After months of looking at homes for sale in California, you have finally found your dream property. You are about to dot the i’s, cross the t’s, and close on the house. If you are taking out a mortgage, title insurance will be one of the closing costs. The premium is a one-time charge designed to protect the lender, and here’s what you need to know about it and what costs you can expect.
What is title insurance?
Title insurance is another kind of insurance policy. The term “title” refers to a person’s legal ownership of the property. The policy covers third-party claims on a house that do not appear in the initial title search that occurs after a buyer has closed on a property. A title claim can occur at any time, and someone may claim to have legal rights to the property when you make an offer on the house.
Your mortgage lender will order a title search from a title company, which will search for public records related to your home to find anything that could affect the mortgage lender’s or your property rights. These can include liens, which are placed on a property by a contractor, tax authority, or mortgage lender who has not been paid. Easements note someone else’s right to use your property, such as a utility company that has access to utility lines in the backyard, or encumbrances, which include zoning laws, covenants imposed by homeowners associations, and leaseholder rights. If the title company finds any problems, they will also try to resolve them and will reach out to the seller’s agent if needed.
After the title company completes its search, a title commitment is made. This document lists any potential issues, exclusions, or exceptions and states the conditions under which the title company is willing to provide title insurance. Sometimes, the title company will ask the seller to resolve certain problems. The title company will also notify the buyer of existing issues that could cause problems in the future.
There are two kinds of title insurance: title insurance for the loan company and title insurance for the owner. The lender’s title insurance is in effect until the loan is paid off and protects the interests of the mortgage company. The policy ensures the lender has the top claim on the property, which is essential if any claims arise. Owner’s title insurance protects the homebuyer from any previous issues that can occur once you own the home. Both types of title insurance only need to be purchased once.
Your mortgage lender will order a title search from a title company, which will search for public records related to your home to find anything that could affect the mortgage lender’s or your property rights. These can include liens, which are placed on a property by a contractor, tax authority, or mortgage lender who has not been paid. Easements note someone else’s right to use your property, such as a utility company that has access to utility lines in the backyard, or encumbrances, which include zoning laws, covenants imposed by homeowners associations, and leaseholder rights. If the title company finds any problems, they will also try to resolve them and will reach out to the seller’s agent if needed.
After the title company completes its search, a title commitment is made. This document lists any potential issues, exclusions, or exceptions and states the conditions under which the title company is willing to provide title insurance. Sometimes, the title company will ask the seller to resolve certain problems. The title company will also notify the buyer of existing issues that could cause problems in the future.
There are two kinds of title insurance: title insurance for the loan company and title insurance for the owner. The lender’s title insurance is in effect until the loan is paid off and protects the interests of the mortgage company. The policy ensures the lender has the top claim on the property, which is essential if any claims arise. Owner’s title insurance protects the homebuyer from any previous issues that can occur once you own the home. Both types of title insurance only need to be purchased once.
What does the owner’s title insurance cover?
The policy typically covers any underlying issues with a property’s title that could have been missed before you purchased the home. Title insurance can protect you against problems such as boundary disputes, conflicting wills, encroachments, liens, and building code violations by a previous owner. Essentially, title insurance protects you from issues that occurred while the property was under different ownership and helps ensure that you and your loan provider have the top claim on the property.
How much is title insurance?
Purchasing title insurance is a one-time fee. The price of an owner’s policy is based on the home’s purchase price, and the lender’s policy is based on the loan amount. Combined, both policies cost around 0.5% to 1% of the home’s purchase price. Typically, the buyer purchases the lender’s title insurance policy as a part of the closing costs. The previous homeowner is usually the person who pays for the owner’s title insurance at closing. The buyer pays for title insurance in northern California, but the seller typically pays the premium in southern California. There is no set rule; it’s typically a matter of custom. Sometimes, buying both the lender’s and owner’s title insurance simultaneously can lower the cost of the owner’s policy.
Where to buy title insurance
Your mortgage lender will choose a title company for you, but you can choose which title insurance company to use. The seller, mortgage lender, and your real estate agent will provide some recommendations, but the final decision is yours. You can shop around and compare prices, coverage, and conditions. You can also research the coverage options available to you, as these can vary based on location, purchasing price, and various other factors.
Working with a company that provides you with comprehensive information and has strong partnerships with its customers and communities is recommended. Your title insurance agent will walk you through any exclusions in the policy and any outstanding claims made against the property. Finding an agent that will spend time discussing your needs and the specifics of the plans available to you will make you more comfortable in your decision and help you understand what your policy will do. If a claim arises after purchasing a policy, then your title insurance company is required to help you resolve the problem. The company may negotiate on your behalf, such as if an old mortgage is discovered. While the lender’s title insurance will be purchased at closing, you can buy the owner’s title insurance any time after purchasing a house.
Working with a company that provides you with comprehensive information and has strong partnerships with its customers and communities is recommended. Your title insurance agent will walk you through any exclusions in the policy and any outstanding claims made against the property. Finding an agent that will spend time discussing your needs and the specifics of the plans available to you will make you more comfortable in your decision and help you understand what your policy will do. If a claim arises after purchasing a policy, then your title insurance company is required to help you resolve the problem. The company may negotiate on your behalf, such as if an old mortgage is discovered. While the lender’s title insurance will be purchased at closing, you can buy the owner’s title insurance any time after purchasing a house.
Do you need title insurance?
Lender’s title insurance is usually required if you are mortgaging your home. Owner’s insurance is not required in California but is recommended by many experts to safeguard against possible problems that may arise. Especially as buyer’s insurance is a one-time fee, then it can be worth it as anyone could make a title claim at any point. The owner’s title insurance is effective for as long as you own the policy, and if all goes well, you will never need to use it. Title insurance is one of those things that you will be glad to have if you need it.
To better understand title insurance and find the best policy that meets your needs, it’s essential to work with a trusted company that knows the ins and outs of the field. Contact Consumer’s Title Company today with questions about owner’s title insurance.
To better understand title insurance and find the best policy that meets your needs, it’s essential to work with a trusted company that knows the ins and outs of the field. Contact Consumer’s Title Company today with questions about owner’s title insurance.
