Title Insurance
Title insurance is an insurance policy that protects homeowners and lenders from financial losses caused by title defects. A title defect is anything that could cloud or challenge the ownership of a property. Title defects can include things like outstanding liens, unpaid taxes, forged deeds, and easements. Some common examples of title defects include:
- Liens, such as mortgages, judgments, or unpaid taxes
- Other liens, such as a mechanic’s lien or judgment lien
- Easements or encroachments
- Unpaid taxes
- Errors in public records
- Fraudulent Documents
- Covenants and restrictions
Title insurance is not required by law, but most lenders now require that sellers to provide an owner’s title policy to the buyer and that borrowers purchase a lender’s title insurance policy when they buy real estate. This policy protects the lender’s interest in the property until the loan is paid off.
Title insurance is typically purchased when real estate is purchased or refinanced. The cost of title insurance is a one-time premium that is paid at closing. There are two types of title insurance: lender’s title insurance and owner’s title insurance.
- Lender’s title insurance protects the lender’s interest in the property. If a title defect is discovered, the lender’s title insurance policy will pay to defend the lender’s title or to compensate the lender for any losses.
- Owner’s title insurance protects the homeowner’s interest in the property. If a title defect is discovered, the owner’s title insurance policy will pay to defend the homeowner’s title or to compensate the homeowner for any losses.
Title insurance is an important part of the real estate buying process. It can help to protect homeowners and lenders from financial losses caused by title defects.
If a title defect is discovered after closing, the title insurance company will defend the homeowner or lender against the claim. If the claim is successful, the title insurance company will pay for the financial losses up to the amount of the policy.
If you are buying a home, it is important to talk to your real estate agent and lender about title insurance. They can help you understand the different types of title insurance policies and decide if one is right for you.
