Title Insurance 101

Title insurance is one of the many services that is ordered on your home purchase or refinance. This article will breakdown title insurance, what it is, and how it protects you.

You have the right

In Illinois, the consumer has the right to choose title. You may waive your right to choose if you wish, and your lender can choose the title company on your behalf. You will receive a disclosure called “Title Insurer Disclosure” when applying for a mortgage in Illinois.

Disclosure Title Insurer Disclosure

Whether you are purchasing a home or refinancing your property, title insurance will be required. You may select your own title company to issue your insurance policy, or you may waive this choice and let the Newcastle choose the title company. A title company chosen by you must meet the NewCastle’s reasonable financial requirements.  

What is Title Insurance?

Title Insurance isn’t the same as homeowners insurance. Whether you buy your home in cash or take out a mortgage you will need a title insurance policy. Let’s break it down:

Title: The collective ownership of rights for a piece of property and includes all previous transfers of ownership and liens on the property.

Title Insurance: An insurance policy that covers past title problems that come up AFTER you purchase a home or refinance, which you were not made aware of at the time of your purchase.

A title insurance policy doesn’t cover any issues that occur after you have purchased your home. 

Types of title insurance Owner's Policy vs Lender's Policy

Both policy types protect the named insureds against PAST losses that can occur after closing and funding on your home loan purchase or refinance transaction.

Owner’s Policy: An owner’s policy protects a buyer’s ownership interest in the property if a PAST title or ownership issue comes up after the purchase.

Lender's Policy: A lender's policy protects the lender in the event a past title or ownership problem arises after closing on the home loan. NewCastle Home Loans will always require a lender's policy.

The owner’s policy will protect you, and you can sleep in peace knowing so. Below are a few examples of what can go wrong if you didn’t purchase an owner’s policy:

• Your neighbor wants ten feet of your property line, but you didn’t have a survey done at your closing. If you didn’t have an owner’s policy stating you can go back to the original survey, you would most likely incur a court battle for ten feet of your property. 
• You’re purchasing a home that had a previous line of credit on the home and wasn’t closed out properly. The previous owner drew $100,000 from the line of credit and defaulted - the bank can now come after you. An owner’s policy would protect this from happening.
• Two homeowners ago, a husband and a wife owned the property. The wife passed away, and the husband sold the house. The couple’s children have a right to your property and can sue you for the value of the property since the property was held in tenants in common. The owner’s policy would protect you from this happening.
• Any type of previous owner’s old liens, special assessments, tax assessments, and even easements on the property.

Title insurance is there to protect you - not just a closing cost on your closing disclosure.

If you are looking for a title company, we suggest SNP Title Co. Bob Gladowski 630-445-8761