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Title insurance is usually required
by the lender to protect the lender against loss resulting
from claims by others against your new home. In some
states, attorneys offer title insurance as part of their
services in examining title and providing a title opinion.
The attorney's fee may include the title insurance
premium. In other states, a title insurance company or
title agent directly provides the title insurance.
Owner's Policy.
A lender’s title insurance policy does not protect
you. Similarly, the prior owner’s policy does not
protect you. If you want to protect yourself from claims
by others against your new home, you will need an owner's
policy. When a claim does occur, it can be financially
devastating to an owner who is uninsured. If you buy an
owner's policy, it is usually much less expensive if you
buy it at the same time and with the same insurer as the
lender's policy.
Choice of Title
Insurer. Under RESPA, the
seller may not require you, as a condition of the sale, to
purchase title insurance from any particular title
company. Generally, your lender will require title
insurance from a company that is acceptable to it. In most
cases you can shop for and choose a company that meets the
lender’s standards.
Review Initial
Title Report. In many areas, a
few days or weeks before the settlement or closing of the
escrow, the title insurance company will issue a
"Commitment to Insure" or preliminary report or
"binder" containing a summary of any defects in
title which have been identified by the title search, as
well as any exceptions from the title insurance policy’s
coverage. The commitment is usually sent to the lender for
use until the title insurance policy is issued at or after
the settlement. You can arrange to have a copy sent to you
(or to your attorney) so that you can object if there are
matters affecting the title which you did not agree to
accept when you signed the agreement of sale.
Coverage &
Cost Savings. To save money on
title insurance, compare rates among various title
insurance companies. Ask what services and limitations on
coverage are provided under each policy so that you can
decide whether coverage purchased at a higher rate may be
better for your needs. However, in many states, title
insurance premium rates are established by the state and
may not be negotiable. If you are buying a home which has
changed hands within the last several years, ask your
title company about a "reissue rate," which
would be cheaper. If you are buying a newly constructed
home, make certain your title insurance covers claims by
contractors. These claims are known as "mechanics’
liens" in some parts of the country.
Survey.
Lenders or title insurance companies often require a
survey to mark the boundaries of the property. A survey is
a drawing of the property showing the perimeter boundaries
and marking the location of the house and other
improvements. You may be able to avoid the cost of a
complete survey if you can locate the person who
previously surveyed the property and request an update.
Check with your lender or title insurance company on
whether an updated survey is acceptable. |