When closing on a home, there are costs associated with the sale. Home buyers can typically expect to pay about 3% – 6% of a home’s purchase price in closing costs. Title fees are one of the major closing costs of buying a home.
When preparing to buy a home, understanding the title fees can help you calculate your upfront costs. We’ll cover title fees in the home buying process, including who pays them and how much they cost.
Title is the right to own and use a property. Title fees are a range of fees associated with closing costs. These fees compensate a title company for reviewing, adjusting and insuring the title of a property.
The title company performs a title search to uncover any potential issues with the title, such as encumbrances or liens. The company will then make the necessary changes and ensure that their findings are correct.
The fees associated with a title search can vary depending on your situation. Mortgage preapproval can provide a good ballpark estimate if you’re unsure what to expect from your total closing costs.
Title fees refer to various title expenses. The fees a buyer or seller pays will depend on their respective circumstances and the terms of their purchase and sale agreement.
Here are some common fees, what they cover and their average costs:
A title search is an investigation of a property’s public records to verify its owner. The search can also reveal any known and unknown claims or liens on the property.
A title search can cost $75 – $200, depending on various factors, including the property’s location. The seller typically pays this fee.
The title company charges a title settlement fee, also known as the closing fee, to cover the administrative costs of closing. Title companies may or may not break out the individual costs of the fee.
The title settlement fee generally covers:
The settlement fee, which can vary, may also include attorney’s fees.
Lender’s title insurance protects lenders – not buyers – from any claims on a property. Mortgage lenders typically require lender’s title insurance because something can still come up even after a title company clears the title.
Lender’s and owner’s title insurance are often bundled and purchased together for a one-time fee that typically ranges from 0.5% – 1% of a home’s total purchase price. For example, you may pay a $3,000 title insurance fee on a $300,000 home.
A lender’s title insurance policy covers a loan’s entire term. If you refinance your loan, you must purchase a new policy.
Much like lender’s title insurance, owner’s title insurance protects the owner from any overlooked claims or liens on the title. Insurance will cover up to the purchase price of the property.
For example, suppose you buy a house, and 2 years later a relative of the previous owner shows up with a deed claiming rightful ownership of the property. Owner’s title insurance can protect you in this scenario. Without it, you would risk losing the house and still being financially responsible for the mortgage.
While optional, owner’s title insurance is highly recommended for home buyers. It’s extra security that can potentially cost less than what you may pay to resolve an unexpected future claim on your title. The policy remains in effect for as long as you own the home.
If you hire a real estate attorney (as required in many states), you’ll pay attorney fees. The fees cover the cost of an attorney reviewing paperwork, including the property’s title.
An abstract is a summary prepared by a title company based on the findings of the title search. It compiles the details of the search and related official documents. It typically costs between $200 – $400 to update a title abstract and potentially more than $1,000 to create a new abstract of title.
Recording fees, which can cost around $125 on average, pay for the costs associated with filing deeds and other official documentation at a county’s public records office.