UNDERSTANDING TITLE INSURANCE

If you’re buying a home, you’ll have to purchase title insurance; Lenders require it. But what is title insurance?

To ensure that the party you are buying your home from has full and legal title, a title company or attorney will research the history of ownership at the local property records office. But while the records may be official, they’re not necessarily correct. In addition, a “cloud” on the title could affect its transfer. Examples of clouds include tax liens, easement problems and mechanics lien, made by a contractor or repairman for unpaid bills.

Here’s where the title insurance comers in. One form of title insurance is lender’s coverage, designed to protect not you, but your lender in case of title problems. As a Buyer, you are required to purchase this form of title insurance, which provides protection up to the original mortgage amount.

You can also purchase owner’s title insurance coverage, which protects your equity. Inflation riders are often available to ensure that as the value of your home goes up, the title insurance will follow.