Buyer Resources
Why Do I Need Title Insurance?​
If you are purchasing a home or property with a loan, the simple answer is that the lender will require title insurance. Even if you are purchasing a property with cash, title insurance is always a good idea. The law surrounding real estate can be complicated and there are many reasons why there could be a problem with a piece of real estate. In the title industry we call these problems "defects" and it is our job to look for them and fix them before closing.
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Title defects can come in many different forms and are not always easy to find. An experienced title agency know how to look through your property's history (the "chain of title") by performing a title search and using that information to locate potential title defects.
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Purchasing a home or property is one of the largest purchases most people will ever make. It is important not to leave anything to chance and confirm that you will be secure in your ownership and rights to the property.
How Much Does Title Insurance Cost?
The cost of title insurance is based on the purchase price of the property you are buying. Pennsylvania title insurance companies are all required to charge the same amount for title insurance. These fees are based on a schedule that the state has established and changes year to year. For properties over $100,000 the cost for title insurance will be less than 1% of the purchase price.
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The cost for title insurance includes the title search, reviewing the search, preparing all of the title insurance forms and the settlement statement for closing, communicating and coordinating with all parties, and holding closing. The tile company is not allowed to charge a closing fee or any additional amount beyond the title insurance for their services.
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Title insurance companies are allowed to charge additional fees for wiring money, overnighting documents, receiving and preparing bank documents for closing, preparing deeds, and to be reimbursed for the cost of certain information like obtaining confirmation that real estate taxes have been paid or HOA fees. It is important to ask your title company up front what fees they charge and how much. Generally these fees are minimal.
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If you are financing your purchase, the lender is required to provide you with an estimate of all of your closing costs called a Loan Estimate or "LE." Because title insurance rates are set by the state, the amount on your loan estimate should be accurate.
What Other Closing Costs Can I Expect?
There are a lot of fees and expenses involved in purchasing property. Here are a few of the charges you can expect to see at closing:
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Transfer Tax: Pennsylvania charges transfer tax on all real estate transfers. The rates can vary by county but generally the amount is 2% and is split between the buyer and seller so buyers will usually pay 1%.
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Tax Prorations: There are two tax bills in Pennsylvania: (1) the County and municipal taxes run from January 1st through December 31st and are billed in February; (2) School taxes run July 1st through June 30th and are billed in August (this is usually the larger tax bill). Most agreements to purchase real estate say that the buyer is responsible for all taxes from the day they purchase the property. The title company will determine what taxes have been paid or remain due at the time of closing and will split or "prorate" them so that the buyer pays for all taxes going forward and the seller pays for all taxes already due. This amount varies and is based on the property's taxes.
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Recording Costs: Generally the buyer will pay for the cost of recording the deed and mortgage which is usually a few hundred dollars and varies by county.
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HOA: If the property is part of a homeowner's association or condominium association, often the buyer will have to pay a new member or initiation fee along with the first month or installment of their HOA dues. These vary between associations.
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Loan Costs: Your lender will charge fees for giving or "originating" the loan and will also bill for their costs including credit reports, property appraisals, and document preparation. These fees must be disclosed as soon as you start the loan process and are not allowed to change significantly before closing.