The home buying experience can be an overwhelming experience that can be exhilarating, fun, stressful and exhausting. The process of securing a mortgage, successfully bidding on a home and completing the transaction can be lengthy, complex and involve seemingly endless professionals. Those professionals may include a buyer’s agent, a loan officer, a home inspector, title […]
Do I need title insurance?
You may be asking yourself if you need title insurance. The short answer? Yes. Title insurance gives you an extra layer of security against fraud and claims.Homeowners, sellers, buyers, and lenders are responsible for ensuring that the property belongs to the appropriate party and is free of defects. This is where title insurance comes in.
Title insurance protects you and your lender from fraud
There are two types of title insurance: lender’s policy and owner’s policy. These policies protect buyers and lenders against the following property title issues:
- Fraud or Forgery
- Undisclosed Heirs
- Spousal claims
Title insurance helps lenders and homeowners guarantee a good and marketable title. If a third party makes a claim, title insurance provides evidence of a marketable title, along with:
- Abstract of title: A document that details a brief history of the land and features information like encumbrances, conveyances, wills, liens, grants, and transfers.
- Certificate of title: A document issued by the government that shows proof of ownership of a property. This document includes information like the name of the owners or title holders, a description of the property, and the lienholder’s information, if applicable
- Warranty of title: A guarantee from the seller to the buyer that the seller has the right to sell the property and transfer its ownership, and that no one else has rights to the property.
If you’re getting a mortgage on your home, title insurance is required. If you are selling, title insurance helps assure buyers that the title to your home is good. Owner’s policy is optional and is designed to protect your equity in the property should a claim be made.
Title insurance is paid upon closing
If you’re concerned about another monthly homeowner expense, title insurance is often paid at closing as a lump sum as a one-time cost. Remember to review all closing costs to ensure accuracy carefully.
Research title companies before choosing
You have the right to choose the title company that will provide your insurance. Not only will this help prevent confusion with the previous owner, but help prevent overpaying. To choose your title company, look at their reputation, fees, professional experience, and where they’re located.
Be sure to ask questions like, “How do you protect against identity theft and wire fraud?” Have them clearly explain what they do and what is expected of you. Your lender also works with a lot of title companies, and should be able to clarify some terminology as well as what is and isn’t normal.
The above information is for educational purposes only. All information, loan programs and interest rates are subject to change without notice. All loans subject to underwriter approval. Terms and conditions apply. Always consult an accountant or tax advisor for full eligibility requirements on tax deduction.