From our experience, title insurance is like most other insurances – you hardly ever need to use it, but when you do it saves your pocketbook – and in this case – it can save your house and your financial investment.
Let’s look more at what is title insurance and why do you need title insurance.
Title insurance is directly related to the plot of land that you are either looking to purchase or looking to refinance. Home owners insurance (also known as fire insurance or hazard insurance) covers the physical aspects of your property (if you have a home or something built on it like a commercial building etc.).
If you can imagine yourself in a timeline, someone has owned your plot of land before you and in time someone will own your plot of land after you. Given that your plot of land has changed hands over the years there could be what are technically called “title defects” associated with your plot of land – with your deed. These “title defects” can impact your ownership either when you purchase the property or down the road after you have had it for awhile.
If you finance your home with a mortgage, the mortgage company will require you to get a title insurance policy. The title insurance policy is issued by your title company when you get your mortgage. While you are applying for your mortgage no matter whether it is a home purchase or a refinance either your mortgage company or your real estate agent will order a title policy on your behalf.
NOTE: In most cases, you do have a say in who you use for your title insurance policy – although your mortgage company and/or real estate company will often act in a way that can lead you to believe that you don’t have a choice in who you get your title insurance policy from.
When your title insurance policy is ordered one of the first things the title company will do is conduct a thorough search or inspection of the public records at the county recorder’s office for the property. In the case of a home purchase they will often go back through the records as far back as 60 years to make sure they understand everything that has happened to your property – and to make sure that the property can be insured for a new mortgage.
Once the title company looks through the public record search and feels confident that there there are no problems with the legal records of the property the title company will then (in simple terms) issue a title insurance policy commitment of which they will convert to a full policy when you get your mortgage.
The title insurance policy provides financial protection against title defects in the case that they show up at a later date by defending against any attack on title. Depending on the problem the title insurance policy will either perfect the title or pay valid claims.
Your home is your most important investment. Before you go to closing, ask about your title insurance protection, and be sure to protect your home with an owner‘s title insurance policy.
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