Are you a first-time homebuyer in the market for your dream home? You may have heard about title insurance, but you may not know quite what it entails or how it affects your home purchase. In this post, we will learn what title insurance is and explain why it's crucial for homebuyers who want to protect their investment.
What is Title Insurance?
When you purchase a home, you become the property owner, and with that ownership comes the responsibility of ensuring that the property is free and clear of any liens, claims, or encumbrances. Title insurance provides coverage if these issues arise after the sale completion, making it an extremely valuable safeguard during home-buying.
The Differences Between Title Insurance—Lender's Policy vs Homeowner's Policy
Homeowners can purchase two kinds of title insurance policies: owner's and lender's policies. An owner's policy protects the buyer, or the homeowner. On the other hand, a lender's policy protects the lender, such as the bank or financial institution providing the loan.
While title insurance is not required by law, most lenders do require it as a condition of the mortgage. In this case, when a bank requires a borrower to purchase title insurance as a condition of the mortgage, they are asking the borrower to purchase a lender's title insurance policy.
Why is Owner's Title Insurance Important for Homebuyers?
Owner's title insurance is optional, but experts highly recommend purchasing a policy in addition to a lender's policy.
Title insurance can protect you from a wide range of issues, such as fraud, forgery, unknown heirs, and errors in public records. It can also provide financial coverage for any legal fees associated with resolving any title issues that arise. Without title insurance, you could find yourself paying all these fees out of pocket.
The cost of title insurance depends on a property's value, but it's generally a one-time fee paid with the rest of your closing costs. While it may seem like an unnecessary expense, the peace of mind that title insurance provides is worth the cost. Of course, if you ever have to cash in on the policy, you'll be glad you made the right decision.
Additional Mortgage Advice from Mortgage Experts
It is crucial to understand the benefits of title insurance and consider how it can protect you from any unexpected issues with a property's title.
So, if you plan to buy a home, we recommend purchasing both owner's and lender's policies to ensure that your investment—and well-being—are fully protected.
Begin your journey to homeownership with ease and peace of mind by reaching out to one of our mortgage professionals with any questions. Click here to get started!
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