A homeowners policy can protect you from the double whammy of having your home damaged or destroyed while having a mortgage to pay off. Your lender, of course, is aware of this, and that’s why many of them require you to pay into an escrow account so that, when the policy comes due, the bill can be paid from those funds that have already been collected.
The exception is with conventional mortgages. Most lenders let you take care of the insurance on your own if you have put 20 percent or more down on the purchase. They reason that with that much of your money down, their exposure to loss is minimal.
An exception is FHA/VA insured programs, which require a monthly escrow until the loan is paid off. Typically, a few days before closing, your lender will contact you for the name and contact information of your insurance provider, or ask you to furnish them with a binder—a written insurance commitment and price quote.
You don’t write a check to the insurance company for this coverage; it’s charged to you as one of your loan costs when you close. For example, when you’re sitting at the closing table with the settlement statements (HUDs) spread out in front of you, look at the 900 section, ‘‘Items Required by Lender to be Paid in Advance’’ on the second page of the document.
A homeowners policy can protect you from the double whammy of having your home damaged or destroyed while having a mortgage to pay off. Your lender, of course, is aware of this, and that’s why many of them require you to pay into an escrow account so that, when the policy comes due, the bill can be paid from those funds that have already been collected.
The exception is with conventional mortgages. Most lenders let you take care of the insurance on your own if you have put 20 percent or more down on the purchase. They reason that with that much of your money down, their exposure to loss is minimal.
An exception is FHA/VA insured programs, which require a monthly escrow until the loan is paid off. Typically, a few days before closing, your lender will contact you for the name and contact information of your insurance provider, or ask you to furnish them with a binder—a written insurance commitment and price quote.
You don’t write a check to the insurance company for this coverage; it’s charged to you as one of your loan costs when you close. For example, when you’re sitting at the closing table with the settlement statements (HUDs) spread out in front of you, look at the 900 section, ‘‘Items Required by Lender to be Paid in Advance’’ on the second page of the document.
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Written by Lawrence
Topics: Mortgage