If you are purchasing a house, you might want to talk about title insurance with your lender, or get in contact with an agent, specializing in title insurance. Title insurance is a security policy that shelters you and your lender from trials and tribulations related to the property’s title before the policy was written.
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These issues can include, but are not limited to, possible past title forgeries, any unpaid property taxes, and any property liens, which include foreclosure. Title insurance is unique in that it protects you from past issues that affect you now; unlike home owners insurance and car insurance, which tend to focus on potential future issues and problems.
There are three different types of title insurance:
- The basic lenders policy
- The basic owner’s policy
- The extended owner’s policy
When Searching for Title Insurance, Comparison Shopping is Key
Tips for saving money on title insurance:
- In many states, it’s a requirement that the seller pays for your title insurance policy. If not, it can be negotiated during closing, or you can simply ask them to do so.
- Ask the closing attorney or title insurer if you can have the current title reissued. This can save literally save you hundred of dollars, but you must ask, because no one will offer this to you outright.
- If there are exceptions on the title insurance policy you purchase, ask the title insurer or mortgage lender if they can be removed from the policy.
- Title insurance pricing varies from state to state. In some states you are able to shop around for the best pricing, while in others it’s controlled tightly by the state, and you won’t see much difference, if any.
Some states don’t regulate title insurance rates, so you are free to comparison-shop. They are: Alabama, West Virginia, Washington DC, Hawaii, Oklahoma, Illinois, Massachusetts, and Indiana. Other states require approval for title insurance rates, but you are still free to shop around. These states are Pennsylvania, New York, Ohio, New Jersey, and Delaware. Florida sets its title insurance prices. Don’t even bother comparison shopping in New Mexico and Texas, where the state governments legislate the pricing for all title insurance companies in these states.
Title Insurance Comparison Shopping Protects You and Your Lender
Title insurance for the owner is given out for the exact amount of purchase of the house. It is purchased for a surcharge that lasts as long as you and or family have interest in it. The amount you are charged can vary between states, but is generally about 1% of purchase price of the house or land. This is according ALTA, the American Land Title Association. According to the California Land Title Association, for example, the price of the owner’s title insurance can be anywhere from $1200- $2000.
If a problem arises with the title that didn’t come up during the title search, your owner’s title insurance is there to protect you, as well as pay any and all legal fees that may be incurred.
A records search can bring up just about anything you want to know about your house or property. The surcharge mentioned previously is earmarked for administrative charges for searches at large research facilities. Here, information about the history of houses and land is stored specifically for this purpose. In some parts of the US, the “chain of title” can date all the way back to the 1800s. Short searches are the most common when it comes to residential dealings, which includes pursuits that are usually between one and three deeds back in time.
Lender’s title insurance is required in many states, if the mortgage is to actually be closed. However, the lender’s type of title insurance has a cap on it that protects the lender only up to the actual amount of the mortgage, but doesn’t do anything to protect your own equity in the house or land.
The limits of a home owner’s title insurance policy vary from state to state, as well. A home owner’s policy will defend the entire worth of your home, including what you already have financially put into the house or land for less than a few hundred dollars. Additionally, sellers will pay for the owner policies themselves, just to show the buyer good faith on the title, while some borrowers have to add it on to their lender’s title insurance policy.
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