Fairfax Title Company Blog

Many home buyers feel overwhelmed by the process of purchasing a home, and thoughts of home security over the long term are pushed for later. You likely have already prepared with homeowner’s insurance, but title insurance is another important coverage to consider when purchasing a home. Be sure to learn more about what owner’s title insurance can do to protect your investment before you close. Here is what you need to know:

What Is The Difference: Owner’s vs. Lender’s Policy:

If you are already aware of title insurance, it may be because you see it as a line item that you are paying for during closing. Be sure to carefully read all of your purchase documents; they may include a section requiring you to purchase title insurance. Most often, you will be required to pay for a lender’s title insurance policy as part of closing, but this policy does not cover you as the homeowner.

The line item you typically see for title insurance protects your lender who requires you to pay for title insurance coverage on their behalf. This protects their investment in you and your home. However, if you want your own coverage, you will need to secure a separate owner’s policy in your name, not the lender’s.

Some buyers are able to negotiate the cost of this policy into the purchase agreement with the seller, but the seller is under no obligation to offer this as an incentive. As a buyer, you may be responsible for this process yourself. Title insurance cannot be transferred from the seller to the buyer; if you want this type of protection you will need to secure your own policy.

Most Common Owner’s Title Insurance Coverages

A title insurance policy bolsters the protection already provided by homeowner’s insurance for a very affordable price, and it lasts for as long as you own the home. Title insurance covers defects and issues with the title of your home. This document tracks who has owned the property, how and when it has changed hands and whether any legal action has been taken.

For example, if a previous owner failed to pay their property taxes, a lien may have been placed on their property demanding them to pay the amount due. If you purchase the property without being aware of the lien, or if the lien is discovered after you buy, you are responsible for paying this debt, even though you had no part in creating it. Title insurance protects against this and other similar events, preventing you from being financially responsible for a mistake or omission in the home’s history.

Similarly, title insurance usually covers formerly undisclosed heirs, fraud and forgery that could threaten your ownership of the property. Without title insurance, you would have to pay legal fees to contest these claims and could even lose the home, as well as any equity you put into it.

Areas Not Usually Covered

Title insurance is flexible; therefore, an experienced provider can craft a policy that is right for you. Physical Issues with the property discovered after you purchase, some of which may require major repairs, are not covered under this type of policy. It also does not protect your home against physical damage; these types of problems are resolved under homeowner’s insurance. Many title insurance policies will not cover you against zoning issues or border disputes unless you pay for these services or purchase an upgraded policy. Be sure to read all of the documentation to understand what is covered and what is not before you sign.

Calculating The Cost Of Title Insurance

Title insurance is generally affordable because it is priced at a percentage of your home’s value. Most people will pay about $1000 on average, but that cost can vary depending on the sales price of your home. However, unlike other types of insurance in which you pay a monthly premium for the life of the policy, title insurance is a one-time fee. Coverage is paid by a single lump sum and provides protection as long as you own the home.

Trust The Pros To Help You Create The Right Title Insurance Policy For Your Needs

If you are ready to purchase title insurance for your new home, be sure to work with experts who will design a policy containing the right coverages for your property. The professionals at Mathis Title Company would be happy to help you understand your title insurance options and select what is right for you. Contact our experienced team to schedule an appointment today.

When homeowners purchase a property, the protection that mostly springs to mind is homeowner’s insurance. This type of policy, which protects against sudden, unexpected problems like wind damage or fires, can go a long way toward keeping a new home safe.

However, it does not cover a wide range of issues that relate to the property’s title—the document that records ownership and other important details, as well as how they have changed over time. This might not seem like important information, at first glance. What does it matter who owned the house in the past if you own it now? But title insurance is a critical element of keeping your investment in a property secure.

What An Owner’s vs. Lender’s Policy Covers

The next most common assumption that homebuyers make is that they have already purchased title insurance because there was a line item for it during closing. Unless the buyer specifically approves a policy for themselves, what usually happens is that the lender requires the buyer to purchase title insurance for the lender. A lender’s policy protects the entity that is funding the mortgage from loss should a problem arise with the title; it offers no protection at all to the buyer themselves. They will need their own separate owner’s policy in order to see any protection in the event of a title issue.

Problems with a property’s title come in many forms, but the most common are the following.

Liens On The Property

A lien is a claim against an asset for the purpose of paying off debt. If a home was previously used as collateral on a debt and the debtor failed to pay what was due, the creditor is legally permitted to seek compensation by putting a lien on the home. Liens should be disclosed before a property is sold, but sometimes they are not properly documented.

A buyer could purchase a home and later discover that it does have liens on it that remain unpaid. If this is the case, the current owner would be responsible for paying off the liens, even if they were not the ones who caused them in the first place. Title insurance defends against undisclosed liens.

Claims Of Adverse Possession

The rule of adverse possession exists to prevent empty properties from going unused. If a person (like a squatter) resides in a property long enough, they may make a claim of adverse possession to gain legal rights to the property. If a buyer tries to purchase a property for which someone tries to claim adverse possession, title insurance can protect against this legal claim.

Formerly Unknown Or Undisclosed Heirs

Some of the strongest claims of ownership to a property come from heirs because they are legally granted ownership due to enforceable documents such as wills. Sometimes, when a will is executed, the heir who is intended to receive the home cannot be located, or the executor does not know that they exist. If the heir appears later, after a new buyer has purchased the home, they may claim ownership at that time unless the owner has a title insurance policy.

Fraud And Forgery

Forgery and fraud of wills, transfer documents, and more cost real estate companies millions of dollars each year. If a buyer purchases a home whose documents have been forged, they may not have a legal claim to the property. Title insurance can help them to keep their investment secure.

Zoning And Boundary Issues

Some types of title insurance, such as enhanced policies, will include coverage for disputes such as boundaries and property lines. A buyer who purchases a home based on a certain element of the property, then later learns that the neighbor claims that element as theirs, may find themselves in a tough spot without title insurance to protect them.

How Affordable Is Title Insurance?

Title insurance is not a cumbersome investment. In fact, it is secured as a one-time payment rather than via monthly premiums like most insurance, making it highly affordable. Those who pay for title insurance just once are protected for as long as they live at the property, and the cost of the insurance itself scales according to the cost of the home. It should never become excessively pricey.

Trust The Professionals To Help You Craft A Comprehensive Title Insurance Policy

Whether you have questions about what title insurance covers or you are ready to secure a policy, trust reputable professionals to help. The experts at Mathis Title Company would be happy to walk you through how title insurance works. Reach out to schedule an appointment to ask questions or to get started on constructing a policy with the ideal protection for your situation.

Title insurance is just one of many potential line items that home buyers face at closing. The entire process of buying property can feel overwhelming, with paperwork to sign, multiple parties to contact, and large amounts of money changing hands.

The good news is that title insurance does not need to be complicated—in fact, it is a simple step in the closing process that protects a buyer’s new investment against unexpected loss. However, in order to make sure that you are properly covered, you should understand the difference between a lender’s policy and an owner’s policy, as well as what is required during closing and what is optional.

What Is Title Insurance and What Does It Do?

Title insurance is just one type of insurance that a homeowner can hold to safeguard their property. It is not the same thing as homeowner’s insurance, which protects against accidents and damage such as fires or a tree crashing through the roof. Instead, title insurance focuses on the property’s deed—the record of who has owned the home in the past, when it was sold and more. If errors crop up in this important record, the homeowner may find their investment in jeopardy.

For example, say that a buyer closes on a home that they purchase from another private buyer. After the purchase is complete, they find out that the previous seller was not the true owner of the property and so did not have the legal right to put it on the market. In this case, the new owner does not legally own the home, and they may be forced to move out and lose any equity they have put into the property. This is just one potential example of an erroneous deed that can threaten homeowners.

Title insurance protects against circumstances like this. It covers errors in the title itself, such as forgery and mistakes, as well as other common issues such as the discovery of previously unknown heirs. Buying a home is the biggest investment that many people will make in their lifetimes, and title insurance keeps that financial decision secure.

What Is the Difference Between Owner’s and Lender’s Title Insurance?

When buyers go through the closing process, one of the most common mistakes they make is to assume that title insurance is included in all of the paperwork. This usually happens because they see that they are paying for what’s called a “lender’s title insurance policy.” However, a lender’s policy is not the same thing as an owner’s policy.

The lender—which is the entity that is lending money, usually in the form of a mortgage—requires the buyer to purchase title insurance for them to protect their financial investment. If a problem arises with the title, the mortgage company does not want to lose their money.

This lender’s policy applies only to the lender themselves, and it will not cover the homeowner. Instead, the buyer will need to purchase their own policy, called owner’s title insurance. Title insurance is valid for the entire time that the designated person lives at the property, so a one-time payment protects you for as long as you live in your new home as long as you have your own owner’s policy.

Does Virginia Require Owner’s Title Insurance?

Some states require that new home buyers purchase title insurance for both the lender and themselves. Virginia is not one of these states, so home buyers are not required to purchase owner’s title insurance. This leads many new owners to neglect purchasing a policy as a simple way to cut down their closing costs.

However, title insurance is a worthwhile investment that can protect buyers from thousands or even hundreds of thousands of dollars in losses, as well as the loss of their physical home. Because its cost is calculated based on a percentage of the home’s value at closing, title insurance is usually very affordable. Unlike other insurance, it is charged as a one-time fee rather than paid monthly as a premium. While no buyer is required to purchase an owner’s title insurance policy in Virginia, it is highly recommended.

Trust the Experts to Provide the Highest Quality Title Insurance Guidance

Title insurance does not need to be complicated. As a new home buyer, you have enough to think about already during the closing process. Leave title insurance to the experts. The professionals at Mathis Title Company can answer any questions you have about how title insurance works, what elements you need to include in a policy and more. Reach out to schedule an appointment to discuss your options.