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Before a home is purchased with a mortgage, it must be covered by a title insurance policy from a title company. While it may sound like a foreign concept to the first-time home buyer, it is actually a necessary aspect of the house buying/selling process.

What Does a Title Company Do?

The title company is where title insurance is purchased before a home is purchased. In fact in some states, closing may actually take place at the company's office vs. the listing agent's office (where your closing occurs and is determined by either your selling agent or mortgage consultant).

The purpose of the title company is to ensure that the title to the home (ownership of the property) is free and clear of any outstanding debts before it is released to the new owner. For example, there may be an unpaid real estate tax connected with the property thanks to the previous owner. In order to make sure that any debts like these are cleared, the company conducts a title search on the property to see what's out there then requires that the new owner pay the debts before a policy is issued.

Who Benefits from Title Insurance?

Believe it or not, the homeowner doesn't benefit from the title insurance policy issued by the title company. When a home is purchased, the only entity that benefits from the policy is the lender. This is because they require this type of coverage before agreeing to the loan they want to make sure that there are no outstanding debts and that if something does pop up, the insurance will cover it.

There is no doubt that you will have to purchase title insurance before closing anytime a home is purchased with a mortgage. So if you know that buying a house is in your near feature, you might as well cozy up to the idea that you will be working with a title company before the deal is sealed.

Some people buy foreclosed homes for long term strategies and others purchase foreclosed homes as short term investments.

Consider David and the purchase of his new home in Los Angeles. Last year, he purchased a condo with his wife at what they believed to be the biggest bargain of the century. Their goal is to live in their home for at least ten years and David has always fancied himself a long term strategist.

Even after David scored his foreclosed home, over the next few months he noticed that some property values in his building were declining even further. As of this month, it appears that the sales prices are stabilizing and that his home is safe from any further decline. Either he knows he would have been fine as since he considered his foreclosure purchase a long term investment he will be able to wait out the storm until the market starts creeping back up.

Other times, foreclosed properties are purchased as short term investments. In David's building there is a second condo that has been bank owned since his purchase.

Recently, the vacant apartment was sold at auction at a substantial discount that made David's bargain pale in comparison. However, only two months later that property is listed and trying to be sold again. In this case, the purchaser considered the apartment a short-term investment.

Whether you are looking for a home for a long term living situation, or you are an investor interested in flipping properties a foreclosed home can be an excellent investment. Purchasing a foreclosed home can be either a long or a short term investment depending on your preference.

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If you're looking to save some money on monthly bills, you should consider taking a look at your mortgage. Although the housing industry isn't a seller's market right now, you can still get good deals on refinancing options.

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For quite some time many people have thought purchasing a foreclosure bargain was a good to earn profit with a low investment. There are dozens of infomercials, books and real estate "programs" all catering to those who want to dabble in the foreclosure investment game, but the strategy is not...

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