Title insurance protects both the home buyer and lender. This is necessary if the seller does not have clear ownership of the property. The one time payment for title insurance insures that you have full ownership of the home after closing.
First, a title company or attorney will research all public records of the home for ownership issues. Records include wills, trusts, liens, divorce decrees, bankruptcy filings, and tax records. If any issues arise, such as money owed on a lien, the seller has the chance to fix the problem. Once the title is clear, an underwriter will issue an insurance policy to protect you if anyone tries to challenge your ownership of the home.
Two policies are issued with title insurance: one for you, the owner, and one for the lender of the mortgage. Even with the most thorough record search, problems may arise down the road. Some issues, like forgeries or undisclosed heirs, are difficult to find in public records. If a problem does arise, the owner’s policy insures your ownership rights. If the court decides the property does in fact legally belong to someone else, your policy will cover your legal fees and other losses.
If you take out a mortgage, the lender will require a lender’s policy of title insurance. This policy protects the lender by covering legal defense costs, interest, and mortgage payments in the instance that someone else has legal claim to the home.
Real estate is a huge investment, and one that you shouldn’t take any chances on.The one time fee for title insurance covers you and the lender for entire time you own the home, giving you security in your ownership rights.