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Title insurance is usually required
by the lender to protect the lender against loss resulting from claims
by others against your new home. In some states, attorneys offer title
insurance as part of their services in examining title and providing a
title opinion. The attorney's fee may include the title insurance
premium. In other states, a title insurance company or title agent
directly provides the title insurance.
Owner's Policy.
A lender's title insurance policy does not protect you.
Similarly, the prior owner's policy does not protect you. If you want
to protect yourself from claims by others against your new home, you
will need an owner's policy. When a claim does occur, it can be
financially devastating to an owner who is uninsured. If you buy an
owner's policy, it is usually much less expensive if you buy it at the
same time and with the same insurer as the lender's policy.
Choice of Title Insurer.
Under RESPA, the seller may not require you, as a condition of the
sale, to purchase title insurance from any particular title company.
Generally, your lender will require title insurance from a company
that is acceptable to it. In most cases you can shop for and choose a
company that meets the lender's standards.
Review Initial Title
Report. In many areas, a few days or weeks
before the settlement or closing of the escrow, the title insurance
company will issue a "Commitment to Insure" or preliminary report or
"binder" containing a summary of any defects in title which have been
identified by the title search, as well as any exceptions from the
title insurance policy's coverage. The commitment is usually sent to
the lender for use until the title insurance policy is issued at or
after the settlement. You can arrange to have a copy sent to you (or
to your attorney) so that you can object if there are matters
affecting the title which you did not agree to accept when you signed
the agreement of sale.
Coverage & Cost Savings.
To save money on title insurance, compare rates among various title
insurance companies. Ask what services and limitations on coverage are
provided under each policy so that you can decide whether coverage
purchased at a higher rate may be better for your needs. However, in
many states, title insurance premium rates are established by the
state and may not be negotiable. If you are buying a home which has
changed hands within the last several years, ask your title company
about a "reissue rate," which would be cheaper. If you are buying a
newly constructed home, make certain your title insurance covers
claims by contractors. These claims are known as "mechanics' liens" in
some parts of the country.
Survey.
Lenders or title insurance companies often require a survey to mark
the boundaries of the property. A survey is a drawing of the property
showing the perimeter boundaries and marking the location of the house
and other improvements. You may be able to avoid the cost of a
complete survey if you can locate the person who previously surveyed
the property and request an update. Check with your lender or title
insurance company on whether an updated survey is acceptable.
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