After the application of a home loan, you will receive two documents, a loan estimate, and closing disclosure. On the surface, these documents are identical but they both serve slightly different purposes. Up Next: Expenses To Expect In The First Year Of Homeownership Here is what you need to know about the differences between these […]
Understanding & Buying Title Insurance
As a homeowner, you’ve probably heard of title insurance. But what is it and do you really need it? In short, yes. It is highly recommended that you get title insurance, since it will protect you from outside ownership claims. Here’s what you need to know:
Title Insurance is Often Required
Title insurance is “insurance that covers the loss on an interest in a property due to legal defects.” If you have a mortgage on your home, you will be required to buy title insurance because it protects against poor record keeping like errors in a title report or an unrecorded lien.
If you are planning to sell your home in the future, it’s important that you get title insurance. For one, it helps a buyer know that the property they want to buy has a good and marketable title. It also assures them that no one else has claims on the house like an ex-spouse. You must remember that title insurance is not the same as a warranty of title.
Use Caution When Buying Title Insurance
Even though title insurance is required by your lender, you still have to shop around for the title insurance that’s best for you. Sometimes, buyers get title insurance as part of their closing costs but that can be expensive—especially if they go with the company the seller recommends. That’s why it’s recommended that you choose your own title company.
Make Sure You Choose the Title Company
When you purchase title insurance, you have the right to select the company it will come from. Purchase from a company that is different than that of your home’s previous owner. The reason being, many companies only search for summaries of a title record and not the actual record. This can cause confusion if researchers look back at past records and mistake the previous owner’s records for yours. Buyers have been known to lose their homes thanks to this kind of mistake. So get your title insurance from a different company so you can have a clean slate.