When you make the move to purchase a piece of property, you will encounter a lot of new things - including new terms. One you may hear quite often is title insurance. Taking the time to understand what it is, how it impacts you, and who pays for it, can benefit you in the future.
Let’s talk about it.
What is Title Insurance?
Buying a new property warrants a title search. This is a deep dive into the history of the property that confirms the seller has the right to sell it - and that there are no issues with the title. Experienced title examiners will comb through all the public records that relate to the property, making note of anything that clouds this title, such as judgments, liens, outstanding mortgages, bankruptcies, easements, encroachments, and more. Each of these items will need to be addressed before the closing can take place.
When the file is cleared to close, the title company will offer you a title insurance policy.
Types of Title Insurance
An owner’s title insurance policy is one that protects the owner (and heirs) from any threats to the title. This is always highly recommended by title agents but is not required. A lender’s title insurance policy is one that provides protection for the lender.
Because they are giving you the money to purchase the property, the lender wants to ensure that nothing is going to get in the way of them getting their money back. Therefore, the clear title search will let them know they are in the first lien holder position - and the title insurance policy will make sure nothing jeopardizes this.
Who Pays for Lender’s Title Insurance?
It can vary from one state to the next as to who is responsible for paying for title insurance - especially when it comes to an owner’s title policy. However, when it pertains to lender’s title insurance, the purchase is most often the responsibility of the new home buyer. Keep in mind that this is only customary and can be negotiated between both parties involved in the real estate transaction.
The title insurance fee becomes part of the settlement costs that will ultimately have to be paid at the closing.
It should be noted that unlike other types of insurance, such as health and car insurance, lender’s title insurance must only be paid once at the closing. The title insurance policy will then remain in effect until the mortgage or loan is satisfied.
Learn More About Title Insurance
At Endeavor Title, we put our experience to work for you. We understand that going through the home-buying process can be exciting, but a little overwhelming, too. That’s why we want to make sure you understand what’s happening at every step along the way - especially when it comes to title insurance.
Learn more about title insurance today. Contact us today at (410) 666-3780.