A Note on Title Insurance

The legalities involved with buying a house can be baffling especially if you are buying a house for the first time.

Title insurance is one of those costs that you have to accept or else you will not get a loan, with the exception being the state of Iowa. With that said, most people get it anyways without knowing why you need title insurance.

But why would you need title insurance?

Usually, the intermediary party which closes a deal on a home, runs a check on who is the owner of the home at the local property office, and its history as well. However, this information is not always correct and if the seller is not the actual owner later on, you could get hauled into court – and worse still, lose the property on which you have spent your hard earned money.

It is for this reason that there exists two types of insurance: lender’s and owner’s title insurance.

For the first type, the lender, who has financed your purchase of the property, is protected, and if there’s a claim in court, the policy will cover the entire mortgage. You won’t lose a nickel if you get hauled into court.

As for the second type, which is called owner’s insurance, will cover the equity that has built up over the years since you’ve purchased your home, and which isn’t covered by the first type of title insurance discussed.

As mentioned earlier, this applies to all states other than Iowa as in the case of a dispute, the state provides the necessary coverage.