Updated August 1, 2019 . AmFam Team
Whether you’re buying a home for the first time or you’ve bought before, it’s important to familiarize yourself with the closing costs you’ll pay. And one important part of closings costs are title fees. What exactly are title fees and why do you have to pay them? In short, title fees are paid to help financially protect you and/or your lender in case the title you receive is unverified or incorrect. Let’s dive a little deeper to gain more understanding of what you’re paying for with title fees.
Title fees consist of a number of factors:
Title insurance. Title insurance is an important coverage to purchase since it covers you — and your lender — in the event the seller doesn’t (or previous sellers didn’t) have clear ownership of the home or if the title isn’t clean. When you have title insurance, a title company will search public records to help determine if there are any ownership issues — and help resolve them. If anything is missed during their research, you’ll be covered.
Loan policy of title insurance. If you’ve taken out a mortgage loan to purchase your property, your lender will require a loan policy of title insurance — also known as lender’s title insurance — in order to protect their investment until the loan is paid off. This way, in case your home is lost to a title claim, your lender is protected.
Owner’s policy of title insurance. On the flip side, an owner’s policy of title insurance — or homeowner’s title insurance — is what protects your ownership rights to the property. It’s usually a one-time fee that lasts as long as you own your home. It protects your investment against things like forgery, undisclosed heirs, errors or omissions in deeds and mistakes in examining records. Basically, this provides peace of mind that, should a title problem arise after you’ve already bought your home, your title insurance company will step in to help out both monetarily and legally if needed.
Notary fees. You’ll need to notarize your mortgage deed of trust, which costs around $10.
Government filing fees. Part of becoming a certified homeowner means officially recording the ownership of your new home as well as transferring taxes and other documents to your name. You’ll file your property and loan information at your local county courthouse for a fee — usually dependent on the amount of pages you’re filing.
Escrow fee/Settlement fee/Closing fee. You’ll have an escrow company who helps handle all the funds involved in the home-buying process. The title closing escrow fee is based on your loan amount and/or purchase price of the home. You’ll pay a fee to the escrow agent who helps you close.
So, who pays title insurance fees at closing? This is actually negotiable — you can work it out with the seller to cover some of the title fees and, depending on your state or locale, the seller may traditionally cover this cost. But most often it’s the buyer who pays the cost of issuing the owner’s title insurance policy and other title fees.
Title fees vary greatly based on the location of your home, your home’s value, your credit score and your loan amount. Remember, the biggest chunk you’ll pay for your title fees go towards your title insurance, including the lender’s title insurance and homeowner’s title insurance. According to ValuePenguin (Opens in a new tab), in 2019 “the average cost of title insurance is $544 for the lender’s policy and $830 for the homeowner’s policy, for a total cost of $1,374.”
If you have a mortgage, you’ll be required to have lender’s title insurance — and anything that makes you riskier to your lender, like a smaller down payment or a not-so-great credit score means you’ll likely have a higher lender’s title insurance price tag. Homeowner’s title insurance, on the other hand, is an optional policy designed to protect your ownership rights to the property, so you can choose whether or not you want to purchase this added protection.
Want to learn more about what your potential home-buying costs might be? Check out our Hidden Costs of Buying a Home Calculator and feel more prepared, confident and ready for closing day!
Don’t forget to check in with an American Family Insurance agent (Opens in a new tab) to make sure your homeowners insurance is lined up for closing day, too.