The Complete Guide on Home Buying Title Insurance
Updated: Nov 5
Congratulations! You just found out that your offer on a home has been accepted. As you begin to move through all the paperwork and necessary steps for the closing in a couple of weeks, you may feel overwhelmed. A lot goes into buying a piece of real estate - getting the mortgage paperwork finalized, setting up inspections of the property, and making the decision regarding title insurance, to name a few. And if you are new to this process, you may not fully understand what it all means. For most new buyers? It comes down to title insurance. What is it? And is it really needed?
When buying your future home, you want everything to go as smoothly as possible. So, when it comes to making decisions about things like title insurance, you need to have a thorough understanding of what it is.
Here’s your complete guide on buying title insurance for a home.
What is Title Insurance?
Before your closing, a title clerk will perform a title search to review your property and make sure that it has a free and clear title. They are looking for things that could cloud the title or allow someone else to take this property. When a defect is discovered, it is disclosed and attempts are made to clear it from the title.
However, sometimes defects get missed. And when this happens, it can threaten the property owner and the lender, leading to great financial loss. It could even mean losing the property.
This is where title insurance comes in. Title insurance is an insurance policy designed to protect you - and the lender - from someone else claiming they have rights to your property or any other type of issue with the title that may arise.
Types of Title Insurance
There are two types of title insurance - lender’s title insurance and owner’s title insurance. Buying one does not protect the other should issues arise.
The lender’s title insurance policy is used to protect the lender from financial loss. They are fronting money for you to buy a property that is supposed to be clear from any defects - and you agree to pay that money back in the form of a mortgage. If you lose the property or lawsuits are filed against it due to an undisclosed defect, the lender wants to be protected. This is why you will likely hear that purchasing a lender’s title insurance policy is a condition for your loan.
When it comes to an owner’s title insurance policy, you have a lot more freedom. You don’t have to require yourself to get this policy, meaning that it is totally optional. But, it is something to consider since buying it for a one-time fee could protect you from any issues that arise for years to come.
How Long is Title Insurance Effective?
Title insurance is a one-time purchase that will never require you to make additional payments. Once that initial premium is paid at the time of closing and a policy is issued, your owner’s title insurance is effective for the length of time that you own the property.
If you were required to purchase a lender’s title insurance policy, that policy will remain in effect until the mortgage is paid in full.
Why You Need Title Insurance
Title agents do a very good job of digging and confirming whether titles are clear or not - and take steps to clear those deficiencies. But, there are moments when things either get missed, something was just too buried to uncover, or there was no record of it to be found in the first place. Fraud may have been committed in the previous sales transaction, heirs may have been omitted in the transfer of an estate, or back taxes or other debts could be tied to the property from the previous owners.
There are so many reasons things can go wrong no matter how right you hope they are. And, although it doesn’t happen every day, it can still happen.
One payment can protect your rights to your new property - and that’s why you need title insurance.
American Guardian Title is an Expert in Title Insurance
If you still have questions regarding title insurance, American Guardian Title has the answers. Call our office at (833) 331-8476 or contact us online. We’d love to walk you through the title insurance process wherever you are on your journey.