Sign up for our FREE Monthly Email Newsletter
In addition to keeping in the financial know, you may be interested in checking your credit score and report.
¹The credit scores provided under the offers described here use the Equifax Credit Score, which is a proprietary credit model developed by Equifax. The Equifax Credit Score and 3-Bureau scores are each based on the Equifax Credit Score model, but calculated using the information in your Equifax, Experian and TransUnion credit files. The Equifax Credit Score is intended for your own educational use. It is also commercially available to third parties along with numerous other credit scores and models in the marketplace. Please keep in mind third parties are likely to use a different score when evaluating your creditworthiness. Also, third parties will take into consideration items other than your credit score or information found in your credit file, such as your income.
²The Automatic Fraud Alert feature is made available to consumers by Equifax Information Services LLC and fulfilled on its behalf by Equifax Consumer Services LLC.
³Equifax Credit Report Control™ is only available while you have a current subscription to Equifax Complete Premier. Locking your credit file with Equifax Credit Report Control will prevent access to your Equifax credit file by certain third parties, such as credit grantors or other companies and agencies. Credit Report Control will not prevent access to your credit file at any other credit reporting agency, and will not prevent access to your Equifax credit file by companies like Equifax Personal Solutions which provide you with access to your credit report or credit score or monitor your credit file; Federal, state and local government agencies; companies reviewing your application for employment; companies that have a current account or relationship with you, and collection agencies acting on behalf of those whom you owe; for fraud detection and prevention purposes; and companies that wish to make pre-approved offers of credit or insurance to you. To opt out of such pre-approved offers, visit www.optoutprescreen.com/.
4We will require you to provide your payment information when you sign up and we will immediately charge your card $4.95. After that, we will charge the card $19.95 for each month you continue your subscription. You may cancel at any time; however, we do not provide partial month refunds.
Equifax® is a registered trademark and Equifax Complete™ Premier is a trademark of Equifax, Inc. © 2014, Equifax Inc., Atlanta, Georgia. All rights reserved.
But if skipping the purchase of title insurance seems like a good idea, you might want to think twice. When you close on your new home, your closing costs can include two kinds of title insurance, both of which may strike you as unnecessary.
What is title insurance, and why buy it?
The primary role of a title insurance company is to research the legal history of the property in order to anticipate any potential problems and resolve them before you close on the purchase. After you close, a title insurance policy continues to protect against any claims on your property that were not found before closing.
There are two types of title insurance: Lender’s title insurance and owner’s insurance title. Lender’s insurance is a requirement if you are getting a loan. An owner’s title insurance policy is technically an option, but most real estate attorneys recommend their clients purchase one.
Your lender will require you to buy title insurance to protect it if a problem were to arise regarding your legal right to the property. If you want the mortgage loan, you usually have no choice but to buy a lender’s title insurance policy for the amount of your loan that will benefit the lender should there be problems down the line.
However, if a problem with your title is discovered after you close, the lender’s title insurance policy does not usually protect you, the owner. Without your own owner’s title insurance policy and coverage, you could lose any equity you have in your home.
Such problems occur infrequently, but when they do, owners can lose their property and equity, says Jeremy Yohe, vice president of communications at the American Land Title Association.
“Just last year in Missouri a family purchased a home for more than $400,000 and a lien was missed during the search,” says Yohe. “The title insurer paid off the lender, but the family was not covered.” In another recent case, a homebuilder sold and financed a home to a first-time buyer, but because the builder financed the sale, neither had title insurance, according to Yohe. When there a lien was found on the property, the family lost its home, and the builder went bankrupt.
How much does title insurance cost?
Once your mortgage loan is approved, the lender provides a list of estimated costs for closing services, including title insurance and the name of a title insurance provider. Title insurance usually costs about 0.5% of the purchase price of the home, depending on where you live and the company you use. So, for a $400,000 house, title insurance could cost as much as $2,000.
Costs vary, and depending on your circumstance, there may be opportunities to save money on title insurance. Just because your lender recommends a title insurer doesn’t mean you must use that company. Shop on the Internet and compare rates from title insurance companies licensed in your state.
When you settle on a title insurance company, negotiate any add-on or ancillary fees that are present in nearly all cases. Yohe said he recommends buyers ask title companies exactly what their costs and fees cover. Some companies will include only basic coverage and may bill separately for search and other services, while others might have a single fee, depending on state law.
Next, you can decide if you want to purchase an additional policy called owner’s title insurance. Ask for the “simultaneous issue rate,” and the title insurance company likely will discount the cost of the lender’s policy.
According to Yohe, consumers may be able to save as much as 50 percent of the cost of the second policy, depending on your state. Plus, if you refinance your mortgage loan sometime in the future, you will have to buy a new policy for your lender, but your original owners policy will remain in effect as long as you or your heirs own the home.
“Your home is the most expensive purchase you will make,” says Yohe. “Unlike other insurance coverage, title insurance is a one-time charge that works out to be very reasonable when you amortize it over the years you will own your home.”
Steve Cook is editor of Real Estate Economy Watch and covers real estate and mortgage finance for leading news sites. He is a member of the board of the National Association of Real Estate Editors and was twice named one of the 100 most influential people in real estate. Cook was vice president for public affairs for the National Association of Realtors.
How Soon After Buying a House Can You Switch Homeowner’s Insurance
Move In Maintenance: How First-Time Homeowners Can Get to Know Their Home
Should I make a Homeowner’s Insurance Claim
The information contained in this blog post is designed to generally educate and inform visitors to the Equifax Finance Blog. The blog posts do not give, and should not be assumed to provide, personalized tax, investment, real estate, legal, retirement, credit, personal financial, or other professional advice. Before making any financial decision, you should always consult with the appropriate professionals who can explain your options, rights, and legal responsibilities, and advise you on any tax, legal, credit, or business implications that may result from those decisions. The views and opinions expressed by the authors of blog posts are their own views and may not be the views or opinions of Equifax, Inc. and/or its affiliates.
Equifax maintains this interactive forum for education and information purposes in order to allow individuals to share their relevant knowledge and opinions with other members and visitors. We encourage you to participate in discussions about personal finance issues and other topics of interest to this community, but please read our commenting guidelines first. Equifax reserves the right to monitor postings to the forum and comments will be published at our discretion. Do you have questions or comments about your Equifax credit report or customer-service issues regarding an Equifax product? If so, please contact Equifax directly. All opinions and information expressed or shared in blog comments are solely those of the person submitting the comments, and don't necessarily represent the views of Equifax or its management.