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Do I need Title Insurance

When you buy a home, there are a lot of fees and costs associated with the purchase – it’s not as simple as just writing a check from your mortgage lender to the seller. One of the costs you’ll see as you approach the closing process is Title Insurance. Unique to home ownership, title insurance is an extra layer of protection for the buyer. While there are a few that recommend saving the money, choosing to purchase title insurance is a smart move and one that you should not skip.

What is Title Insurance?

Do I need Title InsuranceTitle insurance protects you, the buyer, from losing your investment (the down payment and the loan for your new house) in case there are any liens or defects with the house title. Although the real estate company and your mortgage lender will run title searches, sometimes things are missed. When you purchase title insurance, is the house title is fraudulent, or if there are charges taken out against the house.

For instance, of the previous homeowner had some remodeling or repairs done on the house, and didn’t fully pay the contractor, the contractor will take out a lien on the house. This is a judgment of fees owed to the contractor, that must be settled before the title can change hands. Basically, it forces the potential seller to pay their debts before they can sell the property. If the seller owes back taxes on the property, then a tax lien will be taken out on the property. The same thing applies – in order for the seller to complete the closing transaction, the tax fees must be paid.

Title Insurance ensures that the title insurance company, not you the buyer, will be responsible for settling these debts. Typically, title companies require the seller to settle these debts prior to closing, so that the title is free and clear.

Why should a buyer purchase title insurance?

Mortgage lenders are required by law to have title insurance for the homes that they approve loans. A buyer may choose to purchase their own separate insurance. So, if the lender already has the insurance, what are the advantages of a buyer purchasing their own policy?

  • If there is an issue before or after closing with the home, you are personally protected from prior liens. The title company will be responsible for taking care of the debts.
  • If there are errors or fraudulent aspects to the title, or if it hasn’t been properly reported to public records, then you are protected.
  • If the previous owners’ heirs show up and lodge a claim against the property, you, the buyer, are protected.

There is also an extended coverage option, which covers building permit violations, or structural damage. It also protects against zoning issues and incorrect survey. If a lawsuit is filed due to these, the extended coverage covers your down payment, and principal payments you’ve made, and any additional work or improvements you’ve made on the property.

If you have doubts about the security of your home title, especially if you plan to do extensive remodeling and renovations – investing more of your money on top of the purchase price – then you should definitely purchase title insurance. Typically, it costs around $2 for every thousand of the selling price, and that small investment is usually worth it for the buyer’s peace of mind.

Title Problems New Homeowners Can Run Into

Title Problems New Homeowners Can Run IntoTitle problems have a tendency of showing up during the title search and after the closing. This is the time that most homeowners would hope that their title insurance policy would help them in solving some of the problems they have. And subject to the policy terms, you can use your title insurance to get protection from the problems that might come to light after you have sealed the deal. It is very important to avoid the problems connected with the title before the closing. You can only understand the title problems if you have any idea of what a title may mean. The title, in simple terms, is evidence that shows that an owner is in full and lawful possession of a particular piece of property or real estate. Owning a deed to a property means owning the property.

Here are four undiscovered title problems that can cause new homeowners a difficult time.

Errors in Public Records

It is usually said that to err is human, but these mistakes can be very devastating when they particularly affect the rights of home ownership. Errors to do with filling or clerical could greatly affect the survey of the deed of your property and in turn, bring undue financial strain in a bid to fix them.

Illegal Deeds

Despite the fact that the chain of title on your property may look right, there are chances that a prior deed might have been done by either a minor, undocumented immigrant or an individual of unsound mind. Possibly, it could also have been made by a person who is reported to be single but is actually married in the real sense. Any of such situations may interfere with the enforceability of the previous deeds, and in turn, affects both the prior and present ownership.

Undiscovered Encumbrances

When it comes to taking an ownership of a particular home, three can be mostly referred to as a crowd. When buying the house, it could be unclear to you that another person may posses the claim to either a proportion or all of your property. This may occur as a result of a previous lien or mortgage, or other claims that are not financially related such as covenants or restrictions that places certain barriers to how the property should be used.

Undiscovered Wills

When the owner of a property passes on without a clearly prepared will or heir, the state may be forced to sell their assets. This may even include the home they have been living in. When you go ahead and buy such property, you immediately assume the rights of owning it, and therefore it becomes yours legally. However, an unexpected may happen even years later after you had taken up ownership of the house. When, for instance, the will of the deceased owner of the house comes to light, your rights to own the property may be in a stake.

These and most of other issues that are not covered in this article are mostly taken care of by the owner’s policy of the title insurance. When you purchase a home, your immediate responsibility should be to use a title insurance to protect that particular investment. To learn more, get in touch with us!