When you purchase your home, odds are that the Lender will
insist that you purchase Title Insurance. Title insurance protects the
Lender in case there is a mistake made in a title search.
A title search checks details to ensure that there is not a lien or assessment against the property or the individual that is selling the property. It will also check to see if the seller of the house is really the owner. Typical title insurance claims can range from the cost of back property taxes that were missed in research the sale to a settlement with a neighbor who made property modifications that crossed the property line.
The insurance should cover the amount of the mortgage. The value of the insurance policy will decline as the mortgage value declines. Your title insurance premium will be paid once, at the time that the mortgage is taken out. Depending on your lender, taking out a second mortgage on your home can require another title insurance policy.
Your title insurance policy is basically your protection if a claim is made against your ownership of the property. If such a claim is made, the policy should provide you with means of a legal defense and fund all possible court related fees.
Just because you are required to purchase title insurance doesn't mean that you can't look around and save some money. Some ways that you might be able t lower the cost of this would be to check to see if the current owners title insurance can be "reissed" or "transfered" to you. If the seller wants the sale to close bad enough, maybe you can convince them to pay the title insurance for you. This is a requirement in a few select states. Maybe they will work with you and pay half. Shop wisely. Different insurers have different rates, so do some investigating and find the best rates around.
Holding a title to property can have some legal and tax consequences which need to be investigated before you take out the policy. This is especially true if you take out the policy with another person. It's in your best interest to consult an attorney who specializes in estate planning. Consulting a tax advisor might also be in your best interest.
Don't get caught off guard and under informed. Waiting until the last minute to examine your title insurance options can be costly, as you will most likely find yourself uninformed and rushed.
Ensure that you have the properties title examined by a qualified professional before you close. Purchasing a house with a messy and tainted title can lead to major problems later in your ownership.
Make sure that your purchase contract includes a clause that will allow you to inspect the condition of the title. This way, if a defect is discovered in the title, you can be released from the purchase contract and have your full deposit returned.
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