Everybody needs title insurance when they're applying for a home loan, but before you sign up for one try to learn about your options.
If you're brand spanking new in the world of real estate and you don't know your title insurance from your real estate taxes, then read on. Title insurance is an insurance policy that protects you from any title problems of your home or from any challenges in ownership. It is just among the many requirements you need to get for a housing loan. It's either you purchase your title or you don't get a loan at all.
The Benefits of Title Insurance
When you're acquiring a home, you'd like to have the peace of mind that the sellers of your dream house have full and legal title of the property. The realtor who is closing the deal is responsible for checking the records and history ownership of the house. But the bad news is even if your realtor has completely done his research it's possible that those records may have been recorded wrong. Title insurance protects your home ownership from a lot or risks. This includes:
- Protection from another person having interests on your home
- Zoning - When your home does not comply with local or municipal zoning laws
- Someone trying to acquire your home through forgery or fraud
- Impingements or easements brought out by a new survey
What Does Title Insurance Cover?
There are lots of unique and sometimes crazy legal battles over houses, and such legal issues can cloud titles and none of the parties (the lender or the owners) would want a property with a cloudy ownership situation. Here are some options that you may need to look into before you sign up for title insurance:
- Owner's coverage - this coverage allows you to have an "inflation rider." This means that as the value of your home goes up, so does the value of your coverage. Another feature of the owner's coverage is that it protects your equity.
- Lender's coverage is required and generally provides protection as high as the original mortgage amount. For example, if you get a $250,000 mortgage on a $300,000 home then you can get as much as $250,000 on your policy. With this policy, the insurer will fight on your behalf if there's any claim and you won't need to pay the lender a single penny if you lose in court.
Questions to Ask When Getting Title Insurance
So, when you're looking at options for title insurance, what questions should you ask from your real estate agent or finance company? Here are a few ideas to get you started.
- How Much Coverage Do I Need - A good agent or finance officer will be happy to discuss your needs and help you decide on the correct amount of insurance for your purchase.
- Who Pays for Coverage - There are actually two types of coverage, one paid for by the buyer and one by the lender—usually. However, this may be negotiable, so it doesn't hurt to ask.
- Does the Seller “Push” a Company - If the seller is pushing a specific company, you have reason to wonder why. If you're paying for the insurance, you have a right to choose the title insurance company.
Speak to a title insurance specialist today or consult with your real estate agent to determine what type of title insurance is the right choice for you.
By Justin Havre