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 that homebuyers purchase: a lender's title policy, which protects the lender's financial interests, and an optional homeowner's title insurance policy that protects you, the buyer.
Title insurance premiums vary widely based on where you live, how much your home is worth and how much you're borrowing. Let's explore the costs of title insurance in more detail.
What is title insurance?
A title insurance policy protects you against title problems from the past, such as an improperly recorded deed, a contractor lien for unpaid work or an unknown heir. Title insurance policies are issued after a title examiner researches wills, divorce decrees, court judgments and other public records to ensure no title disputes exist.
Lender's title insurance is mandatory anytime you finance your home with a mortgage, and it protects the lender's interests for the life of your loan. A lender's policy is tied to your loan amount (not the purchase price). Meanwhile, a homeowner's title insurance policy protects you for as long as you own your home, and the coverage is based on your sales price.
How much does title insurance cost?
The total cost of a title insurance policy is about 0.5% to 1% of the purchase price when you buy a lender's policy and a homeowner's policy together, says Jeremy Yohe, vice president of communications for American Land Title Association (ALTA), a national trade association for U.S. title insurance agents.
The fee range translates to a premium of $1,372.50 to $2,745 for a median-priced home of $274,500, according to December 2019 data from the National Association of Realtors. While title insurance costs vary by state, the higher your purchase price, the more you'll likely pay for title insurance.
For a refinance loan, the cost of a new lender's title policy is closer to 0.5% of the loan balance, Yohe says. If you bought a homeowner's title policy when you purchased your home, you won't need to buy another if you refinance, because 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 states have laws requiring that fees be bundled into one title cost quote, while others require they 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
- 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 title insurance quote directly from a title company, you may notice it's different from what's disclosed on your loan estimate. Don't be alarmed; laws in some states require that title companies disclose their fees 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 that the bottom-line total matches the title company fees on your loan estimate.
Where to buy title insurance and how to shop
Your lender must provide a settlement service provider list 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 companies on the list.
Tips for shopping for a title insurance policy
- Be prepared to haggle if you're buying a home. You can shop for title insurance if you're buying a home. You may have to negotiate the final choice of title companies, especially if you're in a state where sellers usually pay the owner's policy premium.
- Ask for a lower rate when refinancing. Whenever you get a new loan, you'll need a new lender's title insurance policy. Title companies may offer a "reissue rate" to keep your business, so contact the title company on your current loan for a quote.
- Ask for a combined policy discount. If you need a lender's policy but also want the extra coverage of a homeowner's policy, ask about discounts for buying both policies together.
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