The Ultimate Guide to Title Insurance

Buying real estate means also buying insurance ― several different types, in fact. Private mortgage insurance (PMI) is sometimes demanded by the lender to ensure the loan is repaid if the borrower defaults. Homeowner’s insurance is a necessity to protect the lender’s financial interests.  

Then there is title insurance, one of the least understood forms of insurance required during the home purchase process, if you use a mortgage to buy the house.

What is it?

Title insurance is a policy required by the lender to protect it from any other claims to or liens against the property. These items are known as “clouds” on the title and some of the more common include:

•       Unpaid taxes
•       Fraud
•       Forgery
•       Not including all of the owners’ signatures on the title
•       Undisclosed heir of a previous owner

The Process

Shortly after escrow opens on your home purchase, someone will order a title search. Who this “someone” is varies by region but it is typically the buyer’s attorney or, more likely, the title company.

The title company or investigator will examine public records, looking for legal ownership of the property and to determine if there are any claims or liens. He or she will follow the “chain of title,” or all previous owners to ensure there are no previous clouds on the title.

When the investigation is complete, the home buyer is issued what is known as a preliminary title report, listing any findings of the investigation. The insurance policy guarantees that all is well with the property’s title.

The Two Types of Title Insurance

There are two types of title insurance, the owner’s and the lender’s policies. The former is usually issued for the same amount as your loan and is valid for as long as you or your heirs own the home. You will pay just one fee for the policy at closing. This insurance is not mandatory.

The lender’s policy, on the other hand, is a lender requirement and it protects the lender in the event that a claim is presented that wasn’t found during the title search. You will pay the annual premium for the life of the loan.

The party that pays for the title insurance varies by region and the cost at closing can be significant. Remember, the lender’s policy is required and the home buyer derives no benefit from it should a problem pop up. You will only be protected with an owner’s policy.

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2 Things to Know about Home Inspections!

While a home inspection report is vital before purchasing an older home, such as in Sugar House or the Avenues, experts agree that even newer homes should be checked. Not only will the report help you learn about repairs that should be made immediately, it’s a handy reference guide to keep on-hand throughout the time you live in the home.
Because there are so many aspects to a professional home inspection, many first-time home buyers know little about the process. We’ve chosen two aspects that we find most of our buyers don’t know a thing about.

1. Report Format
Professional home inspectors use different formats when detailing information about the house. All reports, however, should contain several common features:

• A description, in detail, of the condition of the home’s major systems.
• A list of items that require immediate repair.
• A list of general maintenance items.
• Photographs.

Ask inspectors that you interview to supply you with a sample report. Ensure that the above items are included and that the inspector not only lists what’s wrong, but why it’s a problem and what should be done to remedy it.

2. Choosing an Inspector
Choose your home inspector carefully, as any mistakes made will cost you money down the road. At the same time, keep in mind that the home inspector performs a visual survey. He will not tear up walls or floors to look for problems. A professionally trained inspector, however, knows what to look for and can spot warning signs.
The price you pay for a professional home inspection during the home purchase process is worth every cent and usually varies around the $500 mark, depending on how thorough of an inspection you want and additional tests. Use due diligence and hire the most experienced, professional home inspector in your area and complete your home purchase with confidence.
Where will you find this super-sleuth? Ask everyone you know, including me, your real estate agent.
By the way, it’s a good idea to tag along with the inspector after the inspection. This way you can ask questions while on site, rather than later, after looking at a report. Most inspectors welcome a “ride along” with the potential homeowner.

Please CONTANCT US with any questions!