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A responsible homeowner is concerned about the responsibilities that he will be facing prior to the purchase of a new home. If you are planning to buy a new home, it is important to be aware of the costs associated with the purchase to be ready with the financial consequences and determine if you are totally ready with the responsibilities associated with the celebration of moving to your new home. One of the costs that you have to be ready to pay is the title insurance. This is not covered in the mortgage and is included in the closing costs.

The cost of title insurance is not standard for all states and markets. In some cases, the rate can be set by the agent based on market pricing and can be easily negotiated. In other cases, the title insurance is determined by the Department of Insurance and can also be negotiated depending on the home value and some other factors.

There can be a basis for the computation and more often than not, this is based on per $1000 rate. This figure depends on the type of transaction. It can be a basic, re-issue, new construction or refinance rates. The policy for basic rate is computed based on the purchase price and mortgage amount. The re-issue rate uses the back title as a basis for the computation. The back title is determined by the seller owner’s policy and is usually lower than the $1000 rate. The rate for refinance purchases covers a policy that is issued to the owner of the mortgage loan. The insurance is a factor of the value of the previous mortgage amount. Just like re-issue rate, the insurance is lower than the $1000 rate. For new construction rates, the costs associated during the construction of the property is incorporated in the computation. The rate can go lower than the basic rate.

Because there is no specific defined rate for different kinds of home purchases, it is important for you to determine what the prevailing rate is in the state or in the specific area where the home that you intend to buy is located. You can use technology to get the necessary information but the problem is on the relevance of the information. You may not get the latest rates online. You may also not get this information very easily. It will be best to consult your financial adviser or your real estate lawyer if you already have hired their services. They have a clearer picture of the current rates and you can get a close estimate on the costs related to title insurance. With this information, you can prepare for the title insurance cost related to your new home.

Other than title insurance, you will also have to prepare for other costs and it is best to know these closing costs beforehand so you can manage your finances well and be able to say with eagerness that you are ready to move in your new abode.

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Title Insurance FAQ:

Question: What is the difference between Title Insurance and Owners title Insurance?
We are about to buy a home in and the closing is expected to happen in a few days. I was asked by mortgage lender that if I would be interested in ‘ Owners title Insurance policy’? Already there is a fee ($763.00) that I am paying as Title Insurance fees. So do I really need this extra protection of ‘Owners Title Insurance Policy’ and if so how will it help me to have this extra protection, when already I am paying for one.

Answer: The title insurance is the Lender’s policy that protects the lender from any liens on that property. The Owners policy is for you, the owner to protect you from any liens that may show up on the property. For example, if in 10 years the county finds that someone else owned part of your land and owes money on it, you would be responsible to pay that if you didn’t have an owners policy. It’s definitely worth it to get it.

Question: Title Insurance?
I understand that I need Title Insurance for my mortgage, however, do I have to have this through the same company that supplies the mortgage? Point being, my mortgage company have asked $1,700 title insurance (Virginia) for title insurance on a property that is valued at $300k. As I understand it, this insurance only covers them, and not me in any way if anything goes wrong. Is this correct?

Answer: First of all, title insurance rates are a set percentage of the purchase price of the house. Second, the title insurance protects YOU, in case it turns out after all the paperwork goes through, that there’s a PROBLEM with you getting clear title (like, some guy 50 years ago willed it to someone else, and a third party who had no right to it, sold it). So you’re not going to get a better rate elsewhere, and it doesn’t cover them – it covers YOU.

Question: What happens if the title insurance company closed business?
I’ve bought title insurance when I bought a new house 10 years ago. Now, I notice that the title insurance company has quitted and closed business. Does it affect anything? Does it mean no more insurance coverage to my deed?

Answer: Are you saying the title company closed, or are you saying the insurer that wrote the policy is no longer in business? It isn’t clear from the information you gave.

Usually, the title company does not underwrite the policy. You need to check the policy and see if the insurer is out of business–the title company and the insurer are not the same. If you find the insurer is no longer in business, you should contact the insurance department in the state you live in, and find out if these policies were assigned to another insurer. The state insurance department should be able to tell you whether or not your home is still covered. If the settlement company (title company) went out of business, but the insurer is still in business, then you have nothing to worry about.

Question: What is title insurance and can I purchase it and have it work in a foreclosure auction scenario?
The way my county works, all bank-owned foreclosures are sold through a public auction that requires 20% payment at end of auction. I heard that title insurance protects against unknown liens against the property which could very well happen in this situation.

Answer: You are correct in your assumption of what title insurance provides. Before a title insurance firm will provide insurance, they will perform a search of the condition of the title covering the property in question. Contact a local title insurance provider and explain to them what you propose to do, and they will advise you accordingly, as to what liens may be against the property.

Question: Is a Title Insurance company responsible when they do not disclose an open permit?
To make it short and simple, I am refinancing a house now. An open permit from 1949 came up, can’t close with out resolving. House was purchased in 1978 and this “open permit” never came up. Title Insurance was issued at purchase. Can we hold Title Insurance Company responsible for this?

Answer: Where did the issue of the “open permit” come from? Title searches involve property title history and encumbrances – not building permit issues.

Question: What is the purpose of title insurance and why do you need it?
I recently bought property and received the title insurance policy in the mail but it doesent seem to cover anything after reading the exceptions.

Answer: Title insurance generally assures the buyer that the seller has the right to sell the property. For instance, after the closing, somebody knocks on your door and says that the seller had no right to sell because the seller originally borrowed money from a friend to buy the property. Therefore the friend may have an interest in your property. Title insurance would cover this situation.

Question: Regarding title insurance, what is a site inspection? How much does it typically cost?

Answer: You are referring to a survey for mortgage purposes. In many states a survey is not needed for refinancing if you can provide one completed within the last several years and there have been no changes. I don’t know what state you live in but this would apply to most east coast states. I am a title insurance agent in 28 states so this answer is not just a guess. If you are purchasing property then a survey will likely be required, especially if you live in a rural area. If you want to do a bit more research on your own, ask your title agent which underwriter they write for and call the underwriter directly to ask if this mortgage survey is needed.

Question: What can be done when a title insurance company gives wrong info on their final commitment?
The title company provided incorrect tax information on it’s final commitment and closing papers. Their “insured” amount was $1100 less than what the actual taxes are. Therefore they did not collect the correct amount from the previous owners for their share of the year’s taxes. Isn’t the reason for paying for title insurance so to ensure all information including the tax amounts are correct? Since they had the wrong information to begin with the incorrect information shows up on the closing papers. I paid the amount that was on the closing papers but now am delinquent for the extra $1100+ they did not report. Are they not liable to pay the insured amount since it was definitely their gross error?

Answer: Who says it was their error? The title company requires satisfaction of open or unpaid mortgages or taxes. If the current quarter or yearly assessments were not ready yet, they had to work with what they had, and they didn’t pull the numbers out of their butt. Usually the assessors office or the collectors office gives a guesstimate number out if they don’t know the new figures. I do closings, and so many times I have been told the latest actual quarter plus 20%. Sometimes it is enough, sometimes it isn’t.

Contact them and ask if they held any escrow from the sellers proceeds for the estimated taxes. If they didn’t, then either you or they should contact the seller and ask for their pro-rated portion.