Mortgage 101: What Is Title Insurance and Why Do You Need It to Buy a Home?

Posted by Laine Smith on 4/19/17 9:19 AM

Topics: First Time Home Buyer home buying

Though insurance isn’t likely one of your biggest concerns when it comes to purchasing a home, understanding why you need it and how it protects you is essential. You need various types of insurance to make a home purchase, and title insurance is one of those. See how it gives you peace of mind throughout the homebuying and homeownership process.

Mortgage-101-Title-Insurance.jpg

iStockPhoto/Jirsak

What is a title search?

When you hear the word “title”, it’s often referring to both a title search and title insurance. Insuring and searching a title is a two-part transaction. A title company searches a property’s title history to make sure it’s clear of any defects, such as other claims or property liens.

A couple examples include a seller who co-bought the property with a family member who hasn’t signed off on selling the property or a seller who has a lien on the property due to unpaid taxes, child support or contractor services.

A title company and search is essential to making sure that a home seller has the right to be selling the home and property and that the property is not collateral for an owed debt.

What is title insurance and why would I need it after a title search?

Another role of a title company is to issue insurance to a property buyer to guarantee against fraudulent ownership claims. Title problems can occur event after a title search, but title insurance is peace of mind that your title company will stand behind you, both monetarily and legally, if a covered title problem arises.

When do you pay for the title search and insurance?

Title insurance policies, as well as the title search, are paid in full at closing. To see a breakdown of typical closing costs, click here.

For more information about the homebuying and home financing process, loan options, credit scores, and more, download our free Mortgage 101 Handbook.

Download: Mortgage 101 Handbook

Subscribe to Email Updates

Posts by Topic

see all