PURCHASING A HOME? YOU NEED HOME OWNER INSURANCE.
A common question I get as a mortgage broker is "when do I need to buy a home owner insurance policy for the home I'm buying"? Or, "who is responsible for providing a home owner insurance policy?".
When purchasing a home the lender will require you get a home owner insurance policy that will cover the home the first full year. You do not pay monthly on home owner insurance when you have a mortgage on the property. The first year is paid up front at closing from the buyer's funds or the seller paid costs.
It is important to begin shopping for a policy as soon as you get your documents submitted to the lender for processing. Insurance shopping can take time and you do not want to hold up the closing because you do not have the home covered.
- The insurance policy you purchase must be effective the day your close or sooner.
- You cannot close earlier than the date on the policy
- You can shop any time for the policy and choose a carrier weeks even before closing. Simply make the policy effective the date you desire to close.
- You may choose any insurance carrier you want. You are not forced to use any particular company.
- If you have adequate seller contributions you can use these funds to pay for the policy at closing if your insurance company allows it.
- You must have a home owner insurance policy, a quote is not what the lender is looking for. You will need to tell the insurance company to write the policy.
It is very important that you begin asap to shop around for home insurance. It often is the one item that causes delays in the process because the lender cannot finalize your costs and get a closing disclosure out until all costs are fully revealed. So, it is never too early to begin the process.