Buying a home is one of the biggest and most exciting decisions of a lifetime. It’s also one of the most expensive! We know there is a lot of information to take in, and a lot to consider when buying your next home. Here is what you should know about title insurance:
What is a title?
When you purchase a home or a tract of land, you’re handed a title, which is essentially a piece of paper that says that the you, the owner, are in possession of and legally able to use the property. The type of title can vary, depending upon the state of ownership and the property. For example, a government lien may be in place due to unpaid taxes, or another individual or company may have rights to the property. Insuring your title will help you to prevent any unforeseen, and potentially detrimental, circumstances.
Why do a title search?
If you’re going through a lender to purchase a property, a title search is going to be standard operating procedure. However, it never hurts to conduct your own search! You should certainly do so if you aren’t using a lender who will require a third party search. The title search will provide you with a history of the property’s ownership as well as bring up any issues that may exist, such as other owners or liens.
What is title insurance?
Title insurance covers those problems that may have existed prior to your purchase of the property, such as previous liens by other owners, etc. It’s important to note that title insurance will not cover any new issues that may arise due to your ownership of the house or land.
How do you get title insurance?
Before issuing a policy, the insurance company will run a title search to determine the risks. Any issues that arise will typically be dealt with prior to closing. Any identified problems that are not addressed will be listed as an exception to the policy, and a decision will need to be made by you as to whether or not you wish to pursue the purchase.
Why get title insurance?
While newly discovered issues that have not previously been addressed will not be covered, there are many problems that may be discovered after closing. For the most part, title insurance covers these issues and the fees associated with defending you against any claims concerning any prior existing issues. Some examples include: forged or fraudulent documents from prior owners, wrongfully executed deeds, or even cases where the property was sold to another individual who also possesses the property without your knowledge.
If issues like these were to arise, a good title insurance policy will cover you. Most lenders will require that you obtain a lender’s policy as opposed to an owner’s policy. This policy will cover only the amount of the loan, meaning that the amount covered will decrease as you pay down your mortgage. It’s important to note that your equity is not protected, making you more and more vulnerable with each mortgage payment. This is where an owner’s policy can be essential, as this policy will cover the property’s value in its entirety at the time of purchase. In order to protect yourself in the event of inflation and increased property value, you may also want to purchase an inflation rider that will take these factors into consideration.
Are you looking for a great Nashville home? Our award-winning real estate agents are here to help. Give us a call at DeSelms Real Estate 615.550.5565