How to Save Hundreds on Title Insurance
Buying title insurance is low on the priority lists of most homebuyers as they prepare for a closing. However, every lender requires it in order to protect their interests should there be a problem with homebuyers claim to the property you are buying.
The recent “TRID” regulation that took effect last year created new closing documents to simplify the process of buying closing services. TRID, an acronym derived from the two laws that created it — Truth in Lending and Integrated Disclosure of the Real Estate Settlement Procedures Act, reorganized the process and redesigned the documents to help borrowers understand what they were paying for and to give them a chance to shop for their own services should they choose to do so.
Here’s how TRID works. Within three days of receiving your application for a mortgage, the lender must send you a list of companies to provide the closing services you will need, and an estimate of what it will cost you. If you decide to use the lender’s recommendation, the lender guarantees that the estimate he provided does not vary from the final bill by more than 10 percent. If it does, the lender pays the difference.
TRID was designed to encourage buyers to shop around for closing services, but most don’t. They skim the TRID information, make a note of the final costs and move on to something else. If the buyers do not pay close attention, they could end up paying hundreds of dollars more that they need to pay for closing services.
Therefore, lenders have a vested interest in working with a vendor they know well instead of taking a chance on vendors who provide discounts or are very cost-competitive. They know that most borrowers don’t shop for services and will, most likely, never discover that they could have saved hundreds of dollars on their title company. Even borrowers who do shop around and find another vendor are unlikely to find another lender just because an estimate was high.
Title search and title insurance are two services usually provided by the same vendor. They are usually the first or second most expensive services on every list of closing costs. Title insurance is regulated at the state level, and in some states, insurance providers are free to set their own rates, which means the insurance premiums can vary widely. In others, rates are regulated and vary slightly.
A good place to start searching is the website of the American Land Title Association, and it includes a great deal of useful information on title insurance and how to buy it. ALTA also sponsors a website that lists title companies by state, county and city, but doesn’t provide much information about each beyond a phone number and address. If you don’t have time to call everyone for an estimate, ask your real estate agent and people you know who have recently bought a house.
Usually, the lowest cost title companies in any state are online companies that work across many state lines (although they must be licensed and regulated by the states where they customers live). Companies like Entitle Direct and Title365 will provide a quote online.
Total closing costs average about 5 percent of the purchase price. After saving for a down payment and other costs associated with moving, many buyers are stretched when it comes to paying closing costs. Try saving some of those costs by doing some online shopping.
Homes.com is the place to dream and discover your ideal home! Are you starting to get the itch to look for your first or next home, but don’t know where to start? You’ve come to the right place! Browse our real estate and lifestyle blog for home buying tips, mortgage guides, DIY ideas, interior design, lifestyle topics, general home inspiration, or just some homes fun. We are sure you can scratch that itch and find all the information and tools you need to help in your home search. Want to start looking at available real estate right now? Head to our home page and check out homes for sale or rent listings all over the country.
Happy house hunting!