Title insurance helps the home-buying process by allowing both the home buyer and any financing agent to proceed with assurance that the property is eligible to be sold. It protects against the risk that there are potential claims against the property that could nullify the sale after the fact, whether it's from willful fraud perpetrated by the seller or unknown heirs who suddenly discover they may be your new home's rightful owners.
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Title Insurance Process
A title insurance company or attorney first performs research to ensure that the deed is valid and that there aren't any other claimants on the property or mistakes in the record that could prove troublesome later. Once that happens, it issues an insurance policy that will pay to defend you in court if the validity of the title is challenged and compensate you for your equity in the property if you lose such a case.
When you're financing a house, you'll usually have to buy a lender's title insurance policy. This protects the bank in case a claim pops up that threatens its investment. An owner's title insurance policy isn't always required, but it's a good idea to buy one. Otherwise, if a long-lost ex-spouse of a former owner files a successful claim of ownership and the courts agree, you'll be out your down payment and other equity in the property.