About Title Insurance
When you are buying a new home, you would come across the term called Title insurance with a cost associated with it.
But we cannot talk about types of title insurance without first talking about Title.
The term Title refers to a person or entity’s ownership of property. Title insurance is basically as the name implies, insurance for the property’s title.
The title insurance will cover any forgery in the deed or any lien on the property that you were not disclosed about at the time of property purchase. In this post, we will understand what are the types of title insurance.
What Are The Types of Title Insurance?
You have two types of title insurance, an owner’s policy which protects the owner, and a lender’s policy if you are getting a mortgage, which protects the lender or the bank that is lending the money to you so that you can purchase that property.
Since we know that there are two types of title insurance policies, let us know the difference between them.
I - Owners Title Insurance Policy:
The owner’s title insurance policy is coverage to the owner of the property. For example, you are purchasing a home and you are getting title insurance that insures their ownership of the property.
But what does that mean? So the title insurance makes sure that there are no other encumbrances or liens that can possibly hinder your ownership of the property.
And also make sure that there are no other claims to ownership of the property like heirs, divorces, or any other person that could claim ownership on the property above you.
A common misconception about Title insurance is that people think that it covers the house.
That is actually not true. It covers the land. A house can be built any time on a piece of land that could be brand new.
However, the land on which the property is built on been there for hundreds of years.
If there is any claim coming up to your ownership, the Owners Title Insurance Policy will help you to cover it for you.
II - Lenders Title Insurance Policy:
When you are getting a mortgage your lender or the bank will require assurance that there are no liens, judgments, or mortgages that take precedence over their mortgage.
So the lenders’ title insurance policy will cover the lender in the event there are any such claims pop up post the closing.
The interesting thing about the lenders’ title insurance policy is that a lot of owners think that they have the coverage too because their lender has that policy.
That is not true at all. That policy does not cover the owner it only covers the bank.
Conclusion
Out of these two types of title insurance policies, the owner’s policy is something that you only need to pay once at the time of purchase closing.
Whereas the lender title policy needs to be paid every time you refinance your property so that the new lender is protected with a lender’s title insurance policy.
Your home is possibly one of the largest investments you will ever make in your life. As a buyer, you will want to protect your investment as well.
This is why these two types of title insurance policies are included in your closing process.
The two sorts of title protection arrangements can not just compensate substantial claims and legitimate fees to guard against hidden titles issues but also help to diminish ownership risks by giving a careful title search before either policy is given.
There are multiple custom options regarding the title insurance purchase. In some areas, it is standard for the seller to purchase the owner’s policy for the buyer.
Whereas, in other areas, the owner’s policy is recommended buyer purchase. Your real estate agent, escrow officer, or settlement officer would be in a position to help you understand these two types of title insurance policies in more detail.
About Title Company In Real Estate
When you are in the process of buying or selling a real estate property you might have multiple contact points at every step of the process.
From your real estate agent to the closing agent, all point of contact has their significance in the home buying process.
In this post, we will understand the roles and responsibilities of one of the most important teams that help you behind the curtains in your buying process, ‘Title Company’.
What Is A Title Company?
A title company is a neutral party that has many responsibilities during a real estate sales transaction.
The title company enters the process once the buyer and the seller sign the sales contract.
It holds the earnest money deposit in escrow that the buyer makes after signing the sales contract.
It also conducts the title search to ensure the property title is clear and there are no claims, liens, or any other issues with the ownership of the property and help the buyer and the seller at the time of closing.
What Does A Title Company Do?
A title company has 3 key responsibilities.
I - Title Search:
A title company would be responsible to do a title search on the property in question.
This will help the buyer and the seller know if there are any existing and hidden liens or claims against the property or anything that challenges your right to own the property.
In this process, the assigned company will go through public records to verify the seller’s ownership and determine if any issues could impact the buyer’s ownership in the future.
The title agent or the escrow officer will conduct a thorough search through county records and other sources to ensure that the seller has the right to sell the property.
The report provided by the title officer will include the chain of ownership, pending claims, liens against property, judgments, surveys, encumbrances, easements, etc. so that all the issues are cleared before the property is transferred to the buyer.
II - Title Insurance:
They will also provide a title insurance policy to protect the buyer’s ownership rights.
Just like you need insurance for your car or home for the future, title insurance will protect you from the past.
If there are any claims or liens that were missed during the title search, your title insurance will cover the same.
This is a one-time premium that the buyer pays at the time of closing along with other closing costs. This will protect your ownership of the property for the length of time you own the property.
III - Escrow and Closing:
Once the sales contract is signed, the title company will hold the earnest money deposit paid by the buyer in an escrow account till the closing.
Before closing the title company will gather all the documents in form of a package from the lender also known as closing disclosures.
Once the package is received from the lender, they will make sure all the numbers on the packages are matched with their numbers.
At the closing, they will produce the final package for you and the seller to sign in presence of a notary and ensure that the money is collected from the buyer to pay off the vendors.
Finally, they will ensure that the signed copy of this package is sent to the lender and buyer.
Conclusion
Title companies play a very crucial role in the home buying process. They make sure that the title of the home is clear for transfer, maintain an escrow account till closing, and help in closing the transaction.
You as a buyer have an option to choose your title company for your real estate transaction.
You have to make sure that you have a good and reputable title company for your real estate transaction for a smooth process.