What Homeowners Want To Know About Homeowners Insurance

 

Realtor.com asks home shoppers what they would like to know about homeowners insurance and their questions were answered by Allstate insurance experts. If you are in the market for a home, you should become familiar with homeowners insurance. It is important to get good homeowners insurance and understand your policy. Here are some questions and answers below.

1. I’m a first-time home buyer. What should I consider when choosing insurance? – Cynda from Florida

Just like the home you choose, your insurance policy will fit you and your needs. A musician will be interested in protecting their musical instruments while other homeowners might want protection on their garage because of their car collections.

An insurance expert can help you set up your policy with your unique coverage. You can get a personalized quote and make sure all your needs are covered.

“Your home is one of your most valuable assets,” say the experts at Allstate. “Make sure your homeowners insurance protects you and your family in many kinds of situations involving not only your home itself but also the things you own.”

2. What are the most common types of claims? What is the claims process like? – Emily from Colorado

Prepare for the unexpected, that is why homeowners insurance is so important. Many homes get damaged from wind, hail, plumbing failures, theft, and fire. When you do have to put a claim in for damage to your home, your insurance company will work with you and answer all your questions and concerns. Your agent will help you with the process by assessing the damage and helping you recover your losses.

3. How is condo insurance different from home insurance? How can I make sure my condo insurance has the coverage I need? – Maria from Virginia

Condo insurance is different because it only covers your unit and the belongings in the unit. Usually, the condo building is insured under your condo association's insurance policy which covers things like the boiler room, the roof, hallways and other shared spaces. Make sure to get your agent to explain what is covered. Some policies will cover the wall and floor in your specific unit.

4. Are there any surprising things that aren’t covered by a typical homeowners insurance policy? – Emily from Colorado

Surprisingly a flood and earthquake damage are not covered in a regular insurance policy. Both require a separate additional policy on top of your regular homeowners insurance. Make sure you have a clear understanding of what is covered. Things such as an outside sewer or drain might need additional coverage.

5. Does my homeowners insurance cover small damages, like a stolen bike? – Maria from Virginia

This would be under personal property coverage which usually covers theft. Make sure the stolen items are worth more than your deductible before you claim it on your insurance. If your deductible is not met your insurance will not pay for the claim. Make sure to review coverage limits with your agent who will customize your coverage to fit your needs. An agent can help you choose any additional coverage if you take note of the possessions such as sports equipment and riding lawn mowers that might need to be part of your policy.

6. What are some things homeowners can do to help lower the cost of their homeowners insurance? – Emily from Colorado

There are several things you can do to help reduce your rates. Increasing your deductible can reduce your premium payments. Bundling policies such as home and auto will give you a discount. Other ways you might get a discount are if you are a new homeowner, switch insurance providers without having a recent claim,
set up automatic payments to pay your insurance premium or are age 55+ and retired.

Remember when looking for homeowners insurance always seek a professional's advice. Even though a policy is cheaper than another, it might not cover everything you need. Shop around and talk to a couple of insurance agents in your area for the best fit and price for you.

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The Ins and Outs of Mortgage Closing Costs

When buying a home there are many steps to the process. Once you have made an offer, you need to make sure you have money for a down payment, but that is not all the money you will need to bring to the table. Many home buyers do not take into account closing costs. This can come as an unpleasant surprise, but if you understand closing costs and have saved for them, the home-buying process will run much smoother.

First, you will need to understand what closing costs actually are. This is important to the buyer

because most of the closing costs are the buyer’s responsibility. Closing costs consist of the many fees for the services and expenses it takes to finalize a mortgage. Typically they are broken down into property-related fees, loan-related fees, mortgage insurance fees, property tax and homeowners insurance and title fees.

More importantly, is how much are closing costs? The amount usually runs between 2% and 5% of your loan amount. So if you have a $300,000 home purchase, your closing costs would run between $6,000 to $15,000. The best way to pay for them is out of pocket all at once. Some lenders do allow you to finance them by merging them into the loan, but you will end up paying more because of interest over the life of the mortgage. Some states, counties and cities offer low-interest rate loan programs and grants for first time home buyer’s closing costs.

Next, let’s look at the property-related fees that are included in the closing costs. These include the appraisal fee and the home inspection fee. When purchasing a home you will need to know how much the property is worth and what shape the property is in. A certified professional appraiser will be sent to the home to evaluate the home’s worth. This is very important when obtaining a mortgage. The lender needs to know if the property is worth the amount that you want to borrow. A lender wants to make sure they can recoup the value of the home if you default on your loan. Typically the appraisal fee will run between $300 to $400. A home inspection is required when getting a mortgage. A lender wants to make sure the home is structurally sound and in good enough shape to live in. A home inspection fee usually runs between $300 to $500.

Other fees included are loan-related fees. First, there is the application fee which covers the costs of processing your application. These costs usually include credit checks and administrative expenses. Assumption fees can also be included when there is an assumable mortgage that you are taking over from the seller. Many states will require the use of an attorney at the closing. This will add attorney

fees which will vary depending on the amount of work the attorney does for you. Pre-paid interest fees are also included. Lenders typically require you to pay the interest that accrues on the mortgage between the date of settlement and the first monthly payment due date. The biggest chunk of loan-related fees goes to the loan origination fee a.k.a the underwriting fee, administrative fee, or processing fee. This fee is the cost for the evaluating and preparing of your mortgage loan. This cost is about 0.5% of the loan amount. Just like a realtor, if you work with a mortgage broker, there will be a fee. A broker commission will usually be about 0.5% to 2.75% off the home’s purchase price.

Mortgage insurance fees are also included. These include mortgage insurance application fees, upfront mortgage insurance and FHA, VA and USDA fees. Mortgage insurance application fees are included if you make a downpayment of less than 20% of your mortgage. Upfront mortgage fees are there because many lenders require first-time borrowers to pay the first year mortgage insurance premium upfront. FHA, VA, and USDA fees will be tacked on if the Federal Housing Administration insures you, Department of Veterans Affairs, or the U.S. Department of Agriculture. For an FHA you will pay 1.75% of the loan amount, for the VA loan you will pay between 1.25% to 3.3% and the USDA will cost 1%.

Property taxes, annual fees and insurance will also need to be considered. Property taxes will cost about two months’ worth of city and county property taxes at closing. The homeowners association fees will also be required upfront as well as the homeowner’s insurance premium.

When purchasing a home one of the most important documents handled is the title. Title fees include the search fee (to make sure the title is clean and the seller really owns the property), the lender’s title insurance (this protects the lender in case there is an error in the title search) and owner’s title insurance (this protects the buyer if the title comes up with any problems).

So there will be no surprises before you go to closing, mortgage documents will be given to you prior to closing. The loan estimate and the closing disclosure are the two most important. The loan estimate details all the fees, interest rate and other closing costs for your loan and the closing disclosure confirms what was written in the loan estimate. These documents need to be read carefully before you go to closing.

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