The buying your home is likely the most expensive purchase you will ever make, so you want to ensure that you are making a sound investment. Not only do you need to have peace of mind that you are purchasing a home that is free of clouds on title, such as a lien or claim, but your lender will want to have the same assurance prior to lending money on it. Most insurance policies are created to insure you against future accidents, claims, or other risks over time. Title companies work to eliminate risks before they occur to help protect your asset.
Essentially, title insurance ensures your rights and interests in a property are clear.
There are two types of policies, “Owners” which protects you, the homeowner, and “Lender” which protects your lender/banks interest. Prior to issuing a title policy, a company will do an extensive search through public records, looking for liens that could be for taxes, child support, contractor’s mechanic liens or other claims that have been filed against the current property. Any problems that arise, will cause the title company to work with the lien holder to clear it up prior to your purchase closing.
Once the title company is able to confirm that title on the property is clear, they issue a policy that certifies to you that there are no liens or claims filed against the property that would affect you as the owner. Should a claim surface after policy is issued, one that belonged to a prior homeowner, the title company will pay the legal fees to defend your rights. This is a one-time paid premium that is in effect as long as you or your heirs own the property.
Educating yourself on costs and expenses in purchasing a home will help you to fully understand the home buying process and give you more knowledge in how best to protect your newly acquired asset.