Title Insurance agreement in the hands of a businessman.

What Is Owner’s Title Insurance and Do You Need It?

According to some research, first-time home buyers made up 31% of the market.

If you’re one of those first-time buyers, you may be wondering if you really need owner’s title insurance.

The short answer is yes! Keep reading, and we’ll fill you in on all you need to know. 

What is Owner’s Title Insurance?

If you’re first buying a home, you might later find out that the last owners didn’t do all of their paperwork, which could make it difficult to finish your close. 

Some previous owners may have even used the house for fraud. You may not even know about it until later you’ve paid for your house. If you don’t want to get caught up with any of that, that’s why you get owner’s title insurance. 

This will help to protect you if you find any problems that are related to ownership of the property or the deed. 

It will also protect you from other things like if someone incorrectly filed a deed. This would mean that the ownership of the property might not have your name correctly on the deed, which makes the ownership unclear. 

If a past owner made it look like they paid the mortgage and didn’t, then your house could foreclose even if you’re buying it and paying for the mortgage. 

You may also run into issues with encroachments, which is where your property line isn’t clear. If a neighbor builds a fence that’s on your land, this will impact the rights to property. 

However, title insurance will help protect you if someone has built onto your property. 

While there are more terrible options that can happen, a third party could try and come in to try and take your property since the ownership isn’t clear.

Why Do You Need It

You should work with a real estate closing attorney to make sure you don’t miss anything, but it’s still a good idea to have title insurance. 

Some people skip having this insurance because they just do a title search to see if there are any issues. However, these searches aren’t always perfect, and you could miss something. 

You could end up having nothing come up in a title search. A few years into living in the house, a sibling of the previous owner might come over and say that the house was supposed to be theirs and try to take ownership of the home. 

If you had owner’s title insurance, it would protect you from having to deal with issues like that. 

How Much Does It Cost

If you’re interested in getting title insurance, it’ll depend on what state you’re in. However, it will depend on the value of your home as well.

The states can regulate the price of insurance. But in general, the price will be around .5 to 1% of your home’s value. 

It has a one-time premium, and you’ll usually pay it with your closing costs. This will remain the case unless you refinance your home.¬†

The premium will end up being a percentage of the amount you borrow from the lender. So if you borrow more, then your policy will be more expensive. 

However, the cost of your policy will be tied to how much you buy the home for.  So if your home is more expensive, you can expect your policy to go up as well.

However, you may be able to save some money depending on what state you live in. Some states will give you a discount on the owner’s title policy if it is less than ten years old. 

You could get a discount rate, and that rate will range from 25 to 60% off. However, 40% is the most common rate. You can ask your lender if there are any discounts available before you close. 

Pros and Cons

One of the advantages of title insurance is that you’ll have peace of mind when buying a home. You don’t have to worry about paying out of pocket for any problems that come up with the ownership of the property. 

Plus, the small cost can save you a lot of time and money in the long run. You’ll only have to pay a small percentage of the home’s price. This small price could outweigh any risk that could come along down the line. 

It’s also great whether you’re buying a brand new or an old home. 

With new homes, legal disputes could arise if it was part of a condominium or a subdivision.  Sometimes the contractor may have a lien on the home if they were unpaid for some of the work.

When it comes to old homes, there are many owners that could’ve lived there, and there’s a chance that one of them had issues with the paperwork. They could easily come back and try to take your home. 

The one instance where you wouldn’t need title insurance is if you’re not planning on living in the home for very long. This is great if you’re just living there temporarily or flipping the home. 

However, they still offer some insurances that are for the short-term and only last about one to three years. 

Learn More About Owner’s Title Insurance

Before you buy a house, make sure that you also get owner’s title insurance to protect yourself. 

We know that buying a home and getting insurance policies and a mortgage is confusing, but we have more information to help you out.

If you loved this article, search around our website to find more great information!

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