Insurances

BREG - insuranceHome buyers are sometimes overwhelmed by the amount and different kinds of insurance attached to the purchase and ownership of a home. They include:

Buyers Real Estate Group – Insurance information.

1. Title insurance: This is called the “lenders policy” and is paid for at your house closing. This is something your lender requires in case you default on your loan and they have to take ownership of your property. It insures that your title to the land will be in good standing should the unlikely event of default occur. It is a one time fee, it’s paid for at closing and the cost should be included by your lender on your Good Faith Estimate.

2. Private Mortgage Insurance (PMI): Insurance you pay to your lender on a conventional mortgage when you have less than a 20% down payment. This is paid as part of your monthly house payment and would be called the second “I” of PITII. PMI may be removed after a certain amount of time, depending on the provisions of the loan. It is the homeowner’s responsibility to see to the removal of PMI when the time is right.

3. Mortgage Insurance Premium (MIP): This is almost identical to the above, except it is applicable when you are securing an FHA mortgage. This amount is equal to 2-3% of your entire loan amount. It is paid in part at the house closing and the rest stretched over the life of the loan. Unlike PMI, MIP cannot be removed from the loan unless the homeowner refinances the loan.

4. Home Owner’s Hazard Insurance: This is a policy purchased by the homeowner and can be paid by the homeowner either as part of their monthly house payment, where it is escrowed by the lending institution, or separately by the homeowner according to their arrangement with their insurance company. This protects you and your property against damages.

5. Owner’s Policy: This is an offer made to you at the time of closing by your Title Company to protect your ownership of the property. There may be a problem with your title that has gone undetected by anyone prior to your ownership of the property or the ownership papers (called an Abstract or Torrens Certificate) may have been lost or destroyed. In that event, when you go to sell the property, this owner’s policy would rectify any liens, clouds or encumbrances against the title and would allow you to transfer it free and clear. It is a one time fee and is completely optional.

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