Title insurance is a type of insurance that protects mortgage lenders and homeowners against any claims that question the legal ownership of a home or property. If there is a dispute over title ownership, the title insurance policy covers the legal expenses incurred to resolve the dispute.
Title insurance is designed to protect any party who has a financial stake in the sale of a property from any past title discrepancies that might be uncovered during or after the purchasing process. Here’s the million-dollar question, “Is it required?”. Insurance will most likely be required from your mortgage lender to secure a loan, but there’s more than one type of title insurance. Our title experts explain the insurance differences and requirements:
Title Insurance Coverage
With any real estate transaction, a title company runs a title search – a public records search that checks if the home being purchased is free and clear of any liens or ownership disputes and confirms the seller’s legal right to sell a home.
While a title search is typically a smooth process, unforeseen issues may arise. This is when title insurance comes into effect, offering coverage for the following:
- Title forgeries
- Back taxes
- Filing errors
- Unknown heirs who claim ownership to the property
- Inconsistent or conflicting wills
- Liens, i.e. unpaid contractor bills or home equity lines of credit
- Undocumented easements
Title disputes? As a national provider of a full range of title and escrow services, True Concept Title can help! Call our national title company today at 866-651-6224.
Types of Title Insurance
There are two types of title insurance – lender’s title insurance and owner’s title insurance – both of which offer the same kind of protection but cover the different parties involved in the sale of a property.
Lender’s Title Insurance:
This type of policy is designed to protect the mortgage lender from potential title claims that would put their financial stake at risk.
Almost all lenders require borrowers to purchase title insurance on the lender’s behalf as part of the loan-approval process. Most often, this is considered part of the closing costs.
Owner’s Title Insurance:
An owner’s title insurance policy protects the new owner of a property should a claim arise. While this type of policy is not required, it is highly recommended. Good news for buyers…sellers often agree to pay for the policy as part of contract negotiations.
Warranty of Title:
If the purchase of a home or property is a cash transaction or if the lender doesn’t require title insurance, the buyer can request that the seller provide a “warranty of title.” This guarantees the seller is the sole party with a right to sell the home.
Title Insurance: Do I Need It?
To summarize, title insurance will most likely be required from your mortgage lender in order to secure a loan, a.k.a. lender’s insurance. Owner’s insurance is not required but is highly recommended and can be purchased by the seller of the property as part of contract negotiations.
Cost of Title Insurance
A title insurance premium is generally a one-time charge that is paid at closing and may include other charges such as wire transfer fees or courier charges. The cost of title insurance typically ranges between $500 and $3,500 per policy and is based on certain factors:
- The insurance policy provider
- Property location
- Purchase price
- Extent of coverage
In many states, buyers can compare the prices of different title insurance companies. However, in Texas and Florida, all title companies are required to provide the same level of coverage at the same price.
Getting Title Insurance
Title insurance is a small price to pay for peace of mind for one of the largest investments of your life. Your mortgage lender will most likely require it to secure a home loan. Owner’s insurance while not required is recommended to sellers to have in place for contract negotiations on the piece of real estate.
At True Concept Title, we are fully integrated and have a proven track record of success in handling a full range of title and escrow services across the U.S. For more information or to speak with one of our title and escrow representatives, please contact us at 866-651-6224.