As we’ve discussed here on the blog, a title search can unearth many potential problems with a home’s title. These problems need to be resolved by the seller before the sale can be completed.
But there can be undisclosed or missing information or people who can wreak havoc with your title down the road. Even a misspelling can cause problems! That’s why we recommend you get title insurance for yourself and your lender. In fact, many lenders will require that you at least buy a lender’s title insurance policy.
If you purchase just the lender’s insurance policy and no policy for yourself, your interests will not be protected if there’s a problem with your title or a claim made against it. You will have to pay for your own legal defense, and you could lose more than your home if you lose the case: You’ll be out your down payment and any equity the home has accrued.
Meanwhile, because you purchased the lender policy, the insurance company would make sure the lender’s losses are covered.
Had you purchased an owner’s title insurance policy, your interests and losses would be covered in the event you lose the case. You may still have to move out of the home, but you’d be protected from financial losses.