Between homeowner's insurance, mortgage insurance, and title insurance, it can be challenging to keep all of the policies protecting your real estate investment straight. Not to fear! Let’s clarify why title insurance is necessary, how it protects your investment, and what policies are needed by taking a look at 12 common questions.
Title insurance protects you by verifying that a home-seller truly has legal claim to a property. The policy safeguards your expected rights once you own the property, such as your ability to occupy and use the home as you see fit. It will also ensure that you are not held accountable for any existing liens on the property, provided that they are public record. Lastly, a title search validates your right to sell the property at any point as collateral for your loan. In sum, title insurance protects against loss—financial, functional or otherwise.
A title search is the process of uncovering all public records about the rights to a specific piece of property and land. This process usually includes an on-site search, technical review, inspection analysis, and a final issuance of insurance. During these steps, a title officer will search for information about the property, names associated with the property, and tax records related to the property.
A lender's policy, which covers the loan amount in the case of property loss, is always required to get a mortgage. An owner's policy, however, may not be required by all mortgage companies— it is optional here at Apex. The overwhelming majority of homebuyers opt for the additional coverage that an owner’s policy offers, however. Without it, you will lack coverage for payment of legal expenses or other losses in the event of a problem. Additionally, having an owner's policy allows you to obtain a discounted rate on a new lender's policy when refinancing—and that alone can cover a good portion of the cost.
Fraud and forgery, conflicting wills, missing heirs, previously unknown tax liens, and mistakes in legal documents are just some of the issues that could spell disaster for your new property purchase without title insurance. With it, they’re covered.
Title insurance typically does not cover items that are not shown in public records, such as easements or rights of way (i.e. a community driveway), zoning and building restrictions, and other legal actions that are pending against the property. Ask your insurer for specifics regarding what isn’t covered under your policy.
In many states, prices are regulated. For instance, in MD the premiums charged by insurance companies must be approved by the Maryland Insurance Administration; however, document preparation fees and courier fees are not regulated. For that reason, it may benefit you to get quotes from multiple insurance companies by inquiring specifically about what fees will be charged and whether they can be waived.
Title insurance is paid for in a one-time installment at the closing of your loan. In the majority of states, the buyer pays for title insurance. In some states, such as Florida, the seller will cover the Owner's Policy.
Yes. In the case of a new build, a title search is still needed to reveal any problems that may have occurred with the previous owners of the land. It uncovers existing liens that can be caused by builders failing to pay subcontractors and includes an official survey of your land.
Yes: a lender's policy is required to obtain a new loan, and since refinancing originates a new loan, you do still need it. However, a discounted re-issue rate is applied to the cost of a lender's policy when a homeowner is in possession of and can present an owner's policy -- just another reason having both policies can make sense.
You may hold a sole-ownership or co-ownership title. As the names imply, a sole-ownership title is held by one individual, and in the instance that the title-holder is married and seeks sole-ownership, the spouse must relinquish all right to the property. Co-ownership, on the other hand, can be held by two people exclusively (known as community property) or more than two individuals (via joint tenancy).
If you have a concern about your rights as a title-holder, you should contact your insurance company promptly to notify them about your situation. All notices of a potential claim should include the property address, a description of your concern, and any related documents. Ask your title company for their specific requirements.
A title insurance policy covers your interests in the property for the lifetime of your ownership.