What is mortgage title insurance? - April 9, 2008
If you are thinking of buying your own home you will eventually come across the words “title insurance”. But what is meanth by that?
For the most part, title insurance is almost always required by the lender. This insurance will protect the lender againts loss resulting from any legal claims by others against the purchased property. Some lawyers offer this insurance as a portion of their services in examining the home’s title and providing a title option whether it is clean or not. Sometimes you need to get the services of a title insurance company or title agent directly to get this type of insurance.
But be aware of the fact that this insurance policy does not protect the consumer but the lenders. The prior owner’s policy goes in the same direction, it does not protect you. An owner’s policy is what you need to get if you want to protect yourself againts the claims by others against your new home. And you should definitely get one because any claims can be financially devastating if you are not properly insured.
Keep in mind that you can save a bunch of money if you buy an owner’s policy at the same time and with the same insurer as the lender’s policy.
Purchasing an insurance from any title company is not required by all home sellers as a condition of the sale. The mortgage lender will be the one who requires an insurance from an acceptable and reliable company. If you are the homebuyer you can choose a company that meets the lenders requirements.
A few weeks before the closing of the escrow the insurance company will issue what is called a “commitment to insure”. This is also called a preliminary report or “binder” and contains a summary of all defects that where identified during the title search. This piece of paper is sent to the mortgage lender for use until the insurance policy is issued at or after the closing.
You can have a copy sent to you if you wish to. This way you or your lawyer can examine it and take actions if needed.
As with every insurance you should compare the rates between different title insurance companies as the prices may vary greatly. Ask about the services and limitations under each policy and decide if the coverage pruchased at a higher rate may be better for your personal situation.
Many states in the US have dictated insurance premium rates and those rates may not be negotiable. If the home has already changed hands during the last several years you can save money if your title company offers you a “reissue rate”. Be sure to ask for that!
If you are purchasing a brand new home be sure that your policy covers “mechanic liens”. This are claims issued by contractors.
A survey to mark the boundaries of the property is often required by mortgage lenders of title insurance companies. This is just a drawing of the property showing the perimeter boundaries and marking the location of the home and any other improvements that might be on the land.
When you have the possibility to get your hands on a past survey you can save some money if there were no changes made to the property since this survey. Be sure to check with your lender or insurance company on whether an updated survey will be acceptable!
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