What is title insurance?
It is protection against loss if a covered defect is found in your title. When you buy a home, you are given a title to the property, which generally means you receive full legal ownership. But sometimes there’s a hidden mistake in a prior deed, will, or mortgage that may give someone else a valid legal claim against your property.
Why is title insurance important?
It is important because it provides a “safety fence” around your property. Having title insurance can save you money, time, trouble, and even your home.
Who is covered by title insurance?
The lender is covered. When you buy property, you are commonly required to buy title insurance. This may be called a “loan policy” or a “lender’s policy.” It covers the outstanding balance on the mortgage for the lender but does not protect you.When acquiring property, it’s a good idea to get your own title insurance policy. This is called an “owner’s policy.” It will give you peace of mind and maximum protection in case there is a claim against your home
What is the title search?
This is the first step in obtaining title insurance. It’s a detailed examination of the historical records concerning the property. These include deeds, civil and probate court records, and tax records. The purpose of the search is to verify the seller’s right to transfer ownership and to discover any claims, errors, assessments, debts, or other burdens or restrictions on the property. A title search is carried out by a lawyer, title insurance company, or other specialist. In some cases, the title searcher prepares an Abstract, a condensed legal history of all transactions affecting the property.
What happens at the closing?
Ownership of the property is transferred, title insurance is issued, and coverage begins. Closing costs usually add up to 3% or more of the purchase price. Depending on state and local laws, you may have to pay:
- Title costs – fees for the title search and the lender’s title insurance; your own title insurance is an additional fee
- Settlement fees – fees for the lender’s agent, usually a lawyer or a title or escrow company representative; you may want your own lawyer in addition
- Loan charges – including origination, appraisal, and survey fees
- Taxes and government fees – transfer taxes, buyer’s share of yearly property taxes
Before you close, review the HUD-1 Settlement Statement, which provides an itemized list of all closing costs. Be sure you understand them. It is protection against loss if a covered defect is found in your title. When you buy a home, you are given a title to the property, which generally means you receive full legal ownership. But sometimes there’s a hidden mistake in a prior deed, will, or mortgage that may give someone else a valid legal claim against your property.
Who is present at the closing?
You, the seller, the lender’s agent, and agents representing you and/or the seller may all be present.
How much does title insurance cost?
You pay a one-time premium based on the price of your property. Costs vary from state to state. Check with your lender, attorney, or title company for costs in your area. In some areas, title insurance costs are shared by buyer and seller.
What happens if a claim is made against me?
Claims are rare, but if one is made against you, you should notify the title insurance company at once in writing. Include with the letter a copy of all related letters and documents. The company will negotiate with the other party to settle the claim, defend your title in court if necessary, satisfy any covered claim for which it is responsible, and pay legal costs incurred in defending the title.