Home insurance can have an important impact on buying a new home. Most people don’t think about home insurance until closing day approaches, which is too late. In some cases waiting until the end of the home buying process to take care of insurance can jeopardize your ability to close. You’ll never have to worry about losing your next dream home if you keep these four things in mind.
Your current carrier might not be willing to write your new home policy
Check with your current insurance carrier before you start looking for a new home or soon into the process. Don’t assume that your current carrier will cover the new home. All carriers’ exposure to risk changes over time. The carrier you have now might not be able to follow you to your new home if the risk changes significantly or they are overexposed and need to reduce risk in your area.
Insurance is a factor in your mortgage debt-to-income ratio
When buying a new home it’s commonplace for you and your lender to consider your debt and recurring expenses relative your income when calculating how much you can borrow. Car loans, credit cards, student loans, and the like all contribute to your debt-to-income ratio. Most people don’t realize that home insurance is a factor considered in debt-to-income.
New regulations require bound policies sooner
Home sales are largely governed by two federal laws, the Truth in Lending Act and the Real Estate Settlement Procedures Act, collectively known as “TILA/RESPA Integrated Disclosure” or “TRID”. These laws protect consumers from practices that exploit home buyers financially. In order to verify loan details, including debt-to-income ratio, TRID requires that loan documents must be finalized three days prior to closing. In addition to the insurance factor in debt-to-income, most people escrow their home insurance premium payment with their mortgage lender. All of this means that your home insurance needs to be final three days before closing along with everything else.
It’s important to shop
Buying a home and choosing home insurance is a complex financial decision. Because of each of the circumstances described above it’s important that home buyers shop multiple companies for insurance and compare options. Coverages and deductibles can be adjusted to meet debt-to-income ratios, for example, but will you know whether you are making a sound financial decision or taking on too much risk? Speaking with a licensed professional can help. If it seems like shopping with multiple companies and speaking with multiple people takes a lot of time it’s because it does. It’s worth it when it comes to protecting one of your most valuable investments, your home.
Comparity makes it simple
There’s one way to shop for home insurance from multiple companies and get the help of a licensed professional whenever you need it without spending much of your own time. When you shop for insurance through Comparity you avoid all of these common issues and get a side-by-side, “apples-to-apples” comparison of options that’s easy to understand. Home buyers, realtors, and mortgage lenders all use Comparity for home insurance because insurance is complicated and we make it simple.