Buying a home is one of the most significant financial decisions a person can make. Since this is such an important endeavor, it's imperative that you do your research and know what you're getting into before signing on the dotted line. One of the first things to take into consideration when purchasing a home is title insurance.
Most people are familiar with the term “title insurance,” but they may not know exactly what it is or how it works. Title insurance is a type of insurance that protects the lender and/or owner of a property from losses that may occur as a result of defects in the title to the property. It is important to discuss your estimate with a title guide.
Title insurance is typically required by lenders when a borrower is taking out a loan to purchase a property. The lender wants to make sure that they will be able to recoup their investment in the event that something goes wrong with the title. The premium for title insurance is usually paid by the borrower at closing, and it is typically a one-time payment.
While title insurance is not required by law, it is highly recommended for both buyers and sellers of property. In many cases, it is required by lenders in order to get a loan. For buyers, title insurance can protect them from losing their investment if there are problems with the title that were not discovered during the purchase process. For sellers, title insurance can provide peace of mind that their property will be free from issues when the transaction is complete.
Title insurance companies perform a "title search" of existing title documents to validate the owner's ownership, and any claims or liens on the property are verified. The search will reveal any problems with the title, and provide an estimated cost for resolving those issues prior to closing contingent upon how complex they are.
Title insurance policies usually require a "deposit," which is a payment made at closing by the buyer as part of the required down payment, to bind coverage and ensure that all parties receive their policy.