How Does Title Insurance Affect Your Home?

Sheryl Landrum
LoanBiz Columnist

Article Rating , 4 out of 5 based on 1 votes

One of the biggest expenses of buying or selling a home, or refinancing your existing mortgage loan, is title insurance. One of the most frequent questions we hear when doing a mortgage loan application is "Why do I need title insurance? Isn't the property deed all I need to prove home ownership?" The answer is "no!"

You can't get a loan without title insurance because without it, the risk of title loss is too high. For example, government recording errors, forgery by a previous owner, liens, judgments, or claims by heirs and ex-spouses that pop up years later can derail your claim to your own house. Title insurance protects you and your lender against such loss.

Title insurance guarantees that homeowners are acquiring marketable title to the property they are purchasing. Should you suffer a risk or a loss due to defects in the title, the policy will cover your loss up to the amount of the policy (usually the purchase price or value of the home if you are refinancing).

When escrow opens for a home purchase or a mortgage loan refinance, a title report is ordered. The title company's main function is to research public records, laws, and court decisions pertaining to your property to determine the current ownership and to assess any encumbrances that might affect the title to the property.

When the title company completes its search, it issues a preliminary title report for the home or property. The preliminary report shows the ownership of the home, how the current homeowners hold title, any liens on the property as well as a legal description, and a plat mat of the property.

Once you have the preliminary title report, review it carefully. If you're buying a home, you want to ensure that the homeowners' names on the title report match those on the purchase contract. You should also check property information for bonds, deeds of trust, taxes, CC&Rs, and any easements to the property. Once the title process is completed satisfactorily, your new home and your new mortgage loan are one step closer to closing.

St. Cloud Times, "Title insurance provides peace of mind"

About the Author
Sheryl Landrum is a Senior Loan Officer with First Capital Mortgage in San Diego and Prudential Realty in Bonsall, California.

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