When you go to buy a home, or even when you’re going to sell a home, part of your closing costs pays for what is called title insurance.

What is title insurance and why do you need it?

In very simple terms, title insurance makes sure that the title for the property is free and clear.

Think of it like buying a car. When you buy a car, you want to always be sure that you receive title to prove that you are the owner of that car. It is the same when you are buying a home. When you buy a home, you want to make sure you are the ONLY owner of that home. That way, if six months after you close on the purchase of your home someone knocks on your door and says they were given a percent of interest on the property by a family member, you can call up your title company. The title company will then be responsible for paying that owed money, or they can dispute it if the claim made is false.

Another mechanism of the title insurance process when you are closing on a home is that they make sure it is free and clear of any leans.

What does this mean? This means that if the seller of the home you are purchasing had previously hired out a contractor to work on the home and didn’t pay them, the title company will investigate and take care of this issue, making sure all payments are made so that there are no issues for you while you close on your home. It depends on which state you live in, but here in Washington State, you have to have free and clear title to a property in order to transfer the ownership to a new owner.

There is a lot that goes into the title insurance policy, but that covers the basics! It ensures that you are the only owner and that your title is free and clear, assuring your new home is all yours.