There are quite a few secondary expenses you have to cover when you buy a house. You have to pay for inspection and possibly an appraisal. You have to pay for the real estate professionals that oversee the transaction and the title services at closing.
You will also have to pay for title insurance for both the mortgage lender financing your transaction and yourself as the buyer. Some people may consider canceling the buyer’s policy because there isn’t an obligation to pay for that coverage, but doing so is a gamble.
Why is title insurance so important when buying residential real estate?
Title insurance protects your ownership and your investment
The title to your property is what declares you the owner. If there is an issue with the title later, you could lose your home. Not only would you no longer have a place to live, but you will lose the money you’ve invested in the property. Your down payment, years of mortgage payments and even repairs to the property that you financed will disappear with your right to title.
Title insurance protects you in three ways. First, while underwriting a new policy, the title company will look into the chain of title for the property so that you can address issues before you buy the home. Second, if there is a title claim against the property, the policy will pay for your lawyer. Finally, if you lose in court to someone with a valid title claim, your policy should reimburse you for the money you have invested in the property.
Knowing the risks of unaddressed title issues can help you feel better about paying for those title insurance policies.