Title Insurance Helping first-time homebuyers understand and select a title insurance company.

Title Insurance Company
When you buy a home you also need to make sure that you are not buying a lot of extra baggage. Suppose that the previous homeowners had some work done on the house, but for some reason they did not pay the contractor who performed the work. The contractor can file and record a construction lien on the property in order to collect the payment from the current or future owners of the property. The construction lien allows the contractor a legal right to be paid for work they performed on the house. If the lien remains unpaid it can "cloud" the title to the house and stay with the property even after it is sold! If you buy a house without title insurance, you could get stuck paying for the previous owner's bills. Since you don't want this to happen, you need to get a title insurance policy in place when you buy your first and subsequent homes.

If you are financing a home through a more traditional lender, which is strongly advised, they will require that you obtain title insurance and a clear title to the property. Prior to issuing the required title insurance policies, all previous debts clouding the title to the property will have to be paid off. If somehow a past lien snuck through and the title company did not discover it, the title insurance policies you purchase at closing should cover the costs of paying off the lien.

Selecting a Title Insurance Company
There are a number of reputable title insurance companies to consider. Your lender or real estate agent probably will have recomendations for you to help select which company you use for these services. Since each state has different rules regarding regulation of title insurance companies, you can learn more about this from your homebuyer education provider, local lender or real estate agent. In the states that use Escrow Companies as the closing agent, these companies also offer Title Insurance, so many first-time homebuyers will use the same company for both Title Insurance and Escrow services. This company is typically identified in your accepted purchase and sale agreement. If you have a strong preference of which title insurance company you want to use, let your real estate agent know about your preferences so they can negotiate this item for you.

Obtaining Title Insurance
The bottom line is, don't buy a home until you are sure you are being provided a title insurance policy on the property you are buying. Since your lender also has a lot invested in your home they will make sure of this as well.

Within less than a few weeks after your offer is accepted, you will most likely get a document called a "Preliminary Title Report." This report will show you what, if any, liens, easements, or other encumbrances are recorded against the property. Some of these items are acceptable such as utility easements, but anything out of the ordinary will need to be resolved by the seller prior to the issuance of the Title Insurance Policy.

One last thing you need to know is that the title insurance policy will not protect you from paying any debts you take on while owning the home. Title Insurance only covers activity prior to you purchasing the home.