Title Insurance
Sorry that I have been away. I was finishing up this semester in my MBA program. Thankfully, I only have one more semester to go and then I am done!I wanted to post something I wrote awhile back on title insurance...
When you close a loan, if you are borrowing money to purchase the property, you will find a title insurance premium in the attorney section of the Settlement Statement. What is this premium? Title insurance is insurance to the lender that you have a clean title (no judgments, liens, etc). It is also an assurance that the new lender is in the first lien position on the home. In addition, if an issue ever arises that would affect the title, like an heir to a prior owner trying to claim your land, then title insurance would kick in.
However, the premium you pay for through the closing only covers your lender. It DOES NOT cover your interest in the property. Now, most buyers lately put very little down on the purchase, so their exposure is limited. However, if you put money down OR as you pay off the loan, your exposure (this could also be called our equity) increases. You can purchase an owner's policy for title insurance. It is relatively inexpensive, especially at the time you purchase or refinance the home. If you inquire about it prior to the closing, the cost can be rolled into the Settlement Statement.
Let me give you an example. You buy a home with a contract purchase price of $100,000. You put down 5%, or $5000. You are borrowing $95,000. The title insurance premium to the lender on this would be $262.50. You could also purchase an owners policy to cover your interest in the property. In the above scenario, the owners policy would be less than $100. The exact figure can depend on the title insurance company. Any attorney will be happy to handle this for you. After all, if the attorney is an agent of the title insurance company, they get to keep 60% of the premiums.
Labels: Buyers, Title insurance
posted by jkballentine @ 3:22 PM
2 Comments:
Thanks for re-posting your title insurance info. It is really important that a buyer specifically request owner coverage. Even buyers with very little equity should get the coverage. These buyers typically don't have a lot of assets and can't take a hit. Buying the insurance at the time you purchase the real estate is the cheapest way to do it.
Diane -
You are correct that there is great benefit to the buyer to get the insurance at the time of closing. It will never be cheaper and is a one-time.
My problem is that there is a local attorney that will automaticly put owners coverage on the HUD, even on a 100% deal. They never mention that this insurance is optional. I would truly beleive that they were working in the best interest of the client IF they were getting nothing off of the extra premium. But they are. So, there is a financial benefit for them to dell the owners coverage. If they are going to make it an opt-out situation, where they put it on there automaticly, they at least need to TELL the client it is optional. I am certain that most would leave it one there. This is in the spirit of full disclosure.
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