Buying a home is one of the biggest investments most people will ever make. Between securing financing, scheduling inspections, and signing stacks of paperwork, it is easy to overlook one of the most important parts of the process: title insurance. While it may not sound exciting, title insurance can protect you from costly problems long after you close on your new home.
So, what exactly is title insurance?
A title is the legal record that proves ownership of a property. Before a home is sold, a title company researches the property’s history to make sure the seller truly owns it and has the right to sell it. During this title search, the company looks for any issues that could affect your ownership.
Some common title problems include:
- Unpaid property taxes
- Outstanding liens from contractors or creditors
- Errors in public records
- Boundary disputes
- Unknown heirs claiming ownership
- Forged or fraudulent documents
- Mistakes in previous deeds
Even with a thorough title search, some problems can remain hidden until after closing. That is where title insurance comes in.
Title insurance is a one-time policy purchased at closing that protects you against certain legal and financial issues tied to the property’s past. Unlike homeowners insurance, which protects against future events like fire or storm damage, title insurance protects against issues that already existed before you bought the home.
There are typically two types of title insurance:
lender’s title insurance and owner’s title insurance.
Lender’s title insurance is usually required by your mortgage company. It protects the lender’s investment if a title issue is discovered. However, it does not protect you as the buyer.
Owner’s title insurance is optional in many states, but it is highly recommended. This policy protects your financial interest in the property. If someone later claims they have a legal right to your home or if an old lien surfaces, your owner’s policy can help cover legal fees, losses, and other related costs.
For example, imagine you purchase a home and move in without any issues. Six months later, you discover the previous owner never paid a contractor for a major renovation. The contractor files a lien against the property, meaning you could be responsible for paying the debt. Without owner’s title insurance, you may have to pay thousands of dollars out of pocket. With title insurance, your policy may cover the cost.
The best part is that owner’s title insurance is usually a one-time expense paid at closing, and the coverage lasts as long as you own the home.
When you are already spending money on a down payment, inspections, and moving costs, it can be tempting to skip optional expenses. But title insurance offers peace of mind and valuable protection for one of the biggest purchases of your life. Before you close on your next home, make sure you understand your title insurance options and choose the coverage that protects you best.
Posted by Lauren Johnson onEnjoy this blog post? Click here to subscribe for updates
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