Thinking about Skipping Out on Title Insurance? Think Again!

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Title insurance may seem like one of those extra costs that get tacked on at the end of the home-buying process, but in reality it could save you thousands of dollars! Title insurance offers protection against any problems with the title, or legal ownership title-insurance (1)status of the home. A lien, or a right to keep possession of property belonging to another person, against a home could jeopardize your financial stake in it, as well as your mortgage lenders. There are two types of title insurance policies. The lender’s policy protects the lender’s lien priority in the property, and the owner’s policy protects your ownership interest in the property.

Your bank should conduct a title search as part of the mortgage approval process to determine what, if any, legal claims and rights are attached to the house. No matter how thorough the title search is, it cannot rule out a relative or heir of a seller appearing with paperwork that seems to give them claim to a property. Your Heritage Title Services Representative will be able to help you through any of these common situations:

Second sellers. We hope this never happens but sometimes a distant relative or ex-spouse may surprise you with a claim that they actually own the property, and the seller had no right to sell it to you. In that case a judge could confirm the party’s claim which leaves you to either buy them out or move. If the judge rules in favor of someone staking claim to a home, the lender’s title insurance policy will only pay for court costs incurred by the bank, and it will reimburse the bank for what you owe on the mortgage if the sale is deemed null and void. An owner’s title insurance policy will cover your financial losses, such as attorney’s fees and court costs, even if you have to move out of the home.

Hidden mortgages. A slim chance but it is possible that a title search may not uncover a mortgage until after closing because it was posted incorrectly with the county recorder. If an owner’s title insurance policy is in place, and the mortgage is valid, the buyer just has to file a claim and the policy will pay off that lingering mortgage.

Unpaid taxes. A tax search might come up with no delinquent taxes on a property.  That doesn’t mean a buyer couldn’t subsequently receive notification of delinquent back taxes after closing. Owner’s title insurance would pay for those back taxes because you as the buyer were given paperwork that indicated taxes were paid.

The best part about a title insurance policy is that your protection starts the day of closing, and the one-time cost of the policy lasts for as long as you own the property. Even if the chances are low that any of these scenarios could happen, it is worth at least to have a conversation with your title insurance company, Heritage Title Services about your options. If you are on the fence about paying for it, ask yourself, could I afford to move suddenly or pay for any of these title-related expenses?

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Categories: First Time Home Buyers, Home Buying, How to, Tuesday Tips

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