According to wealthymillionaire.com, title insurance is essentially a fee that must be paid at closing when a mortgage is being taken out. This type of insurance is a one-time charge premium designed to protect the lender. The owner’s title insurance can also be purchased to protect yourself.
A document known as a “title” is received when you purchase the property. It states your rights as a homeowner and provides proof that the previous owner transferred the property to you. These rights are protected by title insurance against ownership challenges from any third party. Additionally, title insurance covers any financial loss caused by title defects. Defects can take place at any time, even after years of peaceful ownership.
Prior to closing on a mortgage, it is necessary to have a clear title. This indicates that the seller and existing owner have total property ownership that can be transferred to you.
A title search will be ordered by your mortgage lender; this is basically a review of public records associated with the property. The purpose of the search is to assist in determining and confirming the legal owner of the property. Furthermore, the search helps in uncovering any defects, like liens or encumbrances, which could impact future property rights. If a problem is revealed by the title search, an attempt will be made by the title company to resolve it. However, there are some significant issues that could completely derail the sale of the property.
If the title search does not uncover any title defect or problem, purchasing title insurance is still necessary. This is because title searches are not without fault. Issues not yet discovered could surface later and put the ownership of the property into dispute. This puts you at risk of financial loss. This is why title protection is needed even years after buying your home.
Categories of Title Insurance
This type of insurance is not a monthly premium that is added to your mortgage payments. Instead, it is a one-time fee paid upfront. The two kinds of title insurance are:
- Lender’s Title Insurance
A title insurance policy is required by lenders as it safeguards the lender against financial loss. This insurance is non-negotiable and has to be purchased when a mortgage is taken out. It is also required for refinancing.
- Owner’s Title Insurance
This is optional insurance that safeguards the home buyer’s equity in the property. Furthermore, it covers the right of the buyer to reside in the home even if a claim comes up after the purchase.
Title Insurance Protection
There are many reasons why your title or homeownership could be disputed. This could result in you losing possession of your home. These issues include:
- Fraud
- An error by the title company
- A blunder in the ownership history
- A previously unknown heir
- A legal judgment or pending lawsuit
Below are some of the things the owner’s title insurance safeguards against:
- Boundary disputes
- Survey errors
- Property deed errors
- Unpaid property taxes
- Conflicting wills
- Encroachments
- Forge power of attorney
- Forgery and fraud
- Third-party ownership claim
- Encumbrances
- Flawed records
As the person buying the property, the owner’s title insurance safeguards you for as long as you have interests in or own the property.
What Is the Cost of Title Insurance?
According to wealthymillionaire.com, there are times when a homebuyer can negotiate for the seller to be the one responsible for paying the cost of the title insurance. Even when the buyer has to pay the cost, the policy is not excessively pricey. The fee for title insurance ranges from $500 to $4,000. The cost depends on the purchase price of the home, the state, and the insurance provider.
Texas is one of the states that regulate insurance rates. As such, there might not be a major difference in cost among insurers. However, in other states, title insurance could be a considerable closing cost.
RESPA forbids requirements by sellers to buy from a particular insurer as a means of preventing extortion. A listing of local title insurance providers must be provided by the lenders. Additionally, the buyer is not limited to that list. He or she can shop around to get the best coverage at a reasonable cost.
Information on EPA Endorsement Title Insurance
EPA Endorsement is essentially ALTA’s Environmental Protection Lien. The authorization safeguards the insured against losses that occur on their residential property. However, the losses have to stem from environmental liens that are not acknowledged as exemptions to the title policy.
Information on ALTA Homeowner’s Policy of Title Insurance
There are two of these insurance policies: the homeowner’s policy and the owner’s policy. The owner’s policy safeguards against title liens and defects. The protection will last from the history of the title to when it became public records.
Homeowners policies provide coverage for added consequences, which could occur even after the recording of the deed. This type of policy safeguards you so long as you or your heirs own or have an interest in the purchased property.
Conclusion
According to wealthymillionaire.com, title insurance is a largely obscure and underutilized policy that safeguards against losses that result from title defects. Policies are particular to the state; however, the concept of this type of insurance remains. It seeks to safeguard against losses that both the buyer and seller may encounter due to defective or undisclosed titles.
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