Whether you are a first-time home buyer or a veteran real estate investor, you have to be familiar with title insurance. Title insurance can be purchased through your New Jersey title company and exists to protect you against a financial loss in the case of a defective title and a number of other risks.
There are two parts to title insurance:
- The owner’s policy protects you as a homeowner against title mistakes. It is typically a one-time expense and is issued in the amount of the home purchase.
- The lender’s policy protects your lender in transactions where a mortgage is involved. It is also paid as a one-time premium and is issued in the amount of the loan. However, if you ever have to refinance or want to take out a home equity loan, a new lender’s policy will have to be purchased.
Typically, both policies are itemized in your closing costs. Depending on where you live, traditionally, different parties are responsible for paying each portion (or both portions) of the title insurance. One thing is for certain—lenders don’t pay for the lender’s policy, and it becomes either the seller’s or buyer’s burden. If you are not sure who is picking up the tab, talk to your title insurance agent or your real estate broker. Everything is negotiable, so you are free to discuss the closing costs with the seller and work it into the contract.
What is Included in the Owner’s Policy
While title insurance is not required by law in most states, most lenders won’t issue a mortgage without a lender’s policy. If you are doing a cash transaction, it is still advisable to purchase the owner’s policy to avoid any potential issues down the road. There are different tiers of protection that title insurance can offer, depending on the specific policy you are buying. However, a typical owner’s policy covers the following events:
- un-discharged liens against the property
- unknown heirs claiming their rights to the property
- falsified or forged deeds
- seller impersonating the true property owner
- improperly recorded deeds
Some premium policies offer extended coverage that may include risks like building permit and zoning violations, as well as incorrect surveys and major encroachments.
Contact Armour Title Company today to get more information about our title insurance policies and get help choosing the right policy for your real estate transaction.