Nothing beats the relief and satisfaction that you get once you finally close a real estate deal and get the title of the home you worked so hard to purchase.
Unfortunately, however, there have been several instances in which this happy moment took a bad turn all because of an issue-riddled title.
Because of this, lenders often require homebuyers to get title insurance before the mortgage application can be processed.
Here’s everything that you need to know about this important document:
What is title insurance?
Title insurance is a policy that you take out to protect yourself and the lender from any potential damages or losses caused by issues with a property’s title.
These issues often include the following:
- Unpaid financial obligations, such as liens on taxes and professional fees
- Clerical mistakes in deeds
- Forgeries and fraudulent claims
- Conflicting ownership claims
- Outstanding lawsuits
- Undisclosed agreements
If left unaddressed, these issues can cause major problems for both you and your lender, and in some cases, even render the title invalid.
What type of title insurance should I get?
In general, title insurance is the name given to two separate policies: Owner’s Title Insurance, and Lender’s Title Insurance. These policies are both designed to protect their holders from any potential losses in case the seller is prevented from legally transferring the property’s ownership.
As a buyer, you will only be required to get the Lender’s Title Insurance – usually from a provider recommended by your lender – as it is a major requirement for your home loan. However, it is strongly recommended that you get an Owner’s Title Insurance as well, in order to protect yourself from getting needlessly saddled with back taxes and other liabilities such as outstanding professional fees and fines.
How much will it cost to get title insurance?
One-time premiums for title insurance policies usually start at around $1,000. The amount needed for the premium, however, can still change, depending on the title company or insurance provider, as well as state regulations and the overall value of the property.
In addition, you may be able to pay a much lower rate if you buy both the lenders and owner’s policies from the same provider rather than buying them separately.
What happens if I don’t get title insurance?
Opting out of title insurance exposes you to significant financial risks and other problems that can derail you from your real estate goals. This includes paying off bills and debt that you didn’t incur, and, in worst-case scenarios, even losing your claim on the property altogether.
What is a Warranty of Title?
In some cases, a seller might present a Warranty of Title to you during the transaction. This is a document that guarantees that the seller has the legal right to transfer the property’s ownership and that no one else has a claim to the property. Much like an Owner’s Title Insurance, this Warranty serves as a safeguard for the property’s buyers.
In this case, in the event that another person has a legitimate claim on the property, the warranty grants you, the buyer, the legal right to take action and even file charges against the seller.
You must note, however, that not every listing – especially those handled by firms and agents and other representatives – has this warranty. Because of this, getting title insurance remains the best course of action, especially if you want to guard yourself against potential legal problems when purchasing a property.
Navigating the ins and outs of the housing market can be tricky. Not only do you have to sift through multiple listings and deal with sellers, you also have to make an effort to protect yourself against legal and financial troubles from inattentive – if not entirely negligent – homeowners.
Get your dream West Chester, PA home with the help of RE/MAX Direct!
When it comes to buying properties, it’s best to have a trained real estate professional by your side. Not only will they help you find the best deals, they can also help you make sound decisions regarding your buy, not to mention ensure that every step of the process is as it should be.
Our team of expert real estate professionals can help you find your dream home in the West Chester and the Southeastern Pennsylvania areas. Benefit from their real estate advice for buyers. Call RE/MAX Direct today at 610.430.8100 or send an email to our team at remaxdirectwc(at)gmail(dotted)com to learn more about your housing options in West Chester, PA. You can also drop your message here to get started.