As you prepare to buy a new home, you have likely heard about title insurance. But is title insurance really necessary, you may ask? Yes, because home title insurance can protect you from significant financial loss that would result from liens or defects in a property’s title. Title insurance comes in two varieties: lender’s and owner’s title insurance. These insurances are available for a single payment at the purchase of your home. So what else does this insurance protect you from? Read on to find out.
Hidden Problems Found in a Title Search
A clean and clear title is necessary for a transfer-of-ownership. To make this happen, title companies will perform a title search that involves carefully scrutinizing public records to confirm a property’s legal ownership. This title search will always investigate whether there are any claims on the home you wish to buy. These claims can include back taxes unpaid by the previous owner, or unresolved building code violations and surveys with errors. These issues must be fixed for the home title to be considered “clean.”
Owner’s and Lender’s Insurance Policies
There are two types of home title insurance policies. A basic owner’s title insurance policy will cover issues including:
- Ownership by another party
- Forged signatures on documents, or other forms of fraud
- Flawed records or record-keeping
- Encumbrances or judgments against a home
- Restrictive covenants, which includes unrecorded easements
A lender’s title insurance protects the bank or lending institution you use to purchase your home. This insurance does not protect your investment in the home; it only covers claims affecting the lender’s loan.
The Risks of Not Having Home Title Insurance
One of the most common risks of not acquiring title insurance is related to the previous homeowner’s back taxes. Without insurance, you, as the new owner, become responsible for these payments.
Lender’s insurance protects the lending institution if a borrower defaults on mortgage payments or any other issue with a property title arises.
The cost of home title insurance varies by state but will be a single payment rather than a monthly premium. This insurance is active for as long as you own the property.
A Title Company You Can Trust: Colony Title
At Colony Title, we will help you through the process of getting your property’s title and help you avoid the pitfalls of hidden costs while you buy your home. We are also well trained in identifying any and all errors in public records and helping you resolve them. We specialize in real estate title insurance in both Maryland and Washington, D.C., and we will perform an expert title search, check through all past documentation, and examine records for any fraud or forgery. For more information on how we can get you into the home of your dreams, contact us online or give us a call at (410) 884-1160. To get more updates on housing markets and how to get into your home, follow us on Facebook, Twitter, and LinkedIn.