Most people are surprised when home insurance becomes an impediment to buying a home. Here are three reasons homebuyers shop for home insurance when buying a home. Mortgage lenders and homebuyers take note. Don’t let these home insurance issues catch you off guard.
1. First Time Homebuyer
This seems obvious but don’t take it for granted. Any experienced loan officer or experienced homeowner knows that buying the home is at the top of a long list of things first time homebuyers are doing for the first time. First time homebuyers don’t think about home insurance until loan officers mention it. When a first time homebuyer is ready to shop for insurance they don’t know how. Many people start with the company that insures their parents. But that can lead to another reason homebuyers shop for home insurance.
2. Underwriting Restrictions
Insurance carriers have underwriting restrictions that prevent them from insuring various properties and people. Both first time and experienced homebuyers alike can be taken by surprise when they shop with a single carrier only to be rejected by that carrier’s underwriting restrictions. Underwriting restrictions are numerous and vary by company. For example, some carriers won’t insure homes past a certain age, homes close to a coast, or homes with certain features. Restrictions are too numerous to list. The best way to avoid getting caught by restrictions is to shop as many carriers as possible.
3. Debt-to-Income Ratio
Government regulations require that homebuyers maintain a prescribed debt-to-income ratio when buying a home. The price of home (hazard) insurance is a required element in debt-to-income calculations for home mortgages. When homebuyers don’t shop for home insurance they risk loan rejection due to home insurance premiums that are too high. The situation naturally leads to price-driven home insurance shopping which can undermine the buyer’s protection unnecessarily. By shopping multiple carriers at once you can compete on price without sacrificing coverage.
Comparity makes shopping for insurance easy for homebuyers and mortgage lenders
When mortgage lenders and homebuyers use Comparity to shop for home insurance they avoid the consequences of not knowing how to shop home insurance. Even better, mortgage lenders who use Comparity get added benefits that matter in the closing process – like evidence of insurance delivery per loan and a single access point for home insurance on all in-process loans.