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Is the Title Clean?
When you decide to buy a new home, you want to be sure the property will be yours and that no one else will have any liens, claims, or encumbrances against your home, other than (if applicable) your mortgage. Once purchased, title insurance remains in effect for as long as you own your home.
Loan Policy - Lender
A loan policy insures your lender's security interest against loss due to defects in your title that were not discovered at the time of sale. The lender usually requires the buyer to purchase this policy in order to secure their new mortgage. This policy protects the lender - it offers no protection for the homeowner.
Owner's Policy - Homeowner
Just as lenders want security with their title policy, you should protect the equity in your new home with a title policy. Your policy should be backed by a reputable title insurance company.
The seller usually pays for the Owner's Policy, which provides the following:
- Protection from financial loss due to covered claims that may be asserted against the title to your home, up to the face amount of the title policy.
- Payment of legal costs if the title insurer has to defend your title against a covered claim.
- Payment of successful claims against the title to your home covered by the policy, up to the face amount of the policy.
Some common hidden risks that are protected under a title policy include:
- False impersonation of the true owner of the property by your seller or other persons formerly in title.
- Forged deeds, releases and other documents
- Deeds by persons of unsound mind
- Deeds my minors
- Invalid documents executed under expired power of attorney
- Invalid deeds delivered after the death of the grantor
- Deeds by supposedly single persons who are actually married
- Fraud
- Liens for unpaid estate inheritance and gift taxes against prior owners of your home
- Unrecorded easements - rights of way
- Undisclosed heirs of former owners of your home or the land on which it is situated.
So once title of your new home is transferred to you, title insurance will allow you to rest assured that the home is yours in deed.
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