Buying a home means paying a whole slew of fees, especially if you secure mortgage financing. You’ll have the fees charged by the lender, of course. But, you’ll also pay third-party fees, including those charged by the title company. One fee you’ll see on your closing statement is the ‘title search fee.’
Keep reading to learn what this fee covers and how much it may cost you.
What is a Title Search?
A title search is a search into the home’s ownership history. It specifically looks for any outstanding liens or other title deficiencies that would prevent the lender from taking first lien position or prevent you from taking proper ownership.
Basically, the title company makes sure that the title to the property is clear and that you are free to take ownership of the property. The title examiner will go through all of the property’s records to ensure that no one else can come forward and claim the property as their own.
The title examiner will look for any outstanding liens or even mortgages that still remain on the property. This may include unpaid property taxes, judgments, or mechanical liens. Finally, the examiner will determine if the property is properly situated. The examiner will look at the property’s survey to ensure that there are not any encroachments or other property issues that could cause financial strain in the future.
Once the examiner completes the title search, he can create an abstract of title. This summarizes what he or she found during the title examination. The examiner will also create a title opinion letter. This lets the title company and the lender know that the title is clear for proper ownership by you, the buyer.
The Cost of the Title Search
The title search is going to cost you at the closing. The actual cost will depend on where you live and the title company used. Most title companies charge between $200 and $400, though. This is one of those fees that you will have little say over unless you have your own title company that you want to use. Most lenders have title companies they work with on a regular basis and prefer that you use. This allows the lender to have control over the process and be able to predict the title company’s turnaround time and capabilities.
The Other Title Related Costs
The title search isn’t the only title related cost you will pay when buying a home, though. You’ll also pay title insurance and possibly a notary fee. In many states, the title agent is also the person that closes your loan, which may result in a closing fee charged by the title company.
The amount you’ll pay for title insurance depends on the area. In general, you can estimate between 0.5% and 1% of the purchase price for title insurance. Keep in mind, though, there are two types of title insurance – owner’s insurance, and lender’s insurance. You will have to buy lender’s insurance if you take out a mortgage – it’s required. Owner’s insurance is optional, but since it’s a one-time charge, it’s often recommended in order to protect yourself from any litigation regarding property ownership down the road.
The title search and title insurance fees may seem like just another way for the title company to make money, but they both serve an important purpose. The search protects you from buying a home that isn’t legally available. The insurance protects you in the future should something slip through the cracks during the search and someone come after ownership of the property. They are all one-time charges that help protect your investment in your home.Click to See the Latest Mortgage Rates»