Title is a document that gives evidence of legal ownership of property.
At the end of the home-buying process, there is the actual legal transfer of the house to the buyer. This is done at a meeting called a closing. At closing, many legal documents are signed that solidify the sale of the home and enable the transfer of the funds for the sale. A title is the final paper product of a closing; it proves that the transaction took place and that the buyer is now the owner of the property. The title represents that the buyer now owns the property and that no one else has a right to claim the property. Generally, the owner does not take the title home. Instead, the lien holder, or mortgage company, possesses the title.
Occasionally, problems occur with a title. Someone may dispute the legality of it. This can be the outcome of a dispute over closing or ownership from a previous sale of the home. Such disputes can result from a variety of situations. If the previous owner neglected to pay property taxes, the local county can put a lien on the property, which means the debt obligation must be satisfied. Sometimes a problem can occur on a title as the result of a divorce. If an ex-spouse has not been removed from the title, but also has not been a part of the closing process, this can put a defect on a title. You can protect yourself from defects in the title through title insurance.
Title insurance is protection against potential hidden claims against a title. There are two basic types: The first protects the lender, and the buyer is required to pay for this type of title insurance when they accept a mortgage. The other type, personal title insurance, protects the buyer from loss. Although the first type is mandatory, the second is optional, but is recommended because it protects the buyer.