The more you know about the home buying process, the more confident you will be in making the critical decisions that will shape your home ownership experience. Several things happen behind the scenes when you buy a house.
What is title insurance?
Title insurance protects you from problems with an ownership title when you buy real estate. Title companies search for problems with the title that need to be corrected before you buy the property. If there is a challenge to your ownership later, your title company will handle the dispute.
Why do I need Title Insurance for a new house?
When getting a mortgage through Metro Credit Union, we will have someone perform a title search to ensure the seller has a legal right to transfer ownership and look for liens or restrictions on the property. A lawyer, abstractor, or title company employee does the title search.
Title Insurance is not homeowners insurance.
Title insurance: Protects your ownership of the property. You pay the premium one time when you close on the sale of the property.
Homeowners insurance: Protects you from losses due to fire, weather, other types of property damage, or theft. You pay your homeowners premium every year.
There are two kinds of title policies.
- Owner's Policy: Protects the homeowner. It is suitable for as long as you own the property.
- Loan Policy: Protects the rights of the lender. It is good until the loan is paid off.
Title insurance protects against financial loss in case of a defect in the title turns up in the future. Possible defects include:
- Flawed information in deeds or mortgages (like an incorrect name)
- Liens or claims against the property or property owner (unpaid taxes or bills for water service)
- Claims to ownership from a former owner or spouse
- Invalid deeds (from a past sale or transfer by a party who didn't actually own the property)
Other types of insurance that may be required other than Homeowner's Insurance is Private Mortgage Insurance and Flood Insurance. When you acquire a mortgage with less than a 20% down payment, mortgage insurance coverage helps protect the lender in case you can't make your payments and default on the loan.
Flooding is not covered by a standard homeowner's insurance policy; you will need to ask your insurance company about the flood history in your area. Read more about the basic types of insurance you should know about.
Take a free Save and Succeed course to prepare potential homebuyers and current homeowners for the financial impact of a major purchase, with a focus on securing financing and mortgage management. Let the mortgage team at Metro Credit Union help you with further questions and assist in fulfilling your homeownership dreams.