First Time Homebuyers we talk to want to know what is included in Closing Costs. Obviously there’s an appraisal fee, a credit report – you might want to have a Home Inspection… but we often get asked what Title Insurance is… and the next question is, “Do I Need It??”
Title Insurance: This is a policy you get when you buy or refinance a home that guarantees that the home will have a “clear title” directly to you. It insures that the house “title” will not have any problems because a previous owner has an outstanding judgment.
Title insurance is one of those items Buyers often request that the Seller Cover in Seller paid closing costs
An owner that has a roof put on, for instance, but doesn’t pay the final balance, could create a judgement attached to the HOME (from the previous owner) that could come back on you.
If there is a previous judgment that you find out about after closing on the home, then it falls onto the title insurance to settle it.
In North Carolina, the title insurance is issued by the attorney closing the loan. (we are an attorney state), and they do a search for these judgments up front. The cost of title varies widely from state to state, but in North Carolina a purchase transaction will be approximately 2% of the loan amount. One way you can almost always reduce it is to tack onto the old policy, so having the Seller provide that information might save everyone some money!
If you are refinancing a mortgage, obviously, you want to give the attorney your old policy to save a few bucks.
Remember, the USDA Home Loan Maps could be changing October 1, 2014… in fact, almost 1/3 of North Carolina could LOSE the ability to do USDA Home Loans! Yikes!