Congratulations you have found your dream home! Looking over the sales contract you see that the seller is paying for the title insurance, that’s great but what is title insurance and why do you need it?
Your home in most cases will be your largest investment that you will make. Title insurance protects your investment from losses. These losses can be such things as unpaid property taxes, unknown liens, unknown heirs whom make a claim against the property as well as other title defects. It also protects the right of access to your property. You as the buyer are not the only one protected, your lenders interest is protected as well. There are two types of title insurance policies, The Owners Title Policy and the Loan Title Policy. The Owners Title Policy protects you as the new owner and The Loan Title Policy protects your lender.
Homeowners insurance is not the same as title insurance. Homeowners insurance protects your home in the event of a natural disaster, theft and depending on the location of your new home, you may even have flood insurance. Title insurance protects the title of the land that the home is located on, so really you are purchasing a title to your property. Unlike homeowner’s insurance that has an annual premium that can increase every year, title insurance is purchased with a one-time premium. Title to your land is not the same as a title for your car or truck. Once your Warranty Deed has been filed of record your Owners policy is issued and the title agent will mail you both documents. This is the title to your land and you will want to keep both items in a safe place so that if you need them for future reference you will know where they are.
The cost of title insurance rates is based on the sales price of the property. The Texas Department of Insurance sets the title insurance rates that all title agents use. What this means is that title agents across the State of Texas charge the same premium for property of the same sales price. There are additional fees such as the cost of tax certificate(s), recording fees set by the County that the property is in, escrow fees, etc.
You may be wondering if there are any items that your title insurance won’t cover. Items that your title insurance won’t cover would be defects created after the title policy is issued. These could be things such as, problems arise due to you not paying your mortgage-remember if you don’t pay, you don’t stay. Homestead, community property or survivorship rights of a policy holders spouse, taxes and assessments that you fail to pay, and a lien is filed against your property, these are just to name a few.
How long does your coverage last you may be thinking to yourself. Your Owner’s policy remains in effect as long as you or your heirs own the property. If you took a loan out to purchase the property, the Loan policy remains in effect until you have paid the lien in full.
We here at Red River Title Company are here to answer any questions you may have regarding title insurance and closing fees. We look forward to helping you with your title needs.