Why do you need title insurance?

When you buy a home why should you get title insurance? The quick easy answer is that your lender will require it.  Title insurance protects the lender from any title issues to your home and property.  Title defects could include something as simple as a mistake in the title search, forged documents and claims from unknown parties. The amount of the policy is equal to the amount of your mortgage when you first buy your home.  

You can also purchase an owner's title insurance policy that protects you.  This is a one time purchase that lasts as long as you own the home. This protects your equity in the home.  You may not know there is a title issue until you decide to sell your home, this can help resolve any title issues. It could also be false claims by others or improperly recorded legal documents.  It may be a claim by an undisclosed divorced spouse. It could be community property issues or a false affidavit of death. There are many reasons that someone may claim an interest in your home, that's why title insurance is available.

The title company will do a search and exam to make sure you have clear title to your home and land.  The search should come up with any issues however there are times things are missed.  One item that I seen more often is a previous mortgage was not released from a previous owner – title insurance will help with that.  Some people question if they need an owner's policy with a new construction home – the answer is still yes. Title insurance protects the land also, so if there were prior claims on the land or possibly a contractor's lien that was not paid, it will help you.

For most Americans, buying a home is the single largest financial investment they will ever make. While property ownership may seem very straightforward, a homebuyer's rights to enjoy their property aren't always as clear. There are dozens of ways in which the title to a property can be jeopardized. Title insurance helps reduce the likelihood that title issues will arise, and the policies subsequently issued help protect against loss when a buyer's ownership rights are challenged.

When you consider the price of homes and your equity in the home, getting an owner's policy is cheap insurance to protect your equity. If you buy it when you buy your home, you can get it for a reduced cost since they are already doing the title search for the lenders policy. It could turn into one of the best investments you have purchased – or you may not need it, but you won't know for sure until you sell your home.  

Leslie Vanderwerf,  NMLS ID#335509, American Mortgage & Equity Consultants, Inc, An Equal Housing Lender, NMLS#150953 - Email - Website

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Currently a Senior Loan Officer at Cross Country Mortgage LLC, it's hard to believe I have been in the mortgage business for more than 25 years and have worked with Sharlene since 2000! I love sharing mortgage insights here each week and helping people finance their homes. Listening helps me find the right program for you!

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