When you are purchasing a home, there are a lot of items which need to be checked out, verified and approved. Once you have a prequalification letter and an accepted offer, the real work of loan approval begins. If you are obtaining a mortgage, you will not be able to close on the home without insurance coverage – but at what point in the process should you call for an insurance quote?
An Early Insurance Quote is Best
Many people don’t look into insurance until the very end of the loan approval period. However, experts recommend looking into an insurance quote far earlier, even as early as before you make an offer on the home. Here’s why.
Your loan approval will be based upon your debt to income ratio after you purchase the home. This means that the lender will be assessing whether you can afford the home based upon all of the payments you make monthly. These include current payments such as credit cards and car payments; as well as the future payment comprised of your mortgage, taxes and insurance.
Understanding the amount associated with your future insurance payment is necessary. But while many simply estimate that payment based upon what the current owner pays, or what other similar homes may pay, this could cause a problem with your loan. There may be circumstances where your insurance premium is a lot higher than you expect. For instance, some homeowners are grandfathered in on special programs, or the FEMA map may have recently changed and placed your prospective home in a higher risk category for flooding.
Imagine battling all the way through the mortgage process, only to find out at the end that the insurance payment put you over the allowable debt-to-income ratio, even by just a few dollars? Your purchase may be held up or worse, not allowed to go through.
However, if you solicit an insurance quote at the beginning of the process , you can deal with any possible pitfalls before they become an emergency. For instance, perhaps the insurance premium is higher than you expected because the roof is in the last stages of its useful life. You may be able to negotiate a solution with the seller, or find a special insurance program that will provide a bridge between the sale of the home and the installation of a new roof.
Most real estate contracts have several contingency periods during which a prospective home buyer can perform due diligence and back out of the deal unscathed if necessary. Your inspection contingency period, typically 15 days from contract in Florida, is the perfect window to check out the insurance situation. That way, you can address any unexpected problems before you invest 30-60 days in the process.
Of course, an early insurance quote may also work for you in a positive manner. An estimate of an older homes insurance premium may assume that the property has endured normal wear and tear. However, if you can prove that the home has a new roof and new hurricane shutters, your premium may be lower than expected, and give you some additional leeway and breathing room in the mortgage approval.
Estimating the probable insurance coverage is fine as you look for homes, but once you make an offer, get a quote. Your local insurance expert will understand if the deal doesn’t go through in the end – and will be there to help with your next offer.
The insurance professionals at Anderson & Associate Insurance Group are proud to provide Sarasota, Parrish and surrounding area residents with homeowners insurance, flood insurance, car insurance and more. Give us a call today.
