What is title insurance?
Title insurance protects the homeowner’s or a lender’s financial interest in real property against loss due to title defects, liens or other matters.
Why do I need title insurance?
When purchasing a home, title insurance protects your ownership of your new home. Problems with the title can affect property ownership and cause financial issues. Title insurance covers the insured party for any claims and legal fees that arise out of these problems.
What is a title search?
Title professionals conduct a title search to make sure any outstanding matters won’t affect your title. A title search is performed on recorded documents such as: judgments, liens, general taxes, utility assessments, special taxes, and levies. If any issues with the title are found, your title company works to remedy any problems that could keep you from having “clear” title.
What events can affect a title?
It’s important to stay informed before you purchase a home. Over the years, with each new possession of a property, events can take place that affect the title. Here are some examples:
- An encroachment by a neighbor
- Death of an owner
A tax lien can affect your title if you are thinking of selling your home and purchasing a new one. If a lien is found when a title search is conducted, a lender will not approve the buyer’s mortgage.
When you refinance your mortgage, a new loan insurance policy insuring the new mortgage will be required. The old policy insured the old mortgage, which will be obsolete when the new mortgage is recorded. A title search will take place with your new mortgage to determine if there have been any liens, encumbrances, or transfers of interest regarding the property since the earlier mortgage. Your new policy will ensure that the old mortgage has been released and that the new mortgage is an enforceable first lien against the property as of the new effective date.
Unpaid bills by a previous owner
A previous owner may have had construction done to the home, but never fully paid the contractor performing the work. Title professionals identify this unpaid bill so that it can be resolved by the previous owner before you take ownership. If it isn’t, you might very well be responsible for this payment as the new owner.
What are the different types of Title Insurance?
An Owner’s Policy is assurance that your title company will stand behind you if a title problem arises after you buy your home. Receiving an Owner’s Policy isn’t always an automatic part of the closing process, so be sure to request one. Without an Owner’s Policy, you could be liable for costs and legal fees, even if you prevail in a legal action.
A Lender’s policy covers the financial investment of your lender. Lenders rely on title professionals to ensure that they won’t be impacted by unforeseen title problems that could affect them.
Have more questions about title insurance? Let us know, we can help. Contact us.