
There is no denying that buying a home is one of the biggest financial decisions you will ever make. For many, it may very well be the biggest decision. Yet, it is an exciting milestone that you will not want to miss out on — albeit, a little nerve-wracking, too.
See, when you buy a home, you are not just buying a house, but rather the right to own that house. This right is known as the title. And title insurance protects it.
Let’s take a closer look at title insurance in real estate.
The Title: What is It?
If you pay attention, you will notice that the word ‘title’ gets thrown around a lot when working your way through a real estate transaction. It refers to a legal right of ownership to the property that contains information on past ownership, any transfers, and any liens or other claims against the property. In other words, the title to a property carries its legal history.
To ensure that the title to your new home doesn’t have any unwanted claims attached to it, your title company will perform a title search— an extensive deep dive into public records. This is to ensure that the title is clear and that there will be no issues when it comes to your rights.
Title examiners are looking for things like:
Liens or outstanding debts, such as unpaid taxes, judgments, HOA fees, etc.
Encumbrances that may limit or restrict how you can use your new property, including easements and rights of way
Fraud or forgery, such as instances of falsified documents or signatures in past transactions. Does the seller even have the legal right to sell the property?
Ownership disputes, including any conflicting claims to the property by the previous owners or heirs, will need to be cleared up before moving forward.
Title searches are in-depth. However, they are not fail-proof. Some title issues may not be uncovered and may not appear until well after you take ownership. Thankfully, title insurance can protect you.
How Title Insurance Works
Title insurance protects against past events. It safeguards your financial interest in the property should a title defect arise after you have become the owner. Unfortunately, clerical errors in public records, undiscovered wills and heirs, and even forgeries or fraud can go undetected until it's too late. But, for one premium payment at closing, you can be covered for as long as you or your heirs have an interest in the property. Keep in mind that the details of the coverage may vary, but most policies protect against financial loss, including the cost of legal fees. The goal is always to resolve the title issue so that you remain in your home. That’s what they work toward.
Two main types of title insurance include lenders and owners.
The lender’s title insurance protects the lender’s investment in the property. They are taking a risk in giving you a loan and want to make sure doing so has a few safeguards. This is why they will almost always require you to purchase a lender’s policy at closing. As the loan is paid off, the coverage decreases. This type of policy only protects the lender.
An owner’s title insurance policy protects the buyer’s ownership rights. It is often optional, but highly recommended. After all, without it, a title defect could lead to a catastrophic loss. If you want to be protected, you will need an owner’s policy in addition to a lender’s policy.
Protect Your Future with Title Insurance
Title insurance is a small investment with big protection. At Blue Pointe Title Agency, we will work with you to uncover your options and secure your homeownership now — and in the future.
Contact us today to get started!
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