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Title insurance definition

By: Movement Staff
November 14, 2019

One out of three

That's how many titles or public records, on average, have errors, according to the American Land Title Association.

Title insurance assists with finding and correcting these errors, and saves you a lot of heartache down the road. Keep reading for more of the ins and outs of the title insurance definition, how it could affect you and how it comes to play in the loan process. 


What is title insurance?

Title insurance protects you and your lender in case there's an issue with the previous ownership of a home. For example, if any of the previous owners lied about owning it, that means they sold something that wasn't theirs. 👀 Shady as heck, right? And it could cost you your new home. The costs to title insurance are typically 1% of the loan, but can vary depending on where you live.


Title insurance definition

Title insurance protects both the buyer and the lender from financial loss if there are issues with the title during the transaction. Generally speaking, there are two kinds of title insurance: Lender's title insurance and owner's title insurance. You don't have a two-for-one bundle option though, unfortunately 🤷🏽‍♂️. Both versions of the insurance authorizes a title company to research possible errors in the records as far back as the 1800s (according to Investopedia), and then try to rectify the errors before any financial loss can occur. 


Do I need it?

Most lenders require you to purchase at least the lender's title insurance. Owner's title insurance is usually optional, but don't skimp out just because of the cost. A challenge to the title could arise down the road, such as someone trying to lay claim to your property or equity. If that happens, you'll be singing the praises of the owner's title insurance and how much money it could be able to save you. What's even better: You could try to negotiate to have the seller pay for both fees. Savings all around is the name of this game.


Title insurance defintion

How to get title insurance

If you're able to negotiate the seller paying for one, or both, set(s) of insurance, then it's easy – it's done. Otherwise, you'll need to pick a title agency you'd like to use and settle on a policy. Either an escrow or closing agent can suggest an agency that is best for your situation. You can expect the cost to be around 1% of the purchase price. So keep that in mind when you start saving for all your related closing costs.


Got it – now what?

Get to researching title agencies and what may suit you best. If already in the process of buying a home, talk to your loan officer for any suggestions they may have. Title insurance may be what saves your bank account down the road. Or the deed to your property. Be aware of how much it can save you and make sure your prospective new home is about to actually be yours.

Need more advice? Talk to a loan officer.

Author: Movement Staff

The Market Update is a weekly commentary compiled by a group of Movement Mortgage capital markets analysts with decades of combined expertise in the financial field. Movement's staff helps take complicated economic topics and turn them into a useful, easy to understand analysis to help you make the best decisions for your financial future.