When purchasing a home, you officially gain ownership when you receive the title for the property. However, in some cases that title may come with more baggage than you bargained for.
Before going through with any real estate purchase, it is essential to perform a thorough title search to ensure the property does not have associated debts or ownership claims by another party. Unfortunately, even a careful title search may not expose every potential cloud on a title. For this reason, both buyers and lenders often use title insurance to protect themselves from hidden issues.
1. What is title insurance?
As in other states, in Pennsylvania most mortgage lenders will require you to purchase title insurance to cover the amount of the loan you receive should there be a defect on the title. However, as a buyer, you may also purchase an owner’s policy that protects you from financial losses due to hidden title clouds.
2. What types of title issues can insurance address?
Common encumbrances on a title that insurance may protect against include:
- Hidden foreclosure proceedings
- A mechanic’s lien by a contractor or subcontractor
- Unpaid taxes on the property
- The presence of an easement on the property
- A claim by a previous owner or heir
3. Where can you purchase an owner’s policy?
While your mortgage company may require you to purchase a specific lender’s policy, you can usually purchase an owner’s policy separately. However, you may find that your total cost will be lower if you choose to work with the same company for both policies.
Unlike other forms of insurance, title coverage generally does not require ongoing premium payments. Instead, a one-time payment should protect your investment for the duration of your ownership of the property.