It’s usually last on your list of things to think about when your offer on the new home gets accepted; locking down the homeowner’s insurance company you are going to use and securing the policy. An experienced mortgage broker will insist you get started on picking the insurance carrier as soon as your offer gets accepted.
What’s the big rush?
You are thinking that the closing will not take place for 3-4 weeks so you have plenty of time to shop around and get it done. Why do I have to get going on this project right away?
- You can NOT close on your new home without the insurance coverage in place.
- We have seen folks get stuck for weeks trying to find an insurance carrier and it has delayed their closing date. And with homeowners insurance rates rising nationwide, people often spend too much time deal hunting. If you miss the close date on the contract, you are at risk of paying hefty per diem fines for each day you are late.
- You may also blow through your mortgage “rate lock” which could end up costing thousands of dollars if the market has moved and rates have gotten worse.
What causes delays?
- Laziness or procrastination: Buying a new home can be overwhelming.The mortgage application process is intense and requires you to gather layers of documentation to gain approval. This alone can exhaust many folks and usually the Insurance process finds its way to the bottom of the list.
- Larger insurance carriers take longer to process your application very similar to larger banks take longer to process your mortgage application. It’s just a fact.
- Many carriers will insist they physically come out to the home to take pictures of the house, inside and out. We will provide you with a copy of the appraisal report when it comes in. These reports contain color pictures both inside and outside, as well as all the specific details of the home.
- Some folks have a special breed of dog in the home, ones that are known to bite. These dogs require special underwriting from the insurance carriers to get coverage which takes longer than a policy without dogs in the home. Find more information about how your dog could delay your closing here.
- Flood Insurance: Your new home may be in a flood zone and require flood insurance.This is a separate policy from your standard homeowner’s insurance policy and takes extra time and patience to obtain.
What do I tell my insurance agent?
Let your insurance agent know you have an accepted offer on a new home. They will have you fill out a standard application. The cost to re-construct your new home, your credit score and the deductible are key factors in determining your annual premium.
Your insurance agent will then need to speak with your Mortgage Lender to obtain the Mortgagee clause. This is the address and the loan number for the Lender and is included on the Declaration Page of your policy. Make sure you have the contact information for your Loan Officer ready when you speak your insurance agent to get the ball rolling.
About the Author: Kirk Chivas is a licensed Loan Officer and co-owner of First Commerce Financial, LLC, a mortgage brokerage based in Wixom, Michigan. With over 16 years of experience, Kirk has committed to providing Michigan residents with accurate and honest mortgage advice. If you have any questions about your current or future mortgage needs, please feel free to ask Kirk a question over on his website.