Costs

Title Insurance

Title insurance protects against problems with the home's ownership history, like an unknown lien, a past clerical error, or a missed heir. There are two policies: a lender's policy that protects the bank, which is usually required, and an owner's policy that protects you, which is optional but often worth it. You pay once, at closing.

Most insurance protects you against things that might happen later. Title insurance is different: it protects against things that already happened in the property’s past but haven’t surfaced yet, like an old unpaid debt attached to the home or a deed that wasn’t signed correctly.

On your Loan Estimate you’ll see title lines under both the costs you can shop for and the optional Owner’s Title Policy. The lender’s policy covers the loan amount and is typically required. The owner’s policy covers your equity and is yours to choose, and in most cases I’d lean toward having it.

Related terms

Closing Costs

Closing costs are the fees you pay to finalize your home purchase, on top of your down payment. They include lender fees, title and escrow charges, an appraisal, and prepaid items like taxes and insurance. Closing costs commonly run roughly 2% to 5% of the purchase price, though it varies by location and loan.

Escrow

Escrow has two meanings in a home purchase. Before closing, it's a neutral account that holds your earnest money and documents. After closing, an escrow account is where your lender collects part of your payment each month to pay property taxes and insurance for you when they come due.

Lien

A lien is a legal claim against your property for a debt, which has to be paid before the home can be sold with clear title. Your mortgage itself is a lien: it lets the lender be repaid from the sale. Other liens, like unpaid taxes or contractor bills, can also attach to a home and must be cleared.

Last updated: June 13, 2026

This definition is educational and isn't an offer to lend or financial advice. Rates, programs, and guidelines may change without notice. All loans are subject to credit and property approval.

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