So, you’ve bought your first home – Congratulations! Now, let’s talk about title insurance. Unlike property taxes, down payments, closing costs, and inspection fees, title insurance is another one of those camouflaged fees hiding in that pile of paperwork you can expect to receive at your loan closing.
If you don’t know what title insurance is in the first place, you might mistakenly turn it down when the seller brings it up, which could end up costing you a bundle down the road. Here’s a crash course on title insurance, how it works, and how much you should expect to pay for it.
To put it simply, title insurance keeps you protected from a financial loss related defects on your title. In the world of title insurance, there are two types you need to know about: the lender’s policy (required), and the owner’s policy (optional). You only pay a one-time fee upfront with either policy.
So, if the research company doesn’t find anything wrong with the title of the house you’re buying, do you still need to buy title insurance? The answer is yes. That’s because, despite a research company’s efforts to find any kind of error or legal claim against the property you’re buying, it’s always possible that an unresolved issue could still rear its ugly head in the future.
If, for example, there were a pending lawsuit or legal judgment on the property you purchased, it may not show up on the title for several years yet. That means you could get stuck with the legal ramifications if you don’t have title insurance to protect you. And so, for added protection, you want to buy title insurance.
While title insurance and title loans are two completely different things, having title insurance could prevent a nasty financial situation, whereas otherwise, a title loan might offer some relief. Title loans are short-term loans that most car owners could take advantage of when under financial fire. If you ever found yourself in an unexpected financial emergency, a title loan could offer some much-needed cash in a pinch.
As far as cost goes, it really depends. In some cases, you may be able to work out a deal where the seller pays for both policies. But if it’s up to you to front the money for an owner’s policy, you may not have to pay as much as you think. Since the cost of title insurance varies from state to state, there’s no fixed price point. However, you should be prepared to pay between $500 and $1,000 for an owner’s policy according to ValuePenguin.
Nobody wants to get stuck in a financial quandary, especially after just buying a new house. Besides, you don’t want to get caught up in a nasty situation that could reverse all those years of financial progress, right?
Hopefully, this article helped you pick a side if you’re in the process of buying a house and on the fence about purchasing title insurance. As the old saying goes, “Better to be safe than sorry.” And when it comes to buying a home, being safe is the best thing to be!