Buying a home is a major expense. Many people save for years to have enough money to afford a down payment. People exhaust their savings when putting together a down payment and covering the costs of moving into a home.
For many new home buyers, their first year after closing involves a very tight budget. They may therefore feel very anxious when reviewing their settlement statement before closing. Buyers may fail to factor in the multiple, expensive closing costs that accompany real estate transactions.
They have to pay for an appraisal and an inspection. They also have to pay for title insurance policies, which can cost thousands of dollars. Many people have sticker shock, especially when they recognize that there are two title insurance premiums on their closing paperwork. Why do people have to pay for two separate title insurance policies when buying a home?
Lenders and buyers both require protection
Title insurance protects the ownership interest that a buyer acquires in a real estate transaction. Should there be issues with the title of the property later, title insurance helps protect them. Their policy can pay for legal representation if they must take the matter to court.
Should a valid title claim lead to a loss at trial, their policy can also compensate them for what they invested in the property before losing it to an outside party. Obviously, buyers who have made a down payment and months of mortgage payments stand to lose thousands of dollars after a successful title claim.
The lender who financed the transaction is also at risk. In fact, the lender usually has more to lose because they covered the vast majority of the purchase price of the property. A buyer therefore has to pay for coverage that protects them and also coverage that protects their lender.
In some cases, buyers may have the option of waiving their personal coverage, but the coverage for their mortgage lender is not optional. Despite the expense involved, title insurance can be important for financial protection and peace of mind.
Buyers trying to make sense of their closing documents may need help reviewing different expenses and terms. Obtaining legal assistance during the home closing process can help buyers avoid scenarios in which people may take advantage of them or where they end up subject to unfavorable terms. And, learning about the standard costs involved in residential real estate transactions can help buyers budget accordingly.
