Title insurance protects the buyer and lender against title defects such as unknown liens, forgery, or errors in public records. The lender's policy is required for any financed purchase, while the owner's policy is optional but strongly recommended. The seller typically pays for the owner's policy in Texas.
Title insurance provides one-time protection that lasts as long as you or your heirs own the property.
Lender's Title Insurance Policy
The lender's title insurance policy protects the mortgage lender's investment in the property. It is required for any home purchase with a loan. The policy amount equals the loan amount and decreases as the loan is paid down. The cost is typically paid by the buyer or split between buyer and seller depending on local custom. In Texas, the buyer often pays for the lender's policy.
Owner's Title Insurance Policy
The owner's policy protects the buyer's equity in the property. It covers the full purchase price and protects against title defects that existed before the purchase. If a title issue arises (like an unknown heir claiming ownership or an undiscovered lien), the insurance pays legal fees and covers losses up to the policy amount. In Texas, the seller typically pays for the owner's policy as part of closing costs.
Cost of Title Insurance
Title insurance costs vary by state and policy amount. In Texas, the combined cost for lender's and owner's policies on a $350,000 home is typically $2,500 to $4,000. Title insurance rates are regulated in Texas, so premiums are standard across companies. The premium is a one-time fee paid at closing, with no annual renewals.
As a dual-licensed loan officer and realtor, I can help you understand the title insurance costs in your transaction and recommend reputable title companies.
