Title insurance: It’s another one of those mysterious fees buried inside the pile of paperwork you’ll receive at your loan closing. Who knows what it’s all about? All you’ve figured out is that lenders require a policy for their protection, and either you or the seller will have to pay for it — and then you’ll be asked if you want an owner’s title policy, too.
Here’s how title insurance works, how to decide whether you need your own policy, and how much you can expect to pay.
Title insurance protects the insured from a financial loss related to the ownership of a property. There are two policies in the mix at a home loan closing: the lender’s policy, which is required, and an optional owner’s policy. Both are a one-time, upfront cost — not a monthly premium that will be added to your mortgage payment.
When you’re in the process of buying a home, a title research company will check the property’s ownership history. Ideally, your new home has what’s called a “clear title.” That means the current owner, who is selling to you, has a complete ownership stake in the property, without any legal claims against it. Claims can be in the form of a lien or levy from a lender, creditor or — in the event of taxes due — the government.
If the research company doesn’t find any outstanding claims or title defects, why buy title insurance? Because an as-yet-undiscovered issue could cloud the ownership of the property years after the purchase. That could be a mistake in the ownership history, an oversight committed by the title researcher, even a previously unknown heir. Maybe there’s a pending lawsuit or legal judgment. A title issue could also arise as a matter of fraud.
A title defect that arises after a loan closing could, at the very least, mean a variety of legal costs — and, in a worst-case event, the loss of your property and the money you’ve put in it.
Lenders insist on title insurance to protect their interest in the loan. And that makes sense, because they’re on the hook for the majority of the home’s value, especially in the early years of the mortgage.
» MORE: Calculate your closing costs
Can you make a case against buying the owner’s title insurance policy? Sure. But let’s think this all the way through before making a decision.
“Here’s the deal: When you buy a house or build a property, usually you get a warranty deed,” says Martin Farris, a mortgage broker in San Angelo, Texas. “That means the seller is saying, ‘This is a good deed. I own this property free and clear. I’m transferring it to you free of any other liens.’”
So any ownership defect would be the seller’s responsibility, right? And as a buyer, you’re in the clear — any legal action would be against the seller. But remember, the seller has transferred that risk to the insurance company. And even though the lender is protected by the title policy, your stake in the home could be at risk. That would be equal to your down payment and any equity you have. Again, a title claim could happen many years after your purchase.
For many home buyers, purchasing an owner’s title insurance policy is a matter of being safe rather than sorry.
A lender’s title insurance policy is a given, and maybe now you think an owner’s policy isn’t a bad idea. How much will it cost to buy both?
Sometimes nothing. You might be able to negotiate to have the seller pay for both policies.
But if you end up shouldering the cost, your policy might not cost much. “When you buy two title policies in Texas, the first one you buy at full price. The second one you buy and they charge you a hundred bucks for it,” Farris says. It’s a discount called the “simultaneous issue rate” — kind of a “BOGO” thing.
Prices and discounts vary from state to state. You can expect to pay somewhere between $1,000 and $4,000 for title insurance, according to CourtHouseDirect.com, a courthouse data research website.
Some states regulate insurance rates, so there may not be much cost difference among insurers, such as in Texas. But in other locations, title insurance is one more closing cost that you can shop for.
The American Land Title Association provides a list of insurers by state and city. There are also title insurance providers online, such as EntitleDirect.com.
The article Title Insurance: What It Is and Why You (Probably) Need It originally appeared on NerdWallet.
Outstanding Hill Country Home! Excellent condition! Casita with covered patio, separate living area, bedroom and bath and 2 car garage not shown in sq.ft. This home has two, two car garage, one with Casita and one with house. Well designed in every way. Open floor plan for entertaining and master on its own end of the house. Most impressive is the lot and views of the hills and neighboring pond. Other features include: Induction cooktop, Pelican water softener and Whirlpool filtered drinking water, tile floors, spacious office, circle drive, weaved marble fireplace hearth, garden area, granite in kitchen and bath, natural light abounds ! Tax rolls show 2336 sq ft and owner is showing apx. 640 sq. ft for the Casita that is not on the tax rolls.
Are you looking to explore the beauty that encapsulates the Hill Country of Texas? Rather you’re looking for a vacation spot or a place to move your family in the upcoming future, Texas provides a plethora of exciting and beautiful experiences that can’t be replicated anywhere else in the country.
One of the largest tourist attractions in the area is that of Landa Park; the park is 51 acres filled with lush and breathtaking sights that showcase the beauty of Texas Hill Country. The area also has luxurious golf courses and hiking trails that can be explored in order to fully embrace what the land has to offer. This can be used as a perfect opportunity to take your family, or a special someone, on a picnic in the midst of a gorgeous Texas day.
Similarly, the area is notorious for its livestock and cowboy atmosphere. Bandera, one of the most popular cowboy hot-spots in the world, gives you an insight into what it takes to live on the range and navigate livestock. The lively and caring staff that work within the dude ranches will act as a perfect example of a life lived on the range! Activities include horseback riding, feeding the animals, wood cutting, lassoing the livestock and examining the cowboys at work on the field.
From here, the Hill Country invites residents and visitors to take a taste of the best wine in the country. Often referred to as the “New Napa”, the area has some of the classiest and most prestigious wineries the world has ever seen. The tasty and rich flavors contained within these beverages paints a mental picture of the wildlife and lush agriculture that fills Hill Country. Combining a spring wine tasting with a light lunch will brighten up the day of all that happen to visit these areas.
Last but certainly not least, individuals are welcome to jump into the fresh waters that fill the land. The Guadalupe River, as an example, is the visitor choice for cooling off after a long day under the sun. The river annually draws crowds of hundreds of people of all ages anxious to tube down the river while conversing with their friends. Moreover, the river has copious amounts of fish and aquatic attractions in order to satiate the taste of individuals who love the water. Whatever your interests may be, hill country has it all.
Looking to buy a home? Here are five essential tips for making the process as smooth as possible.
Get your finances in order.
Start by getting a full picture of your credit. Obtain copies of your credit report. Make sure the facts are correct, and fix any problems you find. Next, find a suitable lender and get pre-approved for a loan. This will put you in a better position to make a serious offer when you do find the right house.
Find a house you can afford.
As with engagement rings, there’s a general rule of thumb when it comes to buying a home: two-and-a-half times your annual salary. There are also a number of tools and calculators online that can help you understand how your income, debt, and expenses affect what you can afford. Don’t forget, too, that there are lots of considerations beyond the sticker price, including property taxes, energy costs, etc.
Hire a professional.
While the Internet gives buyers unprecedented access to home listings and resources, many aspects of the buying process require a level of expertise you can’t pick up from surfing the web. That’s why you’re better off using a professional agent than going it alone. If possible, recruit an exclusive buyer agent, who will have your interests at heart and can help you with strategies during the bidding process.
Do your homework.
Before making a bid, do some research to determine the state of the market at large. Is it more favorable for sellers or buyers? Next, look at sales trends of similar homes in the area or neighborhood. Look at prices for the last few months. Come up with an asking price that’s competitive, but also realistic. Otherwise, you may end up ticking off your seller.
Think long term.
Obviously, you shouldn’t buy unless you’re sure you’ll be staying put for at least a few years. Beyond that, you should buy in a neighborhood with good schools. Whether you have children or not, this will have an impact on your new home’s resale value down the line. When it comes to the house itself, you should hire your own home inspector, who can point out potential problems that could require costly repairs in the future.
Moving from a small town or suburb to a large city can be an intimidating proposition. Here are a few tips to help make your move as painless as possible.
Research before you move. It’s important to understand the culture you’re joining. Do research online and find out about school systems, neighborhoods, parking, weather, public transportation, and laws that are native to that area. If you can, visit a city before moving and connect with someone who’s lived there before.
Have a plan. There are a lot of steps to go through before you start packing the moving truck. Find housing before you leave, or at least know where you’ll stay while you look for a home. Never sign a lease on an apartment that you haven’t seen. If you can’t get there, find a friend or an employer to check for you. Have a job waiting for you, or if that’s not possible, know what you’ll do for money in the first few weeks of living there. Try to line up things like driver’s licenses, car insurance, renter’s insurance, and parking passes ahead of time as well.
Get involved. Meeting people in a big city can be daunting. Don’t expect the neighbors to knock your door down with a casserole when you arrive: city life is often too noisy and hectic. Take the initiative. If there are things you liked to do in your town, find ways to do those things in the city. Try new things. Volunteer. Big cities offer so many opportunities to engage other people, so find what you like.
Mind your wallet. City life is expensive. Everything costs more: food, insurance, clothes, rent. There are also a lot more ways to get ripped off, whether legally or criminally. Be careful how you spend, and know where your money is going.
Selling your home doesn′t just mean hiring a realtor to stick a sign out front. There are a lot of preparations you should make to ensure you get the best offer possible in the shortest time.
Repair. Just because you’ve gotten used to the cracks in the walls and the rattles in the radiators doesn’t mean a buyer will too. If you have hardwood floors that need refinishing, be sure to get it done—hardwood is a huge selling point. Buyers like to snoop around, so be sure to fix any sticky doors or drawers as well. Finally, don’t forget to address any issues with the exterior—fences, shingles, sidewalks, etc. After all, without curb appeal, some buyers may never get to see the inside.
Neutralize. You want buyers to see themselves in your home. If your living room has lime green shag, wood-paneled walls, and all your collectibles and personal photographs, this will be much harder for them to do. Try replacing any bold color choices in your floors and walls with something more neutral—beiges, tans, and whites. Repainting and reflooring will make everything look fresh and new, and help prospective buyers imagine all the possibilities.
Stage. Once your house is clean and updated, it’s time to play dress up. Home stagers can add small details and décor touches that will bring out the possibilities in the various spaces in your home: lamps, mirrors, throw rugs and pillows, flowers, decorative soaps and towels, patio furniture. Home staging can be particularly useful if your home is especially old or if the exterior looks dated. Think of it as a little mascara and rouge—if it’s done right, you notice the beauty, not the makeup.
As the events of the last few years in the real estate industry show, people forget about the tremendous financial responsibility of purchasing a home at their peril. Here are a few tips for dealing with the dollar signs so that you can take down that “for sale” sign on your new home.
Get pre-approved. Sub-primes may be history, but you’ll probably still be shown homes you can’t actually afford. By getting pre-approved as a buyer, you can save yourself the grief of looking at houses you can’t afford. You can also put yourself in a better position to make a serious offer when you do find the right house. Unlike pre-qualification, which is based on a cursory review of your finances, pre-approval from a lender is based on your actual income, debt and credit history. By doing a thorough analysis of your actual spending power, you’ll be less likely to get in over your head.
Choose your mortgage carefully. Used to be the emphasis when it came to mortgages was on paying them off as soon as possible. Today, the debt the average person will accumulate due to credit cards, student loans, etc. means it’s better to opt for the 30-year mortgage instead of the 15-year. This way, you have a lower monthly payment, with the option of paying an additional principal when money is good. Additionally, when picking a mortgage, you usually have the option of paying additional points (a portion of the interest that you pay at closing) in exchange for a lower interest rate. If you plan to stay in the house for a long time—and given the current real estate market, you should—taking the points will save you money.
Do your homework before bidding. Before you make an offer on a home, do some research on the sales trends of similar homes in the neighborhood with sites like Zillow. Consider especially sales of similar homes in the last three months. For instance, if homes have recently sold for 5 percent less than the asking price, your opening bid should probably be about 8 to 10 percent lower than what the seller is asking.