Title Fees: What Costs May Be Included?
The title is a document establishing who is the legal owner of a property. When you set out to buy a new home or refinance an existing mortgage, certain costs may be associated with reviewing, insuring, and modifying the property’s title. Your Loan Estimate (LE) document will list the title fees.
The lender will provide the LE within three days of your loan application. So, make a careful note of the title fees and other items listed in the LE. In this short guide, we will describe some of the items that may be a part of your title fees. Each lender may use some of the terms differently, but once you understand what they mean, you may be able to comprehend your LE more easily.
CPL or Closing Protection Letter
This refers to an agreement drafted by the title company to protect the financial interests of the lender in the event of any loss occurring because of the closing agent’s misconduct. The fee will be paid to the title company for preparing the document.
Lender’s Title Insurance
This policy may be required in almost all home buying and mortgage refinance deals. Lender’s Title Insurance will protect the lender against potential losses that may arise from a title dispute. The premium for this policy is usually paid by the homebuyer in refinance deals, but sometimes the buyer in purchase transactions may have to pay this charge. The premium cost will vary according to the amount of loan.
Owner’s Title Insurance
This policy is meant to protect the homebuyer’s interest in the event of any title claims occurring on the property. This is an optional cost, but it is usually prudent to have this coverage.
Some states require a real estate attorney to review the title papers, issue a professional opinion letter, and handle the funds. The Attorney fee will cover these services.
A Commitment discloses any burdens, defects, and liens that impact the property and all the conditions that must be fulfilled before the title gets insured.
This covers the costs related to the closing of the deal. That is why it also sometimes called the Closing Fee. A title company may detail every cost component separately or may bundle them together. Therefore, you should diligently check this fee to know what services you are paying for. Cost components of your Settlement Fee may include notary fee, survey fee, escrow costs, search abstract fee, and deed preparation fee.
You will require a notary to meet you at a particular place for the purpose of closing. The notary will also send to the title company a physical copy as well as a scanned copy of the closing documents. The notary fee will go towards these services.
The survey for the property you are purchasing may be conducted by a third party vendor, and they may also verify the property’s boundary. They will charge this fee for their services.
Search Abstract Fee
The historical information related to the property’s ownership will be disclosed by a third party vendor. They will charge the Search Abstract Fee for this service.
Deed Prep Fee
When a title transfer takes place, or a modification of the existing deed is required as part of the deal, a Deed Prep Fee will apply. For instance, when you buy a home, the seller must transfer the title of the property to you. You may also require a deed for home refinance if your marital status has changed, or some name(s) need to be removed from or added to the title.
The county will charge this fee to pay for the cost of recording the mortgage or deed into the land record. If you are buying a home, the Recording Fee may additionally include intangible taxes and transfer taxes. The fee will be mentioned only as an estimate, and the difference will be returned to you if the actual fee less than the estimate.
Sometimes your lender may require an endorsement to the insurance coverage in addition to the standard policy. For instance, if a structure was built close to the boundary line of the house, an endorsement may be added to the policy in order to cover the future costs of reconstruction or relocation if a dispute arises.
Be Wary of “Junk Fees”
Your Loan Estimate typically lists legitimate fee items as part of the title fees. But it still makes sense any to check for any unnecessary or “junk” fees that may be added in sometimes. If you see items such as an overnight fee, courier fee, rate lock fee, underwriting fee, etc., just check with your lender those fees cover.