One of the items on my closing costs was title insurance. What is that?
Title insurance is a way to protect your home investment.
We need this because many things can occur with a property that we might not see at first.
What if the seller is posing as the owner? What if his ex-wife is still a co-owner? Well, that means you won't have clear title.
Happily, the buyer has title insurance.
When you buy a home, you have to sign a contract with the seller, a mortgage contract with your lender, another contract with your insurer and a few other related documents. Signed contracts by two parties are legally binding agreements. They cannot be broken without costly consequences.
Lots of problems can creep up in a property over a dozen or more years. There can be unpaid taxes or a disputed will. Maybe there is a problematic easement that prohibits building a fence. There can be disputes over a property line.
Professional real estate agents and contract law attorneys can ask the right questions, add or delete anything not in your best interest, and recommend a title company to launch a thorough search that secures you a clear title. In fact, your mortgage lender requires the purchase of title insurance, or it won't issue the funds.
The title company's main mission is to declare a title defect-free; otherwise, it won't sell you the required insurance. The search involves combing through public records for any matter concerning the house you want, including past deeds, wills, trusts, divorce decrees, bankruptcy filings, court judgments, outstanding liens and tax records.
Title policy insurance is a permanent assurance that your ownership and use will be defended promptly against claims, at no cost to you, whether or not the claim is valid. You pay a one-time premium for coverage that lasts as long as you or your heirs own your property. Owners' title insurance is one of the least expensive forms of insurance.