Why You Need Homeowner's Insurance Before Closing On A House

Real Estate Blog

If you are in the process of selecting a home to buy, you will have a lot of different steps to complete before you can close on the house you end up choosing. One step you must take is purchasing a homeowner's insurance policy for the home. Having homeowner's insurance is not only a good idea for protecting your home and things, but it is also a requirement by lenders. Here are several things to understand about homeowner's insurance and why you need it when buying a house.

Your lender requires it

The first reason you will need to purchase a policy before closing is because your lender requires this. If you have a lender, it means that you have a loan. When you have a loan, the lender is issuing money for you to buy a house. The lender will not get this money back until you begin repaying the loan, and it could take up to 30 years for you to repay all the money you borrowed. During this time, the lender will need protection over your house in case something happens to it, and this is why they require homeowner's insurance. If your house burns down and you have insurance on the house, the lender will get repaid the money you owe them for the house loan from the insurance company.

It protects your investment and your things

The second reason you need insurance is for your own protection. If you are buying a house, you might not have a lot of equity in it at this point, but you will in the future. If you do not have insurance, you could lose all this equity if your house burned down. Having home insurance protects you if this happens and offers reimbursement for the personal belongings you own.

Additionally, having insurance protects your credit. If the house burned down and you did not have insurance, you would still owe the bank the balance of your loan. If you could not repay this money, the lender could sue you. Getting sued will appear on your credit report, and this could cause you to have bad credit for many years to come.

Homeowner's insurance is not optional if you own a house, and you will need a policy before you can close on it. To learn about other requirements when buying a house, talk to a real estate agency, like River Birch Realty.


14 October 2018

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