Buying a new home is usually the most significant financial transaction of your life, and it is also the most rewarding. However, it is so essential to make sure your right to own the property is protected. While purchasing your home, you will hear two words you’ve probably never heard of- title insurance. Along with the rest of the home buying process, title insurance can be challenging to understand. Title insurance is often surrounded by misconceptions that keep home buyers from recognizing its importance. Here are some common misconceptions about title insurance!
There's Only One Type of Title Insurance
Wrong! There are two types of title insurance policies; an owner’s policy and a loan policy. An owner’s policy protects you against loss or damage if there is a covered title defect in your right of ownership. If you are procuring a mortgage loan to purchase your home, a mortgage lender will likely require you to buy a loan policy. A loan policy protects the lender’s interest in the property until the mortgage is paid in full. In contrast, the loan policy provides no coverage to the homeowner.
Homeowners Insurance and Title Insurance are the Same
Homeowners insurance and title insurance are not the same. Title insurance protects a home buyer’s right to ownership and a lender’s investment. In comparison, homeowner’s insurance is a policy that will protect you from potential damage to the structure of your home and its contents during an insurable incident.
It is Another Requirement of Purchasing a Home
Title insurance is not always required, but it is recommended. Title insurance protects you from costly losses and damages, and legal liabilities related to title inaccuracies. It is up to the buyer to decide if they want to purchase an owner’s policy. Title insurance is typically paid with a one-time premium at closing and has no monthly payment.
You Do Not Get to Choose the Title Company
You do get to choose! According to the Real Estate Settlement Procedures Act (RESPA), the buyer has the right to choose the title company. The seller may not require the home buyer to purchase title insurance from a different title company unless it has been advised that the seller will pay for both the owner’s and loan policies associated with the transaction.
With the following misconceptions about title insurance, finding a team of professionals you can trust is essential. At Venture Title Agency, we provide efficient, professional, and reliable title and escrow services to put your mind at ease. To learn more about title insurance, contact us today or visit our website!