As a lender, you will say it a lot: Homeowners are required to purchase homeowners insurance to protect themselves and the lender from losses should the home be damaged. But did you know it can affect a client’s mortgage and other aspects of their homeownership?
When clients purchase a home, they know that they will have to pay monthly mortgage payments. However, that payment can be affected by homeowners insurance. When in the process of buying the home, lenders will give homeowners an estimate on how much their homeowners insurance will cost them based on their zip code and other similar homes in the area.
It is important to emphasize to clients that this is an estimate—the actual cost and how the insurance will affect their monthly payment will depend on their policy and if they bundled with other insurances. As such, it is critical that you advise clients to set a budget and shop around for a policy that is right for their needs.
If the client’s home is in a hazardous area like a flood zone, they may be required to purchase additional hazard coverage with their homeowners insurance. This will help protect them and you should flooding or other disaster occur.
When a client purchases homeowners insurance, there are different levels of insurance:
Homeowners insurance is not only helpful in protecting a client’s home. It also helps protect them from liability if someone gets hurt on their property. So if they are sued, a client’s property and savings are protected from being seized by the court and they have some money to defend themselves with.
In some cases, homeowners insurance is not enough. If a client’s down payment was less than 20%, they may be required to also have private mortgage insurance (PMI). Like homeowner’s insurance, this helps protect lenders in case the client defaults on their loan, and can be factored into their monthly mortgage payments.
Putting a home into a trust may seem like an option reserved for older homeowners who have paid off their mortgage and have accumulated an estate, including assets such as a home, motor vehicles, various investments, boats, rental properties, furniture and even a vacation home. However, having a home that’s owned outright is not necessary […]
The start of a new year is often seen as the time to make major changes in life. While many people resolve to start hitting the gym, losing weight, reading more, or making a career change, others may decide to buy a new home in the coming months. That’s a great goal, one that can […]
Buying a home is one of the most exciting events in a person’s life. A new home can mean a new direction, a major step forward, the beginning of a family or just a fun opportunity to live in a new state, city or neighborhood. It’s also a complex task that involves several important steps. […]
