Homeowners Insurance – Why You Really Want It
Moreira Team provides mortgage loans to people we are not in the homeowners insurance business so we’ll refer you to companies who are trusted by our customers.
Property and Fire Home Insurance
At the bare minimum, you have to insure your home against fire, theft, vandalism and significant damage for at least the replacement cost or double. The insurance policy has to be in effect on the closing day. Make sure you cover the costs of all your valuables such as furniture, electronics, clothing, jewelry by documenting everything before you move and insure your new home. Use a camera to photograph your valuables and keep your insurance policy and photos in a safe or safety deposit box at the bank.
Who is involved in the insuring of your home?
You and a home insurance agent who specializes in homeowners insurance policies.
Why does it matter when closing the deal?
Paying your home owner’s insurance policy at closing is necessary when mortgage financing is involved. Your lender requires that you secure and prepay a premium that fits its minimum standards for coverage. The exact amount owed at closing depends on your specific loan. Prepaying your homeowner’s insurance guarantees coverage for the first year of home ownership. You can pay the homeowner’s insurance premium up-front and out of escrow or at closing in addition to your other settlement fees.
The lender will not accept your home loan without proof that your new home is properly insured before the closing can occur, so do yourself a favor and send your homeowners insurance agent information to your mortgage adviser upfront.
You typically order homeowner’s insurance before closing on a home. Paying the premium up front and before closing allows you to exclude the premium from your closing costs. Closing costs include lender and third-party fees which you pay in addition to your down payment. These fees averaged $3,854 in California, according to a 2012 Bankrate.com survey.
You can usually pay the home insurance company up front with a credit card or bank funds. Using a credit card can be advantageous because it allows you to break up or postpone repayment, but it can hurt your loan if the additional credit card debt causes your loan’s debt-to-income ratios to exceed lender guidelines. They typically re-pull your credit right before closing to ensure you haven’t incurred significant debt since the application.