Title Insurance

Title insurance protects against losses in the event that a problem with the title is discovered after the home purchase. For most home purchases, there are two parties who require title insurance -- the lender, and the home buyer. The buyer will pay for an insurance policy to protect the lender. Depending on local laws and the details of the deal, the buyer's policy may be paid for by the buyer or the seller, or the cost may be split between them.

When you get a mortgage to buy a home, you're making a purchase with borrowed money. Since that money belongs to the lender, the lender has a legal claim, or lien, on the home.

If a problem with the title is uncovered, and that problem results in the buyer losing the home, the lender would lose a substantial amount of money. Title insurance protects the lender's investment in the buyer's home until the buyer has fully paid off the mortgage.

If you lost your home due to a title dispute, your lender's title insurance would not protect you. You would lose any money you had invested in your home, including your down payment, mortgage payments, and money spent on improvements and repairs. You may even be required to repay the mortgage on the home, despite no longer owning it.

Getting a title insurance policy for yourself will protect you from these losses. It can also cover your legal costs for any disputes that need to be settled in court.

That depends on where you're buying a home, and the details of your deal. Sometimes, the seller will pay for the buyer's policy. Other times, the buyer will need to pay for the policy. Or, the cost of the buyer's policy may be split between the buyer and seller.

That can vary from one deal to the next, but it's usually one percent of the purchase price, or less. You pay this fee one time, as part of your closing costs.

The buyer always has the right to choose a title company. However, the actual custom of selecting a title company may vary from one region to another. Often, the seller ends up selecting the title company, especially in areas where the seller pays for the buyer's title insurance policy. If the buyer wants to select a different title company, they may need to pay a cancellation fee, or they may be required to pay for their own policy.

If you need help finding a title company, you should talk to your agent, attorney, or lender.