Low down payment mortgages are somewhat risky for lenders because people are more likely to default on a loan in which they have very little money invested. If a default occurs, the lender must sell the home and pay foreclosure costs out of the proceeds, before applying any money to the loan balance. Lenders often lose money on foreclosures.

Lenders generally require PMI if you are borrowing more than 80 percent of the value of the home you are purchasing (i.e., your down payment is less than 20 percent). PMI guarantees your lender will be paid if you default on your mortgage. PMI does NOT protect you against losing your house in the event of a default, however. Moreover, the insurance company may be able to seek recourse against you for any default claim they pay to your lender.

In basic terms, title is your right to own, possess, use, control, and dispose of property. When you buy a home, you are actually buying the seller's title to the home. A deed is the written legal evidence that the seller has conveyed his or her ownership rights to you.

Before the closing meeting when the actual transfer of ownership occurs, an attorney or title specialist generally conducts a title examination. The purpose is to discover any problems that might prevent you from getting clear title to the home.

🛡️ What is Title Insurance?

Title insurance is the best way to protect yourself against title defects, which may not appear until after you've taken ownership of the property. Before a title insurance policy is issued, a title report is prepared based on a search of the public records. Title insurance protects you against title defects that were not discovered in the course of the title search (for example, forged signatures). If such a defect is later discovered, your title insurance would cover you.

✅ How Title Insurance Protects You

If title problems are severe enough, you could actually lose your house. A title insurance policy protects you and your heirs against title defects for as long as you own the property. The policy represents the title insurance company's responsibility to compensate you for any covered loss caused by a defect in the title, or any lien or encumbrance that was not discovered in the title search.