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The Real Estate Settlement Observer

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By Nikki Smith | Real Estate Pro in District of Columbia

How to compare title insurance service providers

Pending home sales in the Washington, D.C. Metro Area are nearly as high as they were two years ago when the $8,000 federal first-time homebuyer tax credit was still in effect, another sign that the market is poised for a turn-around.

That's good news for sellers. More buyers hopefully means homes are spending less time on the market and fetching offers closing to the initial asking price. In fact, median home prices in Arlington County and the District of Columbia have returned to their peak levels of the pre-bubble era.  Meanwhile, Montgomery County has bounced by about 75 percent of the way, and the City of Alexandria is about 95 percent of the way back. (These stats were posted last week on the Washington Post real estate blog.)

But as prices in the local market continue to rise, many first-time homebuyers especially are beginning to notice it's becoming more difficult to find a house in a decent neighborhood for less than $400,000. That means more homebuyers are having to stretch to come up with a down payment and closing costs.

There's lots of advice out there on ways to save for a down payment, but what can a homebuyer do to lower the cost of homebuying? Sometimes shaving off a few hundred dollars in closing costs can even make a difference in the terms of your loan, so it's worth it to examine your title company options.

Look at the 1100 line series (title items) on the HUD-1

Around here, the cost difference between the highest- and lowest-cost title service provider can be as much as $1,180. That's money a homebuyer could use to hire a moving company, buy new furniture or save for a rainy day.

So just as a homebuyer compares mortgage rates, points and origination fees to seek out the most affordable loan, a homebuyer should compare title service providers. Many title companies like Federal Title offer a free online quote, while others will e-mail a pre-HUD-1 or give a quote over the phone.

When comparing quotes from title service providers, look closely at the 1100 line numbers, which are title items. They include a cost breakdown of the title company's settlement fee, lender's title insurance policy, owner's title insurance policy (if purchased) and any discounts the homebuyer may have received. (At Federal Title each homebuyer who orders services online receives an instant discount known as a REAL Creditâ„¢.)

Some title companies like to push their enhanced title insurance policy, but homebuyers should know they actually have two options when it comes to the owner's title insurance policy, and the enhanced option is the more expense of the two. The other option is the standard policy, which is adequate in most cases. Homebuyers should compare coverage of title policies and even consult a title attorney to determine what policy is best for their purchase.

Yet another option is to skip the owner's policy altogether, which some homebuyers do to save money. On a $400,000 purchase, for example, the savings would amount to about $942. Most title professionals will tell you, however, the up-front savings versus the potential loss makes this option a risky one.

Comparing costs among title companies is as easy as getting a quote and looking over a few line items. Go online or make a phone call. Look at the 1100 line series on each HUD-1, and make an educated decision based on the evidence.

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