For The Most Part, Title Insurance Is Almost Always Required By The Lender

Category: Finance.

If you are thinking of buying your own home, you will hear the words title insurance somewhere along the process.

For the most part, title insurance is almost always required by the lender. Many consumers are not exactly sure what this is. This insurance is used to protect the lender against loss resulting from legal claims by others against your new home. The attorney s fee may include the title insurance premium or in some cases it may not. In some states, lawyers will offer insurance as a portion of their services in examining the home s title and providing a title opinion as to whether it is clear or not. In other states, a title insurance company or title agent directly provides the insurance. The same is true with the prior owners policy.

It is important for consumers to understand that the lenders insurance policy does not protect the consumer. It does not protect you. The truth is should a claim occur, it can be financially devastating to the homeowner who is uninsured. When you need to protect yourself against claims by others against your new home, you will need what it is called an owner s policy. It is good to keep in mind that if you buy an owner s policy, it is much less expensive if you buy it at the same time and with the same insurer as the lender s policy. The mortgage lender will, require that the, however insurance is from a company that is acceptable and reliable.

Consumers should also know that the home seller may not require, as a condition of the sale, for you to purchase insurance from any particular title company. As the homebuyer, you can choose a company that meets the lenders standards. There may also be listed any exceptions from the insurance policys coverage. Generally speaking, a few weeks before the closing of the escrow, the insurance company will issue what is called a" Commitment to Insure" or preliminary report or" binder" containing a summary of any defects in the title which have been identified during the title search. The commitment to insure is sent to the mortgage lender for use until the title insurance policy is issued at or after the closing. Consumers should compare rates between different title insurance companies. If you wish, you may have a copy sent to you or to your lawyer, so that you can examine it and object if need be to the contents.

This can result in big savings. In many states, insurance premium rates are dictated by the state and those rates may not be negotiable. Make sure you ask about the services and limitations under each policy so that you can decide whether coverage purchased at a higher rate may be better for your needs. If you are buying a home which has changed hands within the last several years, ask your title company about a" reissue rate. " This can be much less expensive. These claims are known as" mechanic liens" . When purchasing a brand new home, make sure that your insurance covers claims by contractors. Mortgage lenders or title insurance companies will very often want a survey done in order to mark the boundaries of the property.

You might be able to save some money if a past survey is available and no changes have been made to the property in the interim. A survey is simply a drawing of the property that details the perimeter boundaries and marks the location of the home and any other improvements that might be on the land. You should check with your lender or insurance company on whether an updated survey will be acceptable.

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