One of the many things you’ll need to do before you close on the purchase of your new home in Tennessee is obtain title insurance.
Title insurance protects your lender in the transaction. As the home purchase progresses, a title research company will investigate the past transactions involving the house, or the land it’s built on if it’s a new build. The title company is looking to make sure the seller has the right to sell the home and to be certain the house will come with what is called a “clear title.”
Once clear title has been established, the title insurance can be issued. The seller of an existing home customarily pays for the title insurance, while buyers pay for it on a new build. (This can be negotiated in the home purchase, however.)
What would keep a home from having a clear title?
A legal claim against the property would keep a home from having a clear title. That could come from the government in case the property owner owes back taxes, or from a creditor who has gotten a judgment against the owner for an unpaid debt.
With title insurance, the lender won’t be out financially if any claims surface – even years later. That, perhaps, could come from an heir who claims to hold a right to the property or if it’s discovered an error was made in the title research process.
As an owner, you also can take out a title insurance policy. While the mortgage lender has the most financial stake in your home, yours also is significant. Should a claim be made against your home, you could lose your down payment money and any equity in the property.
The cost of the owner’s policy is a small percentage of the home’s market value, and it could be worth it to you to protect your investment. Your real estate attorney can answer your questions about title insurance.