Real estate, Uncategorized

What is homeowner’s insurance? Why is homeowner’s insurance required?

Standard homeowner’s insurance doesn’t cover damage earthquakes or floods, but it may be possible to add this coverage. Homeowner’s insurance is also sometimes referred to as “hazard insurance”.

Many homeowners pay for their homeowner’s insurance through an escrow account as portion of their monthly mortgage payment. You create the payments to the lender, and the lender holds the portion of the payment that’s for insurance in an escrow account. Then, when the bill for the insurance is due, the lender pays it the escrow account.

The cost of your homeowner’s insurance, as well as any similar insurance to defend the property, is listed on page one of your Loan Estimate, in the “Projected Payments” section. However, it’s generally a excellent idea to do your own research about how much homeowner’s insurance costs. You can shop separately for homeowner’s insurance and select the provider and plan that’s right for you.

If you don’t have insurance, your lender is allowed to purchase it for you and charge you for it—but your lender should give you advance notice. If your lender buys insurance on your residence beca you didn’t hold up your homeowner’s insurance, that insurance may only cover the lender, and not you. It also may be more expensive than what you could purchase on your own. Homeowner’s insurance protects your property. Homeowner’s insurance isn’t the same as mortgage insurance.

Homeowner’s insurance protects your property. Homeowner’s insurance is not the same as mortgage insurance.  

Note: You won’t receive a Loan Estimate if you applied for a mortgage prior to October 3, 2022, or if you’re applying for a reverse mortgage. For those loans, you will receive two forms – a Good Faith Estimate (GFE) and an initial Truth-in-Lending disclosure–instead of a Loan Estimate. Information about the cost of homeowner’s insurance can be found in Block 11 of your Good Faith Estimate (GFE). If you are applying for a HELOC, a manufactured housing loan that is not secured by real estate, or a loan through certain types of homebuyer assistance programs, you will not receive a GFE or a Loan Estimate, but you should receive a Truth-in-Lending disclosure. 

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