Title insurance is a phrase you will hear over and over again after you sign the initial contract on your real estate purchase.
A title insurance policy is issued after a title search is completed, offering protection from anything missed. Since your new home is likely one of the biggest financial investments you will make in life, getting this extra coverage is always wise.
The policies for title insurance are likely to end up as part of your closing costs. So, having an idea of what they are can be helpful.
Let’s take a look at the different types of title insurance.
Owner’s Title Insurance
Owner’s title insurance is a type of title insurance policy that protects the owner, just as its name suggests.
Any title issues that didn’t show up in the title search can be a threat to your ownership rights. A title insurance policy means that you won’t have to worry about fighting any claims - they will be handled for you. This can save you a lot of time, money, and aggravation.
There are a couple of different types of owner’s title insurance that you may have the option to choose from - and each cover different things. A standard and an enhanced policy are the two most common options.
Be sure to work with your title agent to discuss the different types and choose the best one for your needs. Keep in mind that you are only responsible for paying one title insurance premium for your owner’s policy - and you will be covered for as long as you or your heirs have an interest in the property.
The purchase of this policy is not mandatory, but it is highly recommended.
Lender’s Title Insurance
A lender’s title insurance policy is one that protects the lender. This is separate from an owner’s policy and will not offer any coverage to the property owner.
When a lender agrees to give you a loan in the form of a mortgage, they are taking a risk. Should something go awry, they want to make sure that they are completely covered and protected for the money they’ve already shelled out.
A lender’s policy goes in sync with the loan. As you pay it back, the policy amount decreases. And, when the loan is satisfied, the title insurance policy is terminated.
Most lenders will make the purchase of this insurance a condition of their loan.
How Does Title Insurance Work?
During a title search, examiners are looking for things such as:
Judgments
Liens
Outstanding taxes
Bankruptcies
Trusts and wills
Forged or fraudulent documents
Easements
Encroachments
If these are present, then they must be addressed before the real estate transaction can go any further.
Although not intentional, it is possible for things to get missed, esuch as an unknown will or erroneously recorded judgment. Should they arise in the future, they could potentially threaten your right to title.
Investing in a title insurance policy can protect you and/or the lender should this happen.
Learn More About Title Insurance
Purchasing title insurance is a very important step when buying a new piece of real estate. So, having the right title company on your side is a great way to make it happen. At NVT&E, we strive to answer any questions you may have about title insurance so you make the best, most informed choice.
To learn more about what our title experts have to offer, contact us today at 703-938-3200.