You Ask, We Answer: What Is Title Insurance, and Why Do I Need It?
What is a title to a home?
A title to a home is a document that proves who has legal rights to the property in question. A title also indicates if the current owner has liens on the property or has additional ownership claims. If a title is clear, it means that the buyer is not responsible for fixing these issues—and that is exactly the situation you, as a buyer, want to find yourself in when buying your house in Connecticut.
What is title insurance?
Title insurance guards both homebuyers and their mortgage lenders from problems with the transfer of homeownership. Should an issue arise either during the sale of the home or afterwards, the title insurance company may be responsible for resolving it and paying specific legal fees for damages.
How does title insurance work?
Once you work with your Calcagni Real Estate agent and are in contract to buy a home, a title company will conduct a title search to ensure the property has a clear title—in other words, is free of liens and that the person who claims to have the right to sell it does, in fact, have the right to do so. You’ll then be notified by the title company of any issues that get flagged.
If the title comes back clear, the title company will then begin underwriting, which includes considering any existing issues and planning for any potential ones. Once they have a clear picture of what potential obstacles exist—or don’t—they will offer you a quote for your title insurance.
Title insurance coverage
Title insurance protects the mortgage lender and the buyer from having to remedy issues with the title, including outstanding bills (unpaid contractors, association bills or taxes), fraudulent deeds or other documents, and disputes surrounding legal ownership or encroachments. Title insurance helps to cover the costs related to settling these types of claims after you have purchased the property.
Title insurance coverage
As part of the home buying process, you’ll want to budget for title insurance. This is a one-time premium that in general, averages between .50 and 1 percent of the home’s value and is usually paid at the time of closing. While many title insurance policies in Connecticut may hover around an average of several thousand dollars, make sure you consult with your title insurance company or attorney to get an exact quote; the cost of your house will figure prominently in helping you obtain an accurate quote.
Title insurance coverage
Most mortgage lenders require buyers to purchase what’s known as a “lender’s policy,” which protects them from liability should title defects arise. You’ll also want to purchase an “owner’s policy,” which will protect you as the homebuyer. While your lender may not require you do so, purchasing an owner’s policy is a critical way to protect the biggest investment you’ll ever make from surprise issues down the road.
In short, title insurance—like all insurance—may not seem important until you need it. By purchasing title insurance, you are investing in the future of your new Connecticut home—and in your peace of mind. Still have questions about title insurance? Ask your Calcagni Realtor for some help. After 50 years in Connecticut real estate, they’re sure to have trusted recommendations for you!
