When buying a home, you are presented with many choices and will be responsible for paying many different costs along the way. Eventually, there will come a point when you will be asked about residential title insurance.
Do you want to purchase a residential title insurance policy?
How will you answer? Do you fully understand title insurance and why you need it?
Don’t move forward with buying your home without taking the time to understand what residential title insurance is – and what the consequences are if you decline the coverage. Keep reading to find out what every homebuyer should know.
What is Residential Title Insurance?
Residential title insurance is a protection available to you that guards you from any claim made against the title of your property. Anything that may arise after you take possession of the property will be handled on your behalf, including:
- Fraud or forgery
- Errors in the recording of legal documents
- Missing or unknown heirs
- Liens for outstanding taxes
- Any improperly signed deed
Types of Title Insurance
There are two main types of title insurance you will want to consider when purchasing your residential property — lender’s title insurance and owner’s title insurance with standard and enhanced policies.
Both types of title insurance are in place to protect from financial loss. However, each policy differs in who it protects and how much it will cover. For instance, an owner’s title insurance policy is in place to protect the purchaser of the property and will typically cover a loss up to the property’s purchase price. A lender’s policy, on the other hand, protects the lender with coverage equivalent to the remaining principal on the mortgage.
It is important to note that each policy only covers the intended party. Don’t expect to be protected personally from a lender’s policy.
What Happens if You Don’t Have Title Insurance?
When a homebuyer chooses to not purchase title insurance for one reason or another, they may find that nothing at all ever threatens their property rights. However, title issues can arise when you least expect it and this happens more often than you’d think.
It only takes one unexpected claim to cause terrible financial losses.
So, what happens if you don’t have title insurance?
You would be responsible for fighting for your rights to title. This will almost always require you to retain an attorney and may potentially lead to legal battles in the courtroom. If the claim is valid, then this fight can be big and can even cause you to lose your home.
Now, not every title insurance hiccup involves the rights to the entire property. Quite often it is a lien or a judgment that was erroneously recorded and didn’t show up on the title search. Even so, these can be tens of thousands of dollars. Title insurance will cover the cost unless you have turned down the coverage. Without title insurance, you will be responsible for paying off the lien or judgment.
Learn More About Residential Title Insurance
Our name may be Loudoun Commercial Title, LLC, but we have extensive experience in handling residential real estate transactions, too – including providing residential title insurance. If you have questions, we have answers.
Contact us today at 703-737-3800.