Overview
When obtaining a mortgage to purchase residential property, the lender is going to require that you also obtain a homeowners insurance policy. The lender wants to ensure that the collateral they are using for the loan is protected in case of loss or damage. In actuality, even if lenders did not require homeowners insurance, it would still be a wise financial decision to carry a policy. After all, your home is at the very least a large financial investment worth protecting.
General Requirements
The policy required is entirely dependent on the property type which you decide to purchase. For example, a single-family detached home will require a different base policy than that of an attached condominium. Lenders will also have minimum requirements for your policy based on its replacement cost and a variety of other factors. Some properties will also require additional policies such as flood insurance or earthquake insurance depending on where your property is located.
How To Obtain A Policy
The first step is to obtain a homeowners insurance quote. Obtaining a quote is extremely similar to shopping around for an auto insurance quote. In fact, a great place to start is likely with your current auto insurance carrier as they will likely offer discounted rates if you bundle the two together. Another great option is to ask your lender and/or real estate agent who their preferred insurance agent is as they will likely have a strong recommendation for a trusted agent or two. Once you decide which quote to go with, all that you need to do is provide this to your lender. In most cases, your policy can be paid through escrow in full at closing.
Conclusion
There is nothing exciting about insurance, however, having a good policy is incredibly important. The last thing that you want when something is happy and you are already dealing with a headache is to find out that your insurance is insufficient. A good policy will help protect you in worst-case scenarios.
Tips & Tricks
-Shop around to get the best quote
-Understand that cheaper is not always better
-Ask the agent questions & know your policy
-Ask About Discounts (1st Time Buyer, Job Industry, Paying In Full, Etc.)
If you have any questions feel free to call us at (760) 930-0569 and one of our loan officers will assist you.
