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
Policy. A lenders title insurance
policy does not protect you. Similarly, the prior owners
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.
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 lenders standards.
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 policys
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
& 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.
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.