What Is Title Insurance And How Much Does It Cost?
Buying a new home is an exciting venture, but there’s no doubt it can be intimidating to put such a large sum of money on the line. That’s why it’s crucial for you as a new home buyer to invest in safeguarding measures to keep you and your finances protected, even after closing.
Title insurance is a valuable policy that protects both the home buyer and lender from financial loss caused by title defects. Title insurance is well worth the small investment when it comes to protecting your finances.
Title insurance costs can vary state to state, but we’ll give you some of our best tips when looking for your ideal title insurance policy and dream home.
What Is Title Insurance?
Title insurance is a policy that helps protect both home buyers and lenders from financial loss due to title defects. What your title insurance covers will depend on your title company. However, most title insurance policies protect homeowners from encroachments, fraud or property rights disputes, liens on the property, or other hidden issues that may arise during the purchase of a home. The title insurance policy pays for any repairs, legal fees, and court costs associated with defending your property and/or financial losses if there are any issues with the title.
Lender's Title Insurance Vs. Owner's Title Insurance
There are two types of title insurance, and if you are a homeowner or prospective homeowner, it is important to understand the notable differences between the two.
Lender's Title Insurance-
Provides liability protection for the lender, often for the duration of the mortgage
Doesn't protect the buyer from potential title disputes
Costs range between 0.5% - 1% of the purchase price
Usually required by most lenders
Owner's Title Insurance-
Can aid in covering costs of potential title disputes
Usually costs a few hundred dollars
Highly recommended, but not always required
How Much Is Title Insurance?
The cost of title insurance will depend on several factors, such as the state you live in, the price of the home, and whether or not it’s a new construction. Generally, title insurance policies range from about $1,000 to as much as $4,000 for more expensive homes.
When looking for title insurance, it’s important to take the time to compare different policies and shop around for the best deal. You should also check with your state’s Department of Insurance to find out what type of coverage is required.
What Fees Are Included In Title Insurance Costs?
Title insurance costs usually include a range of fees, such as the title search fee, wire fee, notary fee, title examination fee, policy rate, transfer tax, recording fees, etc. The title search fee covers the cost of digging up public records related to the property’s title, like deeds and mortgages. The title examination fee covers the cost of an attorney or closing agent reviewing the documents and ensuring that the title is clear. The policy rate is the cost of the title insurance itself, and recording fees cover any costs associated with filing the new deed or loan documents in public records.
In addition to these costs for a standard policy, you may also have to pay additional fees for additional coverage such as endorsements or an owner’s policy. Endorsements can add coverage for potential title defects and owner’s policies offer additional protection to the homebuyer if they choose to purchase one.
Title Insurance Cost And Rules By State
Title insurance costs vary based on location and the price of your home. The title insurance industry is highly regulated, so policies and costs vary from state to state. Each state has general title insurance rules that can provide insight into state-by-state pricing.
In states like Utah and Texas, title insurance is regulated and fixed by the government. This means all home buyers will pay the same amount for title insurance. However, in states like Arkansas and Delaware, title insurance rates are unregulated. This means buyers can shop around and compare title company policy costs to find the best fit.
In Nebraska, a title search is not required before the title insurance is issued and fee regulation is based on prior approval by the state. But in Missouri, a title search is required before insurance is issued, and application must be filed and approved within 30 days for fee regulation.
5 Tips For Shopping For Your Title Insurance Policy
When it comes to finding the right title insurance policy, there are a few key tips that can help you save money and ensure your property is well protected:
- Research different policies before committing to one
- Ask for discounts from your title agent
- Check with the state Department of Insurance to find out what type of coverage is required
- Consider getting a joint policy with your mortgage lender
- Make sure you understand all the terms and conditions of the policy
By following these tips, you can make sure that you’re getting the best title insurance policy for your needs at an affordable price.
Conclusion
In summary, purchasing title insurance is an important part of buying a new home. It offers both lenders and homeowners peace of mind knowing that their investment is protected. Even if the cost of title insurance is somewhat intimidating, it’s a small price to pay for the protection that this policy provides. To get the best deal on your title insurance, compare policies and shop around while paying close attention to any additional fees or endorsements. Good luck with your home search!
