Be Aware that You Can Save Money by Choosing Your Own Title Insurance Service
What is Title Insurance?
Title insurance is usually required by the lender to protect against loss resulting from claims by others against your new home. In some states, attorneys offer title insurance as part of their services in examining title and providing a title opinion. In other states, a title insurance company or title agent directly provides the title insurance.
To save money on title insurance, compare rates among various title insurance companies. Under RESPA, the seller may not require you, as a condition of the sale, to purchase title insurance from any particular title company. Generally, your lender will require title insurance from a company that is acceptable, and in most cases you can shop for and choose a company that meets the lenders standards and save significant money on closing fees.
Ask what services and limitations on coverage are provided under each policy so that you can decide whether coverage purchased at a higher rate may be better for your needs. However, in many states, title insurance premium rates are established by the state and may not be negotiable. If you are buying a home that has changed hands within the last several years, ask your title company about a "reissue rate," which would be cheaper. If you are buying a newly constructed home, make certain your title insurance covers claims by contractors. These claims are known as "mechanics liens" in some parts of the country.
A way to compare title insurance quotes to see where you can save money is to look at the Good Faith Estimate. A Good Faith Estimate is (GFE) is not just full of “mandatory” charges by the bank. If you look at a GFE, you will see there are also Title Insurance charges on it. These charges, unlike popular belief, are not mandatory charges. In fact, nearly almost every charge on your GFE are all estimates, hence the name Good Faith Estimate.
Here is a link to what the standard GFE looks like blank: http://www.hud.gov/offices/hsg/ramh/res/gfestimate.pdf.
Your GFE should be considered your Bible of closing costs. On your GFE, it lists all the fees you will be charges at closing as accurately that the lender can. It also gives you your loan terms prior to approval of the loan. A GFE is provided to you when involving both a Purchase and a Refinance transaction. The only time a GFE is not provided to a homebuyer, is if it is an all cash transaction because there is no lender, and only lenders provide a GFE. At that point it is up to your attorney to provide you with estimated closing costs.
The GFE is a tool that the state requires ALL lenders that are licensed by the state or federal banking and insurance departments to give to their potential clients. The most important thing to know about your GFE is that it is in fact an estimate and is subject to some change. The new HUD regulation allows for change to some areas and does not allow other areas to change in your GFE. It is given in good faith to prepare the burrower for what fees they will have to pay either out of pocket or through the note that the lender is providing.
Title Companies can help with the home’s survey as well. Lenders or title insurance companies often require a survey to mark the boundaries of the property. A survey is a drawing of the property showing the perimeter boundaries and marking the location of the house and other improvements. You may be able to avoid the cost of a complete survey if you can locate the person who previously surveyed the property and request an update. Check with your lender or title insurance company on whether an updated survey is acceptable.
Whether you are buying, selling, or refinancing, you have the right to significant savings when you buy your insurance through companies that serve the consumer and your home’s title and deed will be protected.