The Importance of Homeowners Insurance in the Mortgage Process

By
Mortgage and Lending with NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 IL Lic 031.0006220/WI

 

The Importance of Homeowners Insurance

in the Mortgage Process

    Once they've signed a Contract for the purchase of their new Will County or Chicagoland home, I urge all my Borrowers to actively begin their search for Homeowners Insurance.   
 
 
     Getting comparison quotes is a great idea when shopping for Homeowners Insurance.  Making a decision to secure a policy, no later than a week to 10 days prior to Mortgage Closing, is especially important.  Waiting too long can cause issues and hold-ups with Underwriting and Closings.
 
     Once a decision regarding Homeowners Insurance has been made, it's common practice in the Chicagoland area to pre-pay for the first FULL year of Homeowners Insurance coverage prior to or at Closing.  The initial Annual Premium payment is paid directly to the selected Insurance Company.  Proof of the Annual Premium having been paid is then provided to the Mortgage Lender.  
 
    The Homeowners Insurance Policy must contain a "Mortgagee Clause" that names the Mortgage Company as beneficiary of monies paid upon loss of property up to the amount of the Mortgage held.  It also states that the notice of any cancellation on the Homeowners Insurance Policy must be made to the Mortgage Company.  Other additional protections for the Mortgage Company also apply.
 
     After the Mortgage closes, payment for future  Homeowners Insurance Policy premiums is provided for by monthly installments made as part of an Escrow Account established for the Borrower.  At the time future Homeowners Insurance Annual Premiums come due, the Mortgage Lender then pays the yearly premium from the funds collected in the Borrower's Escrow Account.
 
https://1609956119.secure-loancenter.com/FreeConsult.aspx     If the yearly premium cost of the Borrower's Homeowners Insurance changes, the monthly amount collected for the Insurance portion of the Borrower's Escrow is then increased or decreased accordingly.  Escrow Payments must correctly reflect 1/12th of the yearly Insurance Premium in each monthly payment.  
 
     Borrowers must know that Real Estate Taxes and Homeowners Insurance are typically contained within a Borrower's Mortgage Payment and an Escrow Account will be established for them at the time of their Mortgage Closing.  An Escrow Account must be established when their Loan-to-Value is greater than 80% (meaning they made a Down Payment on their home purchase of less than 20%).  
 
     Those that make a Down Payment of 20% or more can choose to pay Taxes and Homeowners Insurance on their own without the establishment of an Escrow Account.  If this method of payment is chosen, proof of Real Estate Taxes and Homeowners Insurance payments must be provided to the Mortgage Lender. 
 
     Again, it is important to start your search for a Homeowners Policy in advance of your Mortgage Closing.  In the Will County or Chicagoland area, should you be in need of a referral for a reputable Insurance Agent (or other real estate professionals) to help you, please contact me.  I'll be happy to provide you with the names of many of our area's best professionals.
 
 
http://www.genemundt.com/ContactUs.aspx
     
 
     Hoping to Buy, Refinance, or Construct a Home in New Lenox, another Lincoln-Way Community, Will County, or elsewhere in Chicagoland?  Contact Me Today!  I'll put my 36 years of Mortgage experience hard to work on your behalf.
     I can be easily found at:
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Cell or Text:  708.921.6331
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Gene Mundt

 Mortgage Originator  -  NMLS #216987    

                                 IL Lic. #031.0006220  -  WI License #216987                                                                                                    

NMLS #175656

 

Gene Mundt, Mortgage Originator,  40+ years of #mortgage experience, will offer you exemplary mortgage service and advice when seeking:  #Conventional, #FHA, #VA, #Jumbo, #USDA, and Portfolio Loans in #Chicago and the greater Chicagoland region, including:  The #Lincoln-Way Area, #Will County, (#New Lenox, #Frankfort, #Mokena, #Manhattan, #Joliet, #Shorewood, #Crest Hill, #Plainfield, #Bolingbrook, #Romeoville, #Naperville, #Wilmington, #Peotone, etc.), #DuPage County, the City of Chicago, #Cook County, and elsewhere within IL and Wisconsin. 

 

Your Referrals & Testimonials are Always Greatly Appreciated! 

 

 

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Re-Blogged 3 times:

Re-Blogged By Re-Blogged At
  1. Tammie White, Broker 02/08/2014 12:07 PM
  2. Rosie Moore 02/08/2014 01:01 PM
  3. Debbie Reynolds 02/09/2014 09:38 AM
Topic:
Lending / Financial
Location:
Illinois Will County
Groups:
Mortgages
Buyer Information - What Buyers Need to Know in Today's Market
Advice for Buyers
Bananatude
WillCounty
Tags:
mortgages
homeowners insurance
escrow accounts
monthly mortgage payments
escrow payments
insurance protection

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Ambassador
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Debbie Reynolds
Platinum Properties - Clarksville, TN
Your Dedicated Clarksville TN Real Estate Agent

I too tell my buyers to start shopping. One thing I don't want is for the lack of having an insurance policy to slow up the closing. I will be reminding one buyer tomorrow to get it started.

Jan 28, 2014 11:26 AM #3
Ambassador
896,667
John Meussner
Mason-McDuffie Mortgage, Conventional Loans, Jumbo Loans, FHA, 203(k), USDA, VA, - Walnut Creek, CA
#MortgageMadeEasy Walnut Creek, CA 484-680-4852

You're right as always Gene, the sooner the better to find a provider.  I can't count the times I've seen delays because of last minute choices and delays in the provider sending us the necessary information.

Jan 28, 2014 01:57 PM #4
Rainmaker
1,235,391
Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

Debbie: 

You state my exact fears ... and unfortunately I have seen it happen.  Silly, given how easy it is to get that Homeowners policy.

John:

For some reason, this seems to be a real "bug" in my clients' processes too.  They just drag their feet or overlook doing this.  Thus .. this post ...

Glad, as always, to see your comment, John ... they're always appreciated ...

Gene  

Jan 28, 2014 09:51 PM #5
Ambassador
876,996
Connie Harvey
Pilkerton Realtors - Brentwood, TN
Realtor - Nashville TN Real Estate

Gene, it seems like this is the one thing that sometimes slips through the cracks. Yes, they need to be shopping for insurance early.

Jan 29, 2014 12:03 AM #6
Rainmaker
1,235,391
Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

I agree, Connie ... never fails to surprise me.  It's something I have to typically stay on clients about.  Best to shop early and get it done!

Gene

Jan 29, 2014 05:29 AM #7
Rainmaker
1,675,419
Larry Johnston
Broker, Friends & Neighbors Real Estate and Elkhart County Subdivisions, LLC - Elkhart, IN
Broker,Friends & Neighbors Real Estate, Elkhart,IN

Hi Gene, We always make sure the buyer has insurance ready weeks before closing, so all they have to do is call the insurance and give them the start date.

Jan 29, 2014 10:49 AM #8
Ambassador
1,978,066
Silvia Dukes PA, Broker Associate, CRS, CIPS, SRES
Tropic Shores Realty - Ich spreche Deutsch! - Spring Hill, FL
Florida Waterfront and Country Club Living

Gene, this is good advice.  I usually get buyers to get home owners insurance quotes soon after they have a contract.  If they want to shop around a bit they will have that time.

Feb 04, 2014 10:28 AM #9
Rainmaker
1,235,391
Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

As a Lender, all I can say is "God Bless You", Larry.  It's so helpful when the agent reminds the client too.  It's very beneficial and gets great results ...

Silvia:  I like your idea about being able to compare quotes.  Having time .. starting early allows this and helps save money.  Kudos to you!

Gene 

Feb 05, 2014 05:58 AM #10
Rainer
103,107
Rosie Moore
Serving Sugar Land, Richmond, Rosenberg, Missouri City - Sugar Land, TX

Thanks Gene for sharing this information. I agree, buyers should not procrastinate getting homeowners insurance. This should be done weeks in advance so it doesn't affect the closing date.

Feb 08, 2014 12:51 PM #11
Ambassador
1,207,409
Amanda Christiansen
Christiansen Group Realty (260)704-0843 - Fort Wayne, IN
Christiansen Group Realty

Excellent information here Gene!  This should be done weeks in advance of the closing date.  

I'm going to tweet this out to my people if that's okay!

Feb 08, 2014 09:27 PM #12
Rainmaker
543,826
Rob Spinosa
Guaranteed Rate, Marin County, CA - San Anselmo, CA
Vice President of Mortgage Lending, Marin County

Great advice.  I have made a great effort, too, to build relationships with quality insurance agents throughout my area.  We sometimes find that because of the value of a property or its location, the "common" carriers won't insure it.  And you don't want to find this out at the last minute.  So getting these buyers in touch with agents who can place their policy and provide competitive coverage is a value add I feel I can provide where another mortgage pro might just leave the buyer on his own.

Great post.

Feb 08, 2014 09:35 PM #13
Rainmaker
1,949,657
Andrew Mooers | 207.532.6573
MOOERS REALTY - Houlton, ME
Northern Maine Real Estate-Aroostook County Broker

No coverage, no closing. Nuff said. Don't cause a real estate derailment, delay, and make sure you help get it covered to move to the part in the movie where keys are slid one way, at the same time a check with your name spelled right arrives from the other direction.

Feb 08, 2014 09:41 PM #14
Rainmaker
1,949,657
Andrew Mooers | 207.532.6573
MOOERS REALTY - Houlton, ME
Northern Maine Real Estate-Aroostook County Broker

No coverage, no closing. Nuff said. Don't cause a real estate derailment, delay, and make sure you help get it covered to move to the part in the movie where keys are slid one way, at the same time a check with your name spelled right arrives from the other direction.

Feb 08, 2014 09:41 PM #15
Rainmaker
1,379,517
Michael Setunsky
Woodbridge, VA
Your Commercial Real Estate Link to Northern VA

Gene, good information! Leaving this to the last minute can cause unnecessary delays.

Feb 08, 2014 10:47 PM #16
Rainmaker
1,560,731
Carla Muss-Jacobs, RETIRED
RETIRED / State License is Inactive - Portland, OR

Oh, I can't tell you how many minor delays occur because the insurance binder wasn't ordered.  Opps!  And we always go over the "if it lapses" for any reason, the mortgagee has the right to slap on a policy -- and it's expensive!  A necessary must have in the closing process!  Good post Gene.

Feb 09, 2014 02:10 AM #17
Rainmaker
1,235,391
Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

Rosie:  This is definitely something that can be accomplished earlier in the process that it often is.  For some reason, many clients drag their feet over taking action ...

Jared:  Please .. tweet away!  The more the info is available ... and the more often it is seen ... it will make more sense to those in the Mortgage process ...

Rob:  Having been in the business as long as you and I have been, we've both been lucky to find great insurance agents that have become referral partners.  Why?  The provide great service, quality product, and perform services above and beyond ...

Andrew:  So true!  Why take that risk?  Obtaining an insurance policy is something done quite easily .. and can be provided in a timely fashion ...

Michael:  Exactly what you and I are trying to avoid .. delays.  No need for it, given how simple the process of obtaining insurance is ...

Carla:  Frustrating to be sure ... especially given the process and consequences are provided to Buyers ... 

Gene

Feb 09, 2014 02:36 AM #18
Rainer
118,654
Kaye Swain
Keller Williams Real Estate Roseville CA - Roseville, CA
Your Roseville Real Estate Agent

Excellent reminder and info. Thank you.

Feb 09, 2014 06:07 AM #19
Rainmaker
843,553
Barbara Altieri
Kinard Realty Group - RealtyQuest Team, Fairfield and New Haven County CT Real Estate - Shelton, CT
REALTOR-Fairfield County CT Homes/Condos For Sale

Gene -- I always remind buyers to start getting quotes after contract and I am happy to say most tell me that their lender has already told them the same. Still good to give a reminder in case they are not yet aware. Being proactive prevents delays.

Feb 09, 2014 10:00 AM #20
Rainmaker
3,139,213
Nina Hollander
Coldwell Banker Residential Brokerage - Charlotte, NC
Your Charlotte/Ballantyne/Waxhaw/Fort Mill Realtor

Gene... this is one of those "pesky" items that so often home buyers don't think about until the last moment when they see it as a condition on their loan approval. I'm always after my clients to get their quotes early on in the process so we know for sure that the house can be insured at a reasonable rate.

Feb 09, 2014 07:32 PM #21
Rainmaker
1,235,391
Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

You're welcome, Kaye ... thank you for your comment ...

Barbara:  Great news.  So glad to hear that we Lenders are informing our clients of this important step in the Process .. and that you as an Agent are reinforcing what we are telling them too ... it works so much better that way ...

Nina:  Comparing quotes is important .. and it takes time to do that properly.  You're so right when you say it's important to start those comparisons early ...

Gene

Feb 10, 2014 09:32 AM #22
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Rainmaker
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Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi

708.921.6331 - 40+ yrs experience
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