One of life’s most rewarding experiences is purchasing a new home. It might be just as rewarding to ensure that your right to possess the property is protected. You’ll hear two words during the process of buying your ideal house that you’ve probably never given much thought to: title insurance.
Title insurance, like the rest of the home-buying process, can be tough to grasp. To make matters worse, the subject is frequently clouded by myths that prevent property purchasers from appreciating its significance. Let’s look at eight common misunderstandings about title insurance and how it protects your property rights to help you better grasp what it is and how it works:
Only a bare minimum of protection is provided by title insurance.
When you buy a house, you get “title” to the property. Your legal right to own it is known as title. A title search is performed early in the house purchase process to analyze the property’s history and find any concerns that could limit your right to ownership. Even after a thorough examination of public records, hidden title defects like as tax liens, fraudulent signatures, ex-spouse claims, and recording errors may exist. These title flaws might go undetected for months or even years after you buy a house.
Only one sort of title insurance is available.
An owner’s policy and a loan policy are the two forms of title insurance policies. An owner’s policy protects you, the property owner, from loss or damage if your right of ownership to the property is affected by a covered title defect. If you’re getting a mortgage loan to buy a house, your lender will almost certainly need you to buy a loan policy, often known as a lender’s policy. This sort of coverage safeguards the lender’s ownership of the property until the debt is fully paid off. The homeowner is not covered by the loan policy.
Within your owner’s policy, you can choose to get more enhanced coverage. Standard coverage protects you from financial loss and related legal expenditures resulting from common title defects that arose before the policy’s effective date. Enhanced coverage covers all of the regular coverages, plus even more for maximum protection, including some that cover events that occur after the policy’s effective date.
A monthly or annual premium is required for title insurance.
There is no monthly or annual premium, unlike other insurance policies. When you buy or refinance real estate, title insurance is a one-time payment that you pay at closing.
The cost of title insurance is high.
An owner’s title policy’s one-time premium is dependent on the purchase price of your home and makes up a minor portion of your closing costs. For as long as you and your heirs own the property, coverage is given. An owner’s policy of title insurance is relatively affordable when the benefits are weighed against the price.
There is no requirement for title insurance if you pay in cash.
A cash purchase eliminates the necessity for a mortgage loan and, as a result, the need for lender’s title insurance. An all-cash transaction, on the other hand, does not eliminate the danger of unforeseen title flaws. An owner’s policy covers you in the event of a covered title defect causing loss or damage.
The protection provided by homeowner’s insurance and title insurance is the same.
A buyer’s right to ownership and a lender’s investment are both protected by title insurance. Homeowner’s insurance, on the other hand, is a policy that protects you against potential losses or damage to your home’s structure or contents in the event of an insurable event.
The title company is not chosen by the home buyer.
When a property is purchased with the help of a federally related mortgage loan, the buyer has the right to choose the title firm under the rules of the Real Estate Settlement Procedures Act (RESPA). Unless the seller has been advised to pay for both the owner’s and loan policies related with the real estate transaction, the seller may not require the buyer to get title insurance from a certain title business.
With so many misconceptions regarding title insurance, it’s critical to locate a team of experts you can trust. Cities Title Services is dedicated to delivering excellent service and being available to you if your property rights are in jeopardy.