New Homebuyer | 3 most common types of INSURANCE needed for successful HOME sale

Warren Oberholser
Warren Oberholser
Published on June 10, 2021

Hi, I’m Warren Oberholser. I’m a realtor in the East Bay Tri-Valley area in Northern California. My goal is to help both buyers and sellers get maximum results for one of their biggest investments, their home.

New home buyers. Have you looked at all the types of insurance you’re going to have to have? In this BLOG, I’m going to break down the three most common types of insurance home buyers need so you have a thorough understanding and a successful transaction.

If you’re like most of us, there’s two subjects that make our eyes glass over. It’s taxes and insurance.

Sure, we learn a lot from the latter with the introduction of the ACA (Patient Protection and Affordable Care Act). We are now somewhat familiar with premiums, deductibles, co-payments, and the like.

But that’s health insurance. When you buy a house, you’ll be required to buy certain policies of a different type. And some, you may want to consider depending on the region. Let’s start with the three basic types of insurance. Policies you may be required to purchase before you close on your home.

Number One: Title Insurance

The home purchase transaction doesn’t involve just the buyer and seller. Other entities, such as the lender, have interests to protect as well, and financial protection is what insurance is all about in the home buying process. When your offer is finally accepted, the lender begins the process of evaluating the home to see if it matches your contract price. Whether you qualify for a mortgage and whether there are any problems with the homes title. These problems are known by several nicknames, such as a Cloud on Title or Title Defects. Is the homeowner who’s selling the home actually the owner, and do they have the legal right to sell it? Is there anyone else who may have a claim, full or partial, to the property?

The title search will also include if there’s any liens against the home, outstanding judgments, and unpaid taxes, among other issues. The title officer will perform a search of public records to find the answer, then issue a report known as the prelim title report. Anything of a negative nature that will affect the lender will be brought to the seller’s attention so they can handle or correct this issue. The lender will not issue funds to your purchase until these matters have been resolved. If the title is clear, on the other hand, the lender will go ahead with the loan, but will expect a title insurance policy to be issued in the event anything crops up in the future. This policy is known as a Lender’s Policy, and it’s required.

There is a separate policy to protect the owner, which is optional. It is best to consult with your real estate agent so you can be advised whether you may choose to purchase this policy.

Number Two: Private Mortgage Insurance

Let me get this out in the open, home buyers have a love-hate relationship with private mortgage insurance. Or the mortgage insurance premium, in the case of FHA-backed loans. It’s an additional expense, not only at closing, but also will be paid monthly through the life of the loan. Without it however, borrowers who can’t come up with 20% down would be unable to purchase a home.

Learn more about private mortgage insurance from the Consumer Financial Protection Bureau and you’ll find additional information about FHA’s mortgage insurance premium online at hud.gov.

Number Three: Homeowners Insurance

So far, we understand that title insurance protects the lender against any future claims on the property. PMI or MIP protects them in case you default on your loan. So what happens if the home burns down or experiences another calamity? This is where homeowners insurance enters the picture. The difference between this insurance and the other two previously mentioned is that homeowners insurance also protects the homeowner. A standard policy is unlikely to cover the home against certain disasters such as floods and earthquakes. If the home is in a flood zone, you may be able to purchase a separate policy to cover that.

If you’re in California, there are separate policies to cover earthquakes. Flood insurance is available to anyone living in one of the 23,000 participating MFIP communities. This stands for the National Flood Insurance Program. Government-backed loans usually require you have this type of insurance if you live in a flood zone. Yes, there’s a lot to consider when purchasing a home. So do yourself a favor and consult with an insurance agent early so you’re aware of what you’re reading and signing. They will help you determine which type of homeowners insurance is right for you and your lender.

“Flood insurance is available to anyone living in one of the 23,000 participating NFIP communities,” according to officials at FEMA.gov. NFIP is short for the National Flood Insurance Program.

Always consult with your lender or insurance agent if you have any specific questions.

Hi, I’m Warren Oberholser. I’m a realtor in the East Bay Tri-Valley area in Northern California. My goal is to help both buyers and sellers get maximum results for one of their biggest investments, their home.

I hope you enjoyed this article. Please let me know if you have any questions. Warren

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Hello…I work with both buyers and sellers in the Tri-Valley area of Northern California. The Tri-Valley is comprised of 6 cities: Pleasanton, Livermore, Dublin, San Ramon, Danville, and Alamo. To better understand what each city has to offer, I have created a Pros and Cons video and BLOG for each – (Pros & Cons for Pleasanton, Pros & Cons for Livermore, Pros & Cons for Dublin, Pros & Cons for San Ramon, Pros & Cons for Danville and Pros & Cons for Alamo). If you are thinking about purchasing or selling a home, please reach out to me by text, phone, or email. If it is convenient, I can schedule a Zoom chat so we can discuss your home goals. Wishing you all the best on your home journey. Cheers!

Warren Oberholser

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Warren Oberholser

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ALL MATERIAL PRESENTED HEREIN IS INTENDED FOR INFORMATIONAL PURPOSES ONLY. THE INFORMATION CONTAINED HEREIN HAS BEEN OBTAINED THROUGH SOURCES DEEMED RELIABLE BUT CANNOT BE GUARANTEED AS TO ITS ACCURACY. SUBJECT MATERIAL MAY HAVE ERRORS, OMISSIONS, CHANGES OR WITHDRAWAL WITHOUT NOTICE. ANY INFORMATION OF SPECIAL INTEREST SHOULD BE OBTAINED THROUGH INDEPENDENT VERIFICATION.

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