What All Homebuyers Should Know About Title Insurance (Made Simple)

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First-time homebuyers deserve to know once and for all: what is title insurance?

Title insurance for most buyers is a required purchase in North Carolina and other areas of the United States. However, does not require this. As a result, some buyers skip the purchase completely. Property owners without this coverage are vulnerable to any hazards hidden in their title’s history.

In this title insurance breakdown, we will do our best to simplify the subject for you.

In the process, we’ll answer some of your bigger questions and 

We will cover:

  • Do I need title insurance when buying a house?
  • Do I need title insurance if I pay cash for a house?
  • Is an owner’s title insurance policy necessary?
  • What is lender’s title insurance and do I need it?

As usual, we’ll start with the basics.


Basics of title insurance

You’re likely a homebuyer looking to understand all of your closing costs, including insurance for your title.

To have the best ownership experience, you’ll be wise to understand what is title insurance and how insuring your title protects your home.


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What is the purpose of title insurance?

Title insurance prevents issues in your title’s history that could disrupt your home ownership. Your insurer is tasked to proactively find and fix legal mistakes in your title’s creation or transfer history. Financial coverage protects against any errors not found in the initial policy creation.

Title coverage protects you against anyone claiming to be the true owner of all or part of your home. As with all insurance, you purchase it because of the risks you face without protection.

Insurance on your title also protects your mortgage lender from losing their loaned money. If legal costs overwhelm you in a property dispute, your ability to repay your mortgage may be crippled. This coverage ensures that lenders will be secure as well.


Deciding if you need title coverage

Your level of financial risk should be the top factor when choosing to purchase any insurance.

For your title, consider whether you can handle thousands of dollars in fees due to a legal dispute. In many cases, the cost of title insurance is far cheaper than the troubles of going without it.

However, not every buyer has the option to ditch the coverage.


Do I need to buy title insurance?

Lender’s title insurance is the only coverage many parts of the United States require. If you have a mortgage and your lender deems it necessary, they may require you to buy this. Owner’s title insurance is optional in most cases. Cash buyers normally will not be required to have either form of this insurance.

The basis for requiring coverage on your title focuses on how you’re buying your home.

Lenders view cash paying property buyers as more financially flexible than most people. They may be capable of funding court and attorney fees if a claim were to come forth. Therefore, they are of lower risk and only endanger themselves by foregoing insurance.

Home buyers making a loan-based purchase may be less prepared to throw money at legal trouble. Additionally, the owner and the lender are both at-risk if the law steps into the homeowner’s wallet. By that logic, the threat is elevated and the lending party is motivated to protect their money.


So what is title insurance actually worth for me?

You are buying your own property to have the peace that accompanies having your own space.

If you value protecting that which belongs to you, insurance on your title can provide that.

By now, you’ve learned that title insurance is useful if you want to avoid tall legal costs. You also know that lender’s coverage is the only truly required purchase. Finally, you know that any buyer without a mortgage likely will not have to buy title insurance.

Ultimately, whether you buy title insurance depends on your ability to handle your finances without external funding. We hope we’ve successfully answered “what is title insurance.”If you still have any questions about title insurance and any related topics, please set up a chat with us. Here at Tryon Title, we love to meet with our community. Talk with us anytime, and we’ll guide you closer to a worry-free home life.