Title insurance protects homebuyers and mortgage loan issuers from financial loss resulting from problems with a land title in the act of a property transfer. Title insurance is generally a combination of lender’s and owner’s insurance. Lender’s title insurance is purchased by the borrower to protect the mortgage lender, and owner’s title insurance is purchased by the seller to protect the buyer’s equity in the property.
When issuing title insurance, the insurance company or attorney will perform a “title search” that checks public records concerning the property. Those records include past deeds, wills, trusts, divorce decrees, tax records and more. This step ensures that another individual does not have rights to the property. This search results in a preliminary title report, which allows all parties involved in the sale to eliminate problems before proceeding.
Because title insurance prices are regulated in most states, price variance between companies is minimal. To find out if you are in an area that is regulated, ask your mortgage planner. Even if the title insurance price does not vary, the quality of the title search and insurance can vary between companies, so it is wise to solicit a recommendation from your mortgage planner or real estate agent.
A typical title insurance policy protects homeowners against contingencies such as fraud, forgery, undisclosed heirs and spousal claims. A mortgage lender requiring additional coverage for your property could cause an increase in pricing. The party responsible for funding the title insurance varies by state and county, so contact your mortgage lender to determine who is responsible for your title insurance.
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