When you’re a first time home buyer, you might be expecting the process to be more glamorous and exciting than it is in reality. Now, buying your first home is certainly an exciting event, but glamorous? Last time we checked, there wasn’t much glamor about paperwork… If you’re like most people, you will work with a mortgage lender to purchase your new home. Therefore process of closing on your home will involve an almost overwhelming amount of paperwork and finances, but this is a good thing. It ensures that your investment is made with all the right t’s crossed and i’s dotted. However there is one important thing you must do before you can close on your home, and that’s purchasing homeowners insurance.
Would it surprise you to learn that purchasing homeowners insurance coverage is a requirement for closing on a home, if you finance through a lender? That’s right. Lenders require you to have home insurance for at least a year in order to allow you to close on your home. The thinking behind this is that by lending you the funds to buy a house, your lender needs an assurance from you that they are not going to suffer a huge loss if something happens to your new home. You see, that new home is an investment for both you and your lender, and when left uninsured, your home is a huge liability for your lender. This is why they usually will not agree to giving you a loan until you have proved that you have homeowners insurance in place.
It is common practice for lenders to ask you to bring your homeowners insurance binder with you to the closing meeting. The binder acts as definitive proof from your insurer that your home and its contents are covered under a policy. Some lenders may accept a photocopy of your insurance documents or a letter from your insurer.
This is where the assistance of an independent insurance agent is invaluable. Just like shopping around for a mortgage lender is a smart idea, shopping around for the best homeowners insurance is also a smart practice. But with your busy life, you probably don’t have time to shop the insurance market. Work with a dedicated independent insurance agent, and they will shop the market for you to find the best policy and most competitive rates.