Get a Home Insurance Quote Before You Commit

By Louay Yousif | Mortgage Advisor | NMLS #1515287

You find a home you like. The price works, and the estimated payment looks comfortable. Then the insurance quote comes in much higher than the number in your budget, or the first insurer will not cover the property.

That is a problem to investigate early, not in the final days before closing. Wherever you are buying in the United States, get a written, property-specific insurance quote and have your lender review it before you make decisions that limit your options.

My recommendation is simple: give insurance the same early attention you give the monthly payment and the home inspection.

Start with the address and ask direct questions

A generic online estimate is a starting point. It does not establish that an insurer will issue coverage for the home you want. Give a licensed insurance professional the address, intended use, closing date and requested property information, including roof details and any known condition concerns.

Ask these questions:

• Will your company actually write this policy for this address, or is this only an estimate? What underwriting, inspection or repair conditions remain?

• Does your company consider this property high risk for wildfire, wind, hail, flooding or another hazard? If you will not cover it, what are my options?

• What is the annual premium for every policy I would need, and when could coverage take effect?

• What does the policy exclude or limit? Is the home insured on a replacement-cost basis, and how was the rebuilding amount determined?

• What would each deductible cost me in dollars, including any separate wind, hurricane, hail or earthquake deductible?

The Consumer Financial Protection Bureau recommends comparing written quotes and having your loan officer confirm that the proposed coverage meets the loan requirements. Compare coverage and deductibles alongside the premium.

See what the real premium does to your payment

Here is an illustration, not a market average or an actual insurance quote:

• An annual premium of $1,500 equals $125 per month.

• An annual premium of $6,000 equals $500 per month.

• The difference is $375 per month, or $4,500 per year.

That additional expense can change both your comfort with the payment and your mortgage qualification. Fannie Mae includes applicable insurance premiums in the housing expense used for qualification. Your lender must review the actual numbers under your loan program.

If insurance is collected through escrow, it affects the total monthly mortgage payment, even though it does not change the loan’s principal-and-interest payment. Ask about the insurance premium and initial escrow funds needed at closing, too. If you need more than one policy, put all of the premiums in your budget.

California wildfire and FAIR Plan example

California illustrates why local insurance conditions matter. Buyers there should ask specifically about wildfire eligibility and current carrier availability. Some insurers have limited new business or nonrenewed policies. Do not assume that because the seller has coverage, the same insurer will issue a new policy to you.

If a diligent search does not produce coverage in the traditional market, the California Department of Insurance identifies the FAIR Plan as a last-resort option. It provides limited property coverage and is not the same as a standard homeowners policy.

A separate Difference in Conditions policy, often called DIC, may complement FAIR Plan coverage by providing protection such as water damage, theft and liability. DIC policies come from other insurers, not the FAIR Plan. Have your agent explain the combined cost, deductibles, exclusions and remaining gaps, and have your lender review the proposed coverage. Do not assume this combination automatically includes flood or earthquake protection.

Check the risks wherever you are buying

California is one example. The questions apply nationwide, but the coverage you need depends on the property and location:

• Flood: Standard homeowners insurance generally does not cover flooding. Ask whether separate flood insurance is required for the loan and discuss the property’s flood exposure even when coverage is not required.

• Wind and hail: In coastal and other storm-prone areas, these risks may have separate deductibles or require separate coverage. A percentage deductible can be a substantial out-of-pocket amount. Ask what value the percentage applies to.

• Earthquake: Standard homeowners insurance generally excludes earthquake damage. Ask about separate coverage and its deductible if this is a concern for the property. Earthquake risk is not limited to California.

The National Association of Insurance Commissioners explains these coverage and deductible differences. California buyers can also review the state’s earthquake insurance guide. Your insurance professional should explain what the actual policies cover.

Review both layers of condo insurance

The association’s master policy does not settle every insurance question for your unit. Have your insurance agent and lender review it alongside any unit-owner policy, often called HO-6, and the association documents that address owner responsibilities.

Ask what covers the unit’s interior and improvements, whether the master policy has a per-unit deductible, and what coverage you need for your exposure. Do not assume a loss-assessment endorsement pays every association deductible or assessment.

For loans subject to Fannie Mae’s individual-unit insurance rules, unit-owner coverage is required when the master policy leaves interiors or improvements uncovered, or when it has a per-unit deductible. Required coverage must account for the applicable deductible and any uncovered interior or improvements. The details depend on the policy and loan program; there is no single deductible obligation that applies to every condo buyer.

For the broader financing review, read Can a Qualified Buyer Still Lose Condo Financing Because of the Project.

Review insurance before your deadlines

A mortgage preapproval does not mean a specific home’s insurance has been approved. A quote is not the same as coverage being in force. Coordinate early:

• Your insurance professional confirms availability, coverage, deductibles and what remains before the policy can take effect.

• Your lender reviews the coverage for the loan and updates the estimated payment, qualification and cash needed to close.

• Your real estate professional helps you understand your contract deadlines and options before removing contingencies or making other binding decisions.

If the first quote is expensive or unavailable, investigate alternatives while you still have time. A lower premium is useful only if the coverage, deductible and lender requirements also work.

Send me the address and your insurance quote

I’ll walk you through how the proposed insurance cost changes your estimated housing payment and what it means for your financing review. Let’s check the numbers before you commit.

Call or text Louay at 619-954-3446.

Louay Yousif | Mortgage Advisor | NMLS #1515287

Paramount Residential Mortgage Group, Inc. | NMLS #75243 | Equal Housing Opportunity

Educational information only, not insurance or legal advice or a commitment to lend. Consult a licensed insurance professional about coverage. Loan eligibility and availability depend on the borrower, property, program and applicable licensing.

Mortgage services are offered only where the individual originator and PRMG are authorized. PRMG licensing disclosures | NMLS Consumer Access