How Much Does Title Insurance Cost and Do I Need It?
When you buy a home, the cost of title insurance can be worth it to protect against ownership claims from a previous owner. There are two types of title insurance policies: a mandatory lenders title policy, which protects the lender's financial interests, and an optional homeowners title insurance policy that protects you.
Title insurance premiums depend on where you live, the value of your home and how much you're borrowing. Here, you can explore the costs of title insurance in more detail.
What is title insurance?
A title insurance policy protects you against past problems, such as an improperly recorded deed, a contractor lien for unpaid work or an unknown heir. Policies are issued after a title examiner researches wills, divorce decrees, court judgments and other public records to ensure no title disputes exist.
Lenders title insurance is mandatory anytime you mortgage a home. It protects the lender's interests for the life of your loan and is tied to your loan amount (not the purchase price). Meanwhile, a homeowners title insurance policy protects you for as long as you own your home. That coverage is based on sales price.
How much does title insurance cost?
If you buy both lenders and homeowners title insurance policies, the total cost is about 0.5% to 1% of the purchase price, says Jeremy Yohe, vice president of communications for American Land Title Association (ALTA), a national trade association for U S title insurance agents.
This translates to a monthly premium of $114.38 to $228.75 for a median-priced home of $274,500, according to December 2019 data from the National Association of Realtors. Costs vary by state, but the higher your purchase price, the more you'll likely pay for title insurance.
Yohe says the cost of a new lenders title policy is closer to 0.5% of the loan balance for a refinance loan. If you bought a homeowners title policy when you purchased your home, you won't need to buy another if you refinance. The coverage lasts as long as you own the home.
What's included in title insurance costs?
When you get a title insurance quote, the title company fees may be itemized. Some state laws require fees to be bundled into one quote. Others require the fees to be itemized. An escrow officer can help answer questions about title closing costs.
Title insurance quote fees may include:
- Endorsement fees
- Title search fee
- Closing protection letter fee
- Deed preparation fee
- Government recording charges
- Tax and other certificates
- Overnight mail charge
- Wire fee
- Transfer tax
- Settlement fee
- Notary fee
- Document preparation fee
- Email/electronic document fee
Understanding your title insurance quote
If you get a quote directly from a title insurance company, you may notice the fees are different from what's disclosed on your loan estimate. Don't be alarmed: Laws in some states require fees to be disclosed differently. But the total should be the same as what's on your loan estimate.
To avoid confusion with title insurance cost estimates, the Consumer Financial Protection Bureau (CFPB) recommends ensuring the bottom line and loan estimate match.
Where to buy title insurance and how to shop
Your lender must provide a list of settlement services with a loan estimate three days after you apply for a mortgage. The list should provide email and phone number contacts for several title companies. But you're not limited to the ones on the list.
Tips for shopping for a title insurance policy
- Be prepared to haggle if you're buying a home. You can shop around for title insurance if you're buying a home. You may have to negotiate with title companies, especially if you're in a state where sellers usually pay the homeowners policy premium.
- Ask for a lower rate when refinancing. You'll need a new lenders title insurance policy (but not homeowners) whenever you get a new loan. Title companies may offer a "reissue rate" to keep your business, so contact yours for a quote.
- Ask for a combined policy discount. If you need a lenders policy but also want the extra coverage of a homeowners policy, ask about discounts for buying both together.
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