For more information on title insurance or current rates, please contact our title representative, Lyna Miller at Title Extra.
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