Buying Your Home:
Settlement Costs and Information
II. Buying and Financing a Home
Securing Title Services
Title
insurance is usually required by the lender to protect the lender against
loss resulting from claims by others against your new home. In some states,
attorneys offer title insurance as part of their services in examining
title and providing a title opinion. The attorney's fee may include the
title insurance premium. In other states, a title insurance company or
title agent directly provides the title insurance.
Owner's Policy. A lender’s
title insurance policy does not protect you. Similarly, the prior
owner’s policy does not protect you. If you want to protect yourself
from claims by others against your new home, you will need an owner's policy.
When a claim does occur, it can be financially devastating to an owner
who is uninsured. If you buy an owner's policy, it is usually much less
expensive if you buy it at the same time and with the same insurer as the
lender's policy.
Choice of Title Insurer. Under RESPA,
the seller may not require you, as a condition of the sale, to purchase
title insurance from any particular title company. Generally, your lender
will require title insurance from a company that is acceptable to it. In
most cases you can shop for and choose a company that meets the lender’s
standards.
Review Initial Title Report. In
many areas, a few days or weeks before the settlement or closing of the
escrow, the title insurance company will issue a "Commitment to Insure" or
preliminary report or "binder" containing a summary of any defects in title
which have been identified by the title search, as well as any exceptions
from the title insurance policy’s coverage. The commitment is usually
sent to the lender for use until the title insurance policy is issued at
or after the settlement. You can arrange to have a copy sent to you (or
to your attorney) so that you can object if there are matters affecting
the title which you did not agree to accept when you signed the agreement
of sale.
Coverage & Cost Savings. To
save money on title insurance, compare rates among various title insurance
companies. Ask what services and limitations on coverage are provided under
each policy so that you can decide whether coverage purchased at a higher
rate may be better for your needs. However, in many states, title insurance
premium rates are established by the state and may not be negotiable. If
you are buying a home which has changed hands within the last several years,
ask your title company about a "reissue rate," which would be cheaper.
If you are buying a newly constructed home, make certain your title insurance
covers claims by contractors. These claims are known as "mechanics’ liens" in
some parts of the country.
Survey. Lenders or title insurance companies often
require a survey to mark the boundaries of the property. A survey is a
drawing of the property showing the perimeter boundaries and marking the
location of the house and other improvements. You may be able to avoid
the cost of a complete survey if you can locate the person who previously
surveyed the property and request an update. Check with your lender or
title insurance company on whether an updated survey is acceptable.
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