If this is your first time purchasing a house, you should think about how to protect yourself in case something goes wrong with your new residence. You may have heard about getting title insurance. This is a form of coverage that may help you if you encounter legal problems with your new home after you have bought it.
To understand how title insurance may be of value, you should first understand the concept of a title search. Title insurance is like a failsafe in the event a title search does not uncover all title defects.
Conducting a title search
Before you purchase a home, the title insurance company will have a title examination performed on the property you want to buy. This should uncover any defects with the title before you make the purchase. You will be able to find out if there are any liens on the home, if someone has an ownership claim on the house, or if the current owner has any unpaid property taxes.
If the title company discovers title problems at this stage, they will have them corrected or give you the opportunity to decide if you’d rather look for a different home if the title defects seem too daunting. However, it is possible the title search will not turn up a problem before your purchase goes through.
The use of title insurance
U.S. News and World Report explains that buying title insurance gives you coverage in case an unexpected title defect arises after you become the owner. Basically, title insurance covers expenses that you might otherwise be on the hook for. This means if a court has placed a lien on the home that is worth thousands of dollars, your title insurance will likely pay off the expense.
To take another example, a person may show up at your door claiming to have ownership of the home through a will or another estate document. Title insurance can pay your legal costs if you become involved in litigation over who has the rightful claim to the property.
The cost of title insurance
In Ohio, the cost of title insurance is based upon the purchase price of your new home. The price of buying title insurance is likely to be much lower than the costs you would have to pay to settle a title defect.
Additionally, title insurance is not something you pay monthly amounts on like homeowner’s insurance. You make a one-time payment and hold on to the policy for as long as you retain an interest in the property. Once you have made your payment, confirm that your title insurance is in place before you sign your closing documents. This will be on your closing statement, and is often paid by the other party.