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
