Buying a home involves more than finding the right property and securing financing. Before ownership transfers, several important steps take place behind the scenes, including a title search and the purchase of title insurance in many transactions.
Title insurance helps protect buyers and lenders against certain title-related issues that may affect ownership rights after closing. Understanding how it works can make the settlement process easier to understand and help buyers feel more prepared.
If you’re buying a home in Rockville, Gaithersburg, Bethesda, Potomac, Silver Spring, Frederick, or elsewhere in Maryland, learning about title insurance is an important part of understanding the home buying process.
Jeremy Rosenthal, REALTOR®, helps buyers throughout Maryland, Virginia, and Washington, DC understand each stage of the transaction, from accepted offer through closing day.
What Is Title Insurance?
Title insurance is a policy that helps protect against certain problems related to a property’s legal ownership, commonly referred to as the property’s title.
Unlike homeowners insurance, which generally protects against future covered events, title insurance is designed to address certain covered title issues that existed before the property changed ownership but were not discovered during the title search.
Coverage depends on the policy language and any applicable exclusions.
What Is a Title Search?
Before closing, a title company or settlement attorney typically performs a title search.
The purpose is to review public records and identify issues that could affect ownership.
A title search may identify:
- Existing liens
- Recorded easements
- Ownership history
- Outstanding judgments
- Recording errors
- Other matters affecting title
Many issues are resolved before closing so ownership can transfer according to the purchase agreement.
What Does Title Insurance Typically Cover?
Coverage varies by policy, but title insurance may help protect against certain covered issues, including:
- Recording mistakes
- Unknown heirs with ownership claims
- Certain undisclosed liens
- Errors in public records
- Forged documents
- Boundary disputes, where covered
Always review the specific policy to understand what is and is not covered.
Owner’s Policy vs. Lender’s Policy
There are generally two types of title insurance.
Owner’s Title Insurance
An owner’s policy helps protect the buyer’s ownership interest according to the policy terms.
Lender’s Title Insurance
A lender’s policy protects the lender’s financial interest in the property when financing is involved.
These policies serve different purposes.
Is Title Insurance a One-Time Cost?
In many transactions, yes.
Unlike homeowners insurance, which is typically renewed annually, title insurance is often purchased as a one-time premium at closing.
The policy remains in effect according to its terms.
Why Is Title Insurance Important?
Even after a thorough title search, some issues may not become known until after closing.
Title insurance provides protection for certain covered matters that may arise later.
For many buyers, it offers additional peace of mind regarding ownership rights.
Frequently Asked Questions
Is title insurance required?
A lender’s title policy is commonly required for financed purchases. An owner’s policy is often optional but commonly recommended. Requirements vary by transaction.
Does title insurance replace a survey?
No. A survey and title insurance serve different purposes.
Who chooses the title company?
The answer depends on the purchase agreement and local practices.
Key Takeaways
Before closing on a home:
- Understand the purpose of a title search.
- Learn the difference between owner’s and lender’s policies.
- Review your closing documents carefully.
- Ask questions if you don’t understand a settlement expense.
- Work with experienced professionals throughout the process.
Understanding title insurance helps buyers better prepare for closing day.
Work With Jeremy Rosenthal
Jeremy Rosenthal is a REALTOR® serving buyers and sellers throughout Maryland, Virginia, and Washington, DC. Whether you’re purchasing your first home or preparing for closing, Jeremy provides guidance throughout every stage of the transaction to help clients understand their options, navigate paperwork, and make informed real estate decisions.
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