One thing that many people who have purchased or inherited property should certainly obtain is title insurance. To purchase title insurance, you should know both how title insurance works as well as how much a person should pay for it.
What Is Title Insurance?
The “title” in title insurance refers to the title of a piece of property a person currently owns. What the insurance does is protect against problems and issues with the title that could cost the title-holder money. For example, if someone else were to make a claim on the property. A second situation in which title insurance may come in handy is when you discover a lien has been placed on the property due to the actions of a previous owner.
Why Do I Need Title Insurance?
In reality, the protection provided by most kinds of title insurance is mostly for the benefit of the mortgage lender as opposed to the home owner. The title insurance is a way to insure that the mortgage will be paid off if problems with the title were to occur. This is why most mortgage lenders require a homeowner to purchase title insurance. It also helps protect the credit of the borrower, though.
In most cases, the price of title insurance should be only 0.5% of the home’s purchase price. A piece of property that is worth $300,000, for example, would probably result in title insurance that costs $1,500. You should keep the 0.5% figure in your mind when choosing a policy to make sure you aren’t charged an unfair rate.
Negotiating For A Better Rate
The mortgage broker or realtor may recommend purchasing insurance from a certain company. However, you do not have to use the recommended insurer. If your quote is above the 0.5 % amount, you may want to look elsewhere. In some states, the price charged for title insurance is regulated. If your state is not regulated, you could haggle with the insurer for a better price.
Unfortunately, the states that do regulate the cost of title insurance may force you to pay more than you would normally. This may be due to the fact that other services such as the search for the title and closing costs are included in the price of the insurance.
Getting An Estimate
One thing you should obtain before shopping around for title insurance is what’s called a “good faith estimate”. This is something the lender is legally required to give you. It should include an estimate of all costs associated with the loan including title insurance. It has to be given to you within days of submitting your application. This can help you find the right price for coverage.