It is a time of great excitement in your life. You looked at house after house before deciding on the one. Working with a Colorado Springs lender, such as Elevation Mortgage, you have secured the mortgage necessary to complete the transaction. As you go over the paperwork, one thing stands out: title insurance. You might wonder what it is and how it can benefit you. Here is what you need to understand about title insurance.
What Is It?
Often part of the closing costs, title insurance is a policy that protects you from claims for past occurrences. For instance, if the previous homeowner opened a permit and you did not find out until after the closing, title insurance would assist you in paying for the costs associated with closing that permit. As part of any title insurance policy, there is an extensive search to find out everything possible about the property. This search includes looking for anything that could be a potential liability associated with the property.
Once that search has been completed and you take possession of the property, title insurance will protect you against any claims or litigation that challenges the validity or legality of your ownership.
What Are the Costs?
While most insurance requires monthly payments to keep it in effect, title insurance requires just a one-time payment. The cost will vary based on the price of your home and any state regulations governing that property.
You may find that the cost of title insurance is part of your closing costs, meaning that it will be one of the expenses that you need to pay for at the closing table.
What Types of Claims Are Covered?
Typically, title insurance claims are filed for errors in the public record, undiscovered liens, omitted heirs, and even fraud. A title examiner will analyze the chain of ownership, while a title check looks for any outstanding lawsuits, encumbrances, or anything else that would stop the title of the property from being transferred.
These errors must have occurred prior to the issue date of the policy and may even include legal defense costs.
Can Lenders Require Title Insurance?
Lenders can require title insurance to secure their interest in the property. After all, they do not want to issue a mortgage for the home, only to find out after the fact that the home could not be legally sold and that they potentially have no claim. A qualified third party is typically required by the lender, versus you just running a title search yourself.
There are two policies available: the owner’s and the lender’s policies. While the lender can require you to hold a lender’s policy, having an owner’s policy protects you as your equity grows through your monthly payments to payback the mortgage.
Your lender may actually have a few companies that they work with to address the issue of title insurance. If you are unclear about what you need and who to contact, then your lender may be able to help. Our team is capable of helping you navigate the ins and outs of getting a mortgage and then closing the loan. Contact us today to help you with the purchase of that dream home.