When you’re ready to buy a home, the topic of title insurance is going to be on your to-do list. Though for many people, title insurance may seem a mystery, it’s worth your while to understand both the importance of title insurance and the title process. Today, we’re going to take a closer look at the process itself, so you can know what to expect and why it’s vital when buying your new home.
Obtaining title insurance can feel like just one more step in a complicated process of purchasing property, but in truth, title insurance protects you, the homebuyer, and your investment. When you find the property of your dreams, there’s no doubt you’re picturing exactly how you want to transform it into your home, and that may include changes to the surrounding land as well. Title insurance ensures you have the ability to use your property in the way you intend. To do that, the title process itself is detailed.
The first steps in the title insurance process are the title search and exam. The title insurance company you select does a deep dive into public records to identify any title risks. As properties can have long and storied histories, you can imagine the level of detail required for a comprehensive review of a title. The goal is to identify any of what we call title defects, which could include liens, unpaid taxes, judgments, bankruptcies, probate issues and more, anything that would prevent that property title from being transferred to you. Your title insurance company will likely also look at the property specifications themselves, such as zoning, surveys, location and the like.
Title defects are common, and by industry estimates, as many as one in three title searches may unearth an issue that could affect your right to take ownership of the property. Typically, these must be reconciled before moving forward with closing. When it is a relatively minor issue, such as a low-balance second mortgage the seller has taken on the home, it can be reconciled relatively easily. In other cases, title professionals work to remedy the title defect, or they may opt to insure around the risk that has been uncovered. It’s a ton of work that typically happens behind the scenes of the homebuying process, as you’re working on the front end to make sure everything is in order.
When the title insurance professionals have completed their work and have determined that the title to the property can be insured, they can issue a title insurance policy. If you have purchased owner’s title insurance, that policy will protect your interests, while a lender’s title insurance policy protects your mortgage lender for the amount of the mortgage loan. Your title insurance typically will insure you from loss related to title defects and may also protect you from issues that may not be uncovered through the public records search, such as forgery and fraud.
Now that the title process is coming to a close, your title professionals will typically conduct the closing process. In addition to finalizing documents, they may arrange for property inspections, depositing funds, paying off past mortgages and more. They will also help close the transaction and submit the necessary public records.
It’s easy to see that purchasing property is a complex process, and like many complex processes, those who are good at it make it look easy. By choosing a title insurance company you can trust, you will enjoy greater confidence in their ability to uncover title defects. In the end, title insurance is all about protecting your investment, so above all, it’s important to find a reputable, knowledgeable partner to help you through the title process.