Everything You Need to Know About Title Insurance
Title insurance seems like just another expense that’s added to your mortgage. But it actually provides some very important benefits to homeowners. In this article, we’ll answer the 6 most common questions about title insurance.
If you’ve ever shopped for a mortgage or bought a house, chances are good that you’ve also bought one or two kinds of title insurance or paid for a title search. Why is this part of the process? What does title insurance protect you against? Let’s answer those questions.
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Top 6 Questions About Title Insurance
1. What Is Title Insurance?
As the name suggests, title insurance insures the title of your home or property against certain problems that happened before you bought it. If an expensive problem surfaces after you’ve completed the purchase (e.g. back taxes are owed on that property), you’re off the financial hook.
There are two types of title insurance:
- Owner’s insurance protects you, the home buyer/owner.
- Lender’s insurance protects your mortgage lender.
We’ll go into more detail on the differences between owner’s and lender’s title insurance as we answer the other questions.
2. What Does Title Insurance Cover?
Title insurance protects you against things that can interfere with your ownership or use of the property. Common title issues include the aforementioned back taxes (which you, as the current owner, would have to pay), fraudulent sales, liens and other claims against the property, survey errors, encroachments, document errors, boundary disputes, easements, building code violations, and conflicting wills.
It’s important to note that title insurance only protects you against past issues – anything that happened before you bought the property. If you choose not to pay property taxes or if you have a lien filed against your property after you buy it, title insurance won’t help you.
3. When Is Title Insurance Important?
Although most lenders require a title search (an in-depth examination of public records related to that property) before they’ll finance a loan, this search may not find all the potential errors. Owner’s insurance protects you from having to pay for such claims, while lender’s insurance insures the lender against loss. Often, a lender will require that you purchase enough title insurance to cover the mortgage principal (the amount you owe).
4. Who Buys Title Insurance?
The home owner/buyer must purchase the title insurance. The actual price will depend on the location and value of the property.
5. How Long Do I Need Title Insurance?
Owner’s title insurance is a one-time purchase that lasts for as long as you own that property. Lender’s title insurance only covers the mortgage amount; coverage decreases as the principal decreases and eventually ends once the mortgage is paid (i.e. once the lender’s financial investment has been paid off).
6. Where Do I Get Title Insurance?
You get it from a title company (like AmeriTitle). We’ll perform a title search, disclose any problems we find, and then work with underwriters to create a title insurance policy.
Got More Title Insurance Questions?
We’re happy to help! Contact AmeriTitle today and let’s find your answers!
