Why Home Insurance Is Important For Obtaining A Mortgage
When you purchase a home, you're making a large investment
. A lot is riding on this investment--your future and your security, as well as any increase or decrease in the value of the property as time passes--the real estate markets change based on the economics of it. If you're buying a new home then you are going to have to ask for a loan. And that means pleasing mortgage lenders, such as your bank. You need a reputable lender to ensure your home-buying process goes smoothly. In order to impress lenders you need to prove you're worth your promise of paying it back--that includes not only your assets and a clean track record, but evidence you take care of your responsibilities--those who insure their property are considered more reliable to lenders. It guarantees that the bank doesn't lose out should something happen to the property prior to the full and final payment.Homeowner's insurance is more than just that thing that keeps your personal items safe. It is a buffer for the banks--technically they still hold some ownership of the property while you owe them. If anything goes awry they want to know they won't have to step in and pay it. They want the costs covered. And you want the costs covered anyway so you don't have to pay out of pocket. That is why it's wise (and pretty much required) that you select home insurance when you start real estate shopping. By having a trustworthy company there to assist when you file a claim, you are saying that regardless what happens at least some of the damage will be take care of--whether this is the actual cost or replacement cost is dependent on your plan. The better your plan, the safer the lender feels and the more comfortable you will be with your home and your bills every month, knowing that there aren't shadows lurking that could disrupt the peace.
Also, without insurance you are expected to pay out of pocket. If anything happens that requires you to repair damages that you can't afford, it puts you at risk for not to being able to pay your monthly mortgage bills. That means the bank will have to go through the trouble of filing foreclosure. Foreclosure on a damaged home is just a pain for the lender to deal with. It won't sell and it ends up being a serious loss.
Essentially, the lenders just want to know that you're not going to leave them with nothing to show for the investment. You can ease their concern with home insurance.
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