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Bad Credit Mortgage or Home Refinance: What You Need to Know About Title Insurance

By Barbara Marquand
Mortgage Credit Problems Columnist


Home loans for people with bad credit are challenging to get in today's lending environment, so getting approved may feel like passing an endurance test. But don't get so caught up with winning over the lender that you lose sight of important closing details, such as title insurance.

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Title insurance comes into two forms--policies for the lender and the owner. The owner's policy protects you against financial losses in case your ownership is questioned after you buy the home. Although a title search is conducted to make sure the seller is the rightful owner, problems can still occur. For instance, a missing heir could suddenly appear and claim ownership, or a lien against the property could come to light.

Good or Bad Credit, Lenders Require Title Insurance

The lender's policy protects the lender's interest should a problem with the title come up. When you buy property, you must purchase title insurance for the lender and you can choose whether to purchase an owner's policy for yourself. In some regions, sellers typically pick up some or all of the cost of title insurance.

If you already have an owner's policy, you don't have to buy a new one when you refinance your mortgage. The owner's policy covers you for as long as you or your heirs own the home. But you do need to pay for the lender's title insurance.

Home Refinance or Purchase: Save Money on Title Insurance

Title insurance prices vary widely in some states, so it pays to shop around. In some cases, the premium will include fees for title search and other services, while in others those fees will be tacked onto the premium. The American Land Title Association provides a tool on its Web site to find a local title company. You might also want to check if your state's land title association provides information. In California, the California Land Title Association provides a handy online tool for comparing title insurance prices.

If you're refinancing, be sure to ask your title company if there are discounts for reissuing a lender's policy.

Home Refinance Quotes

Keep title insurance in mind even if closing seems a long way off. Meanwhile, if you're just starting to think about refinancing, enter your information into the form on this page to get up to four free quotes from lenders.

Sources

http://www.homeclosing101.org / http://www.kiplinger.com

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