Do you want to protect your home from future vulnerabilities caused by title defects? Title insurance is your answer. But how much will title insurance cost you? Let’s find out!
What is Title Insurance?
Title insurance safeguards the interests of both the owner and the lender in issues related to the house’s title, including:
- Liens or lawsuits
- Undisclosed heirs
- Errors in deeds
What are the Title Insurance Costs?
Title insurance costs are included in the closing costs of a real estate transaction and are about 0.5% to 1.0% of the home’s purchase price. Based on the state you reside in, you will either get a proper breakdown of your quote or a cumulative one.
A typical title insurance policy quote will include the following title fees:
Title Search Fee:
A title search helps guarantee that the house being sold actually belongs to the seller. It also checks to see that the house has a clean title, i.e., it has no debts, liens or lawsuits, undisclosed heirs, etc. This protects the homeowner from future disagreements related to the title.
The title search can be carried out either by a title company or an attorney representing the buyer. Based on the property, the cost of a title search is typically between $100 to $250 for a standard single-family home. A land search could be as high as $1,000.
Title Settlement Fee:
A title settlement fee is paid to the title company that is the settlement agent in the real estate transaction. This fee includes the following:
- escrow fees
- land survey fees
- notary fees
- deed preparation fees
The buyer usually pays the settlement fee. It can also be split between the seller and buyer.
Lender’s Title Insurance:
A lender’s title insurance safeguards the mortgage lender financing your transaction. If in the future, someone claims your house to be their own, this policy will protect the lender’s money. It is issued for the loan amount given to the buyer, and as the debt reduces, so does the liability.
A loan policy is a compulsory purchase.
Owner’s Title Insurance:
An owner’s title insurance policy protects the new owner’s transaction from property title issues. This isn’t a compulsory purchase, but it’s recommended to prevent monetary losses later.
The premium of an owner’s title policy is a one-time fee. Its coverage, on the other hand, lasts for as long as you or your heirs own the property.
In some states in America, the law requires a real estate attorney to be present at closing. They review contracts and other paperwork, including the title. The attorney fee is usually split between the seller and the buyer.
Real estate attorneys usually charge an hourly fee from $150 to $400.
Types of Title Insurance Policies
Title insurance policies are of two types:
- Owner’s Title Insurance: This title policy protects the buyer from problems caused by a defective title like an unmarketable title, post-policy forgery, pre-policy fraud, etc. If the premium rates are government regulated, then it will cost the same irrespective of the company you choose. But, if the rates are placed competitively, you can pick a policy that fits your needs.
- Lender’s Title Insurance:
A lender’s title insurance is needed when you purchase a house via a mortgage. It secures the lender’s investment should a title ownership dispute arise in the future.
You will necessarily need a lender’s title policy when purchasing a house using a mortgage. It is usually issued for the loan amount given to the buyer.
Average Cost of Title Insurance by State and City
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