If you’re getting a mortgage, you’ll almost always need a lender’s title insurance policy to close on a new construction home. Owner’s title insurance is usually optional, but many buyers still choose it because “new” construction can still have title risks tied to the land, paperwork, and unpaid contractor bills.

Why title insurance still matters for new construction

Even when the home itself is brand new, the property still has a title history. Title insurance is designed to protect against certain title defects, liens, or ownership issues that existed before your policy date (even if you only discover them after closing).¹ In other words, “new construction” doesn’t automatically mean “risk-free title.”

In most financed purchases, title insurance is also part of how lenders protect their collateral. Many mortgage lenders require a lender’s title insurance policy as a condition of closing.²

Lender’s policy vs. owner’s policy

Lender’s title insurance (usually required with a mortgage)

• Who it protects: the mortgage lender, not you.
• Why it’s common: lender requirements typically include evidence of acceptable title coverage.²
• Coverage amount: generally tied to the loan balance (and typically decreases as the loan is paid down).³

Owner’s title insurance (often optional, protects your equity)

• Who it protects: you (the homeowner).
• Why people buy it: it can help protect your financial interest in the property against covered title issues discovered after closing.⁴
• Shopping tip: consumers can often shop for title insurance, and pricing can differ by provider and state rules.⁴

If you want protection for your ownership interest, you generally need an owner’s policy in addition to the lender’s policy.³

Common title risks with new construction homes

Title issues in new construction tend to be less about a prior homeowner—and more about the land, development process, and paperwork created during construction. Examples include:

• Builder or contractor liens: unpaid subcontractors may file liens (often referred to as mechanic’s or construction liens, depending on the state). Some owner’s policies may require specific endorsements to address these risks.³
• Easements and right-of-way limitations: utility, drainage, or access easements may limit how you can use parts of the lot.
• Boundary or survey-related issues: lot line questions, encroachments, or improvements that cross boundaries may require survey review and (sometimes) specific coverage enhancements.⁵
• HOA/CC&Rs and subdivision restrictions: new communities often have recorded covenants and assessments that matter for ownership.
• Errors in public records: recording mistakes and data errors happen; title work is meant to catch issues, but policies address certain covered defects discovered later as well.¹

Endorsements that often come up in new construction

Title insurance coverage can be expanded through endorsements (availability and naming vary by state and underwriter). Consumer-facing guidance commonly notes endorsements as a way to add coverage for specific risks not included in a basic policy.³

Depending on your transaction, you may hear about:

• Mechanic’s lien-related coverage (where available/appropriate)
• Survey/encroachment coverage (often tied to providing an acceptable survey)
• Enhanced owner’s coverage options (sometimes marketed as a “homeowner” or enhanced policy)⁶

Because endorsements can change what is and isn’t covered, it’s worth asking your closing professional for a plain-language explanation of any endorsement being added, and what it costs.

Who pays for title insurance on new construction?

Who pays can be negotiated and often depends on state customs, contract terms, and whether the builder offers an incentive. Many states regulate aspects of title insurance (such as forms and/or rates) through their insurance departments, so pricing and practices can vary significantly by location.⁵

A practical way to approach it: focus less on “who usually pays” and more on (1) which policies are required for closing, (2) which optional protections you want, and (3) what fees and premiums appear on your Loan Estimate/Closing Disclosure.

How to decide what you need

1. Start with your financing. If you have a mortgage, expect a lender’s policy requirement in most cases.²
2. Think in terms of “who is protected.” A lender’s policy protects the lender; an owner’s policy protects your ownership interest.³
3. Ask about construction-specific risks. In new builds, ask how contractor payments are handled and whether any mechanic’s lien exposure exists (and whether endorsements are recommended/available).³
4. Review exceptions before closing. Title commitments list what won’t be covered unless addressed. Fannie Mae’s guidance, for example, addresses title coverage requirements and acceptable exceptions for loans it purchases.²
5. Consider what happens after closing. Title insurance is primarily about covered issues tied to the past as of the policy date; if you’re also thinking about post-closing monitoring of record changes, some homeowners pair insurance with ongoing monitoring solutions. For an overview of how title insurance and monitoring can complement each other, see Do You Need Title Insurance?

What title insurance does not do

Title insurance is not a home warranty and doesn’t cover construction defects, workmanship issues, or future disputes unrelated to covered title matters. It also doesn’t automatically cover every possible lien or boundary issue—coverage depends on the policy terms, exceptions, and any endorsements you purchase.³