Whether you’re buying a home or refinancing, you’ll need to budget for costs associated with insuring, reviewing, and modifying the title to your property. These costs are commonly referred to as “title fees.”
Title fees can come as an unpleasant surprise if you’re not expecting them. So let’s walk through where to find them, where they come from and what they’re for.
Where to find title fees
Title fees are listed as part of your Loan Estimate (LE) — a legally required document that summarizes the features, costs, and risks associated with your mortgage. Every lender is obligated to provide an official Loan Estimate within 3 days of receiving a new application. So if you haven’t seen one yet, be sure to ask about it.
What it all means
Next we’ll define each item, and explain why it’s required. The specific terms used may vary a bit from lender to lender, but if you understand the meaning of each, you should be able to navigate any Loan Estimate without too much trouble.
Depending on the state, an attorney might be required to review the title work, provide an attorney opinion letter, and hold and disburse funds. This fee covers that work.
Closing Protection Letter (CPL)
The CPL is an agreement written by the title company that protects the lender in case of losses caused by misconduct on the part of the closing agent. (Title companies charge this fee to draft the document.)
A Commitment is a document that discloses liens, defects, and burdens that affect the property and all the requirements that must be met before the title can be insured.
Owner’s Title Insurance
Owner’s Title Insurance protects the homeowner in case of any title claims made on the property. It's optional, but generally recommended for homeowners. An Owner’s policy lasts as long as the property is in your possession, so it won’t need to be repurchased if you refinance your home.
Lender’s Title Insurance
Lender’s Title Insurance is required in nearly all refinance and purchase transactions. As the name suggests, this policy protects the lender against losses incurred due to title disputes.
In a refinance transaction, the lender’s premium is typically paid by the borrower, but in some purchase transactions, the borrower may be responsible for the cost. The lender’s premium is dependent on the loan amount or purchase amount. So if either increase, the premium will likely follow suit. The cost of Lender’s Title Insurance also varies by location, and is strictly regulated on a state by state basis.
Sometimes referred to the Closing Fee, the Settlement Fee covers costs associated with closing operations. Some title companies list out each cost, and some bucket them all in one place, so be sure you know exactly what you’re paying for. Costs bundled under the Settlement Fee may include the cost of escrow, survey fees, notary fees, deed prep fees, and search abstract fees.
Search Abstract Fee
This fee is paid to a third party vendor to disclose historical information about the ownership of the property. It may appear as an individual item, or be included as part of the Settlement Fee.
This fee is paid to a third party vendor to survey the property, and verify its boundaries, if needed. It may appear as an individual item, or be included as part of the Settlement Fee.
The cost to get a notary to meet at a specified location for the closing and for sending the scanned copy and mailing the physical copy to the title company.
Deed Prep Fee
A Deed Prep Fee is applicable when a title is transferred, or an existing deed has to be modified as part of a transaction. When a home is purchased, for example, the deed must be transferred title from the seller to the buyer. A deed may also be required when refinancing if marital status has changed, or people need to be added or removed from the title.
An Endorsement is a specific addition to the coverage that a lender may require beyond a standard policy. For example, if a structure was built near the property line, the policy may be expanded to cover the cost of relocating or rebuilding it in the event of a dispute.
Recording Fees are set by the county, not the title company, to cover the cost of entering deeds and mortgages into the land records.If a home is being purchased, these fees may also include transfer taxes and intangible taxes. It’s important to note that this is an estimate; if these fees end up being less than you were quoted, you will be reimbursed for the difference.
How to spot “junk fees”
While most of the fees listed on your Loan Estimate are necessary for closing, it’s wise to keep an eye out for any padding that may have been added in. If you see any of the following fees, be sure to ask your lender what they mean, and why they’re necessary; they may not be legit.
- Application Fee
- Rate Lock Fee
- Loan Processing Fee
- Underwriting Fee
- Courier Fee
- Overnight Fee
Still have questions about title insurance?
Better Settlement Services, an affiliate of Better Mortgage, has answers. Contact us at firstname.lastname@example.org and we’d be happy to provide you with any information you need.