Types of Insurance | Home Purchase | Mortgage

Homeowner's Insurance
This insurance covers replacement costs for damages caused by fire, wind or other disaster that might affect the value of the property. Typically, the insurance also includes personal liability and theft coverage.  Homeowners are normally required to have a policy setup before the lender will allow settlement to take place.

When you purchase a condo, the condo association will have a masters insurance policy that covers the main building and structure, but you will still want a policy to cover your personal contents.  Condo insurance for a purchaser is similar to renters insurance.  New regulations will require that you still do need to purchase a certain level of homeowner's insurace.  This can either be paid for in advance or incuded as one of your closing cost charges.  If you are getting a large amount of closing cost assistance paid by the seller (seller subsidy) it is best to have the homeowner's insurance paid at settlemnet and reflected on the HUD-1.  This will allow you to use the money you are getting from the seller to pay your first year's premium.

Flood or Quake Insurance
Additional hazard insurance coverage that is required for homes located in a designated hazard zone as established by the Federal Emergency Management Agency (FEMA). As we tour houses, I will let you know if the property resides in a hazard zone. Typically this is not needed with properties in Northern Virginia.

Private Mortgage Insurance (PMI)
Insurance required for conventional mortgage loans when the borrower's down payment on the house is less than 20 percent of the loan value.  Many lenders will work around this by having the borrower take out a second trust to cover the remaining 20% down requirement.  Programs like that will be called 80-10-10, 80-15-5, 80-20 (if no money down).  If your loan program is going to have PMI, you have the option to prepay the entire amount at closing.  In a buyers market you might be able to get the seller to pay for this when you are negotiating the terms of the sales contract.

Title Insurance
This policy protects both the buyer and lender by insuring a clear chain of title. (In other words, it insures that that the person who sells the house has the legal right to do so.)

The lender portion of title insurance is required, but the owner's portion is optional.  However, it is always recommended.  Title companies will automatically put both lender's and owner's coverage on the HUD-1 you see at settlement so if you decide not to purchase the owner's side make sure to have the settlement company take that off adjust the HUD-1.  Have the attorney at the settlement company expain the different types of title insurance offered.  You can make your final decision at the actual settlement as it does not need to be done in advance.  Contact me to find out how you can get a reduced raite on your title insurance at closing.