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What is Owner's Title Insurance?

Owner’s title insurance provides protection to the homeowner if someone sues and says they have a claim against the home from before the homeowner purchased it.

When you purchase your home, you receive a document most often called a deed, which shows the seller transferred their legal ownership, or “title” to their home, to you. Title insurance can protect you if someone later sues and says they have a claim against the home from before you purchased it. Common claims come from a previous owner’s failure to pay taxes or from contractors who say they were not paid for work done on the home before you purchased it.

Most lenders require you to purchase a lender’s title insurance policy, which protects the amount they lend. You may want to buy an owner’s title insurance policy, which can help protect your financial investment in the home.

You can usually shop for your title insurance provider separately from your mortgage. If you shop for title insurance, you may be able to save money. If you choose to buy owner’s title insurance, the total cost will usually be lower if you use the same provider for both the lender’s policy and the owner’s policy, compared to buying them separately.

Depending on the state where you are buying your home, your title insurance company may give you an itemized list of fees at closing, which may be different than what is shown on your Loan Estimate or Closing Disclosure. This does not necessarily mean you are being charged more.

Why do you need Title Insurance?

Buying a home, property, land? You will need to also buy title insurance to protect your investment, especially if borrowing money to buy the home. (Lenders do require title insurance.) Title insurance is often overlooked by buyers. Going without title insurance involves some serious investment risk. Title insurance is important because it protects you and the lender in a situation where the seller or a previous owner sold the property without free and clear title.

What does Title Insurance protect against?

  • False impersonation of the true owner of the property
  • Forged deeds, releases or wills
  • Undisclosed or missing heirs
  • Instruments executed under invalid or expired power of attorney
  • Mistakes in recording legal documents
  • Misinterpretations of wills
  • Deeds by persons of unsound mind
  • Deeds by minors
  • Deeds by persons supposedly single, but in fact married
  • Liens for unpaid estate inheritance, income or gift taxes
  • Fraud

Benefits of Title Insurance

After a title search has been conducted, many title companies will offer title insurance to the buyer of the property that protects them in the event that something comes up after the property has been transferred. Title insurance is represented as a one time charge and is generally part of the closing costs that are associated with the closing of a real estate transaction.

This means that the lender will front the cost of the title insurance and will be reimbursed when the transaction closes and the closing costs are paid. It is customary for the seller to pay the buyer’s premium and the buyer to pay the lender’s premium. No matter what lender you are using, you will be required to pay for title insurance as part of the home buying process.

What is FIRPA?

What is FIRPTA? The Foreign Investment in Real Property Tax Act, better known as FIRPTA, 26 U.S.C. § 1445, provides that a buyer must withhold 15% of the amount realized by the foreign seller in the sale of an interest in U.S. real property. If the seller is a foreign person and the buyer fails to withhold, the buyer may be held liable for the tax.

Additional information, applicable forms, the withholding certificate application process and more can be found at the www.irs.gov

What is Closing Disclosure?

A Closing Disclosure is a five-page form that provides final details about the mortgage loan you have selected. It includes the loan terms, your projected monthly payments, and how much you will pay in fees and other costs to get your mortgage (closingcosts).