A
title insurance policy can be a vitally important tool if a title is discovered to be impaired in any way after a piece of real estate is purchased. While owners are not usually required to purchase title insurance for themselves, it can save a lot of headaches in the future. For the price, an owner’s title insurance policy provides a lot of coverage, since the policy lasts as long as the owner and his or her heirs have an interest in the property.
While buying an owner’s title insurance policy is optional, a lender’s title insurance policy is usually necessary because traditional mortgage lenders will not provide a loan without one.
If a lender’s title insurance policy is purchased, that will mean that a title search is conducted, which lessens the likelihood of title problems being found later. However, just conducting a title search does not guarantee that the title is clear. The only way an owner can fully protect his or her interests if title issues arise is with a title insurance policy.
When is Title Insurance required? When is it optional?
In almost all cases involving a traditional mortgage lender, the purchase of a lender’s title insurance policy will be required by the terms of the loan. Owner’s title insurance policies are generally optional, however, and bought at the discretion of the purchaser. Some non-traditional lenders may not require the purchase of this insurance. If a property is being bought through a cash transaction, without any lender involved, then a title insurance policy may not be required. However, in those cases, it may be even more beneficial for the purchaser to buy an owner’s policy to protect his or her interests down the road.
Is Title Insurance expensive?
Title insurance is a one-time purchase, paid for at the closing of a new property or during a refinancing. Generally, title insurance policies costs a few dollars per $1,000 of the property’s value. With this one-time purchase, the property is insured against liens and other title problems for as long as the property owner or his or her heirs own the property, or for the life of the loan, which could be many years. This means that, despite the up-front cost, it is potentially a very valuable product.
Some title insurance policies only include the insurance portion, while others also provide services such as title searches, and that can affect price. In addition, in some states, the title insurance costs are set by regulators, while in other states the product’s premium is not regulated at all, so different companies can offer widely different prices.
How does Title Insurance work?
Many title insurance policies both protect the insured party against losses due to title problems, and pay for searches to make sure that the title is as clear as possible based on available knowledge. Other policies only provide the insurance portion, and another party, such as a lawyer, conducts title searches. With a title insurance policy, if an issue arises later, the policy will pay the insured (usually the lender, but sometimes the homeowner) for some or all of the costs related to the lack of access to the property, usually up to a limit of the value of the property or the size of the loan. The premium for a title insurance policy is paid one time, at closing, but the coverage in a lender’s title insurance policy lasts for the life of the loan, even if it is resold. The coverage under an owner’s policy will continue for as long as the owner or his or her heirs have an interest in the covered property.
How do I qualify for Title Insurance?
Most title insurance companies will do a title search to see if the title of the property in question is impaired in any way. If the search does not show any impairment or encumbrance, then, in most cases, a title insurance policy should be issued. However, what happens if a title search shows that a property does have a problem with its title? It is unlikely that a title insurance company will issue a policy on a property that is known to be impaired. And any consumer will probably want to rethink purchasing such a property, especially since it is unlikely that a mortgage lender will be willing to issue a mortgage for property with title problems. If the title problems can be resolved, though, the property may then be eligible for a title insurance policy and appropriate for a buyer to consider purchasing.
How do I determine how much Title Insurance I need?
The amount of title insurance purchased is almost always related to the purchase price of the property in question, or the size of the mortgage against it. In some cases, additional endorsements and features can be purchased for an additional cost. However, in most cases, parties need enough title insurance to cover their interest in the property, i.e. how much it is worth, and no more. When a title insurance policy is required by a mortgage lender in order to get a loan, the lender will decide what amount of title insurance is needed.
What is the minimum for Title Insurance?
When a mortgage lender requires a title insurance policy, the minimum coverage is usually whatever is required to cover the cost of the loan. With owner’s title insurance, there generally must be enough coverage for the purchase price of the home. Traditional mortgage lenders always require the purchase of a title insurance policy to protect their interests. The premium is a one-time payment, usually made at the real estate closing.
What options do I have for Title Insurance companies?
In general, most homeowners use the title insurance company that was chosen by their lender or their attorney. But, according to the Real Estate Settlement Procedures Act of 1974, property buyers have the right to choose their own company when buying or refinancing, if they prefer. In fact, it is against the law for any lender or lawyer to require a buyer to use a specific title insurance company. In recent years, the U.S. Government Accountability Office has been taking steps to improve consumers’ access to information about title insurance so they can get the best price. In some cases, the closing attorney may get a commission on any title insurance policy purchased at closing, so he or she may not be the best source for information on inexpensive title insurance. It can be worthwhile for consumers to shop around. It is important to note that RESPA protects only residential homebuyers, not purchasers of commercial property.
